The Supreme Court has cleared the path for the Income Tax Department to reassess the tax liabilities of Chetan and Nitin Sabharwal, sons of former Chief Justice YK Sabharwal. A bench led by Justices JB Pardiwala and K Vinod Chandran dismissed four appeals filed by the brothers on October 28. The decision upholds notices issued for the assessment years 2008-09 and 2009-10, targeting share transactions linked to their 2010 acquisition of a prime property on Delhi’s Sikandra Road.
The core dispute centers on whether the tax department had valid grounds to reopen old files. The court found that the notice issued on March 31, 2015, relied on tangible material from the Director General’s probe report. This evidence satisfied the legal threshold of "reasons to believe" under Sections 147 and 148 of the Income-tax Act, 1961. The bench rejected the argument that overvaluation alone does not constitute escaped income.
"The escapement of income at the hands of the seller of the shares... could as well be a diversion of income," the judgment stated. The court clarified that judicial scrutiny cannot extend to judging the sufficiency of reasons if the officer acted on investigated facts rather than vague feelings. YK Sabharwal, the 36th CJI, served from November 1, 2005, to January 14, 2007, before retiring from a decades-long career spanning the Delhi and Bombay High Courts.
The ruling ends the legal stalemate that had blocked the assessment process for nearly a decade. With the appeals dismissed, the Assessing Officer can now proceed to quantify the exact tax demand based on the share sale proceeds. The brothers' challenge to the legality of the probe report has failed, leaving the financial scrutiny to resolve in lower forums.