The Delhi high court on Tuesday refused to set aside a demand raised by the Income Tax (IT) department from news portal NewsClick for allegedly receiving predetermined foreign remittances from the Justice and Education Fund (JEF), observing that the portal has a “lot to answer for” in terms of its financial dealings.

The court said that the portal, in its appeal pending before the Commissioner of IT (appeals), failed to make out a prima facie case in its favour, and the demand was raised after the assessing officer (AO) determined that the transaction between the petitioner and the foreign entity was a form of “reverse engineering”.

The IT department, on December 30, 2022, issued an assessment order against NewsClick, holding that funds received from the foreign entities in the form of remittances towards services were a modus operandi to introduce unexplained funds into the portal, which, it alleged, was acting in the nature of an agent of Judicial Educational Fund (JEF).

Read Here: NewsClick founder conspired to sabotage 2019 polls, siphoned off funds, states FIR

“Agreement shows that the party receiving the services is to give 90% of the ‘budget’ even before the start of quarter, and the same is not directly linked with the quality of services to be delivered. In the service industry, such types of agreements are not seen generally. The practice of receiving predetermined advances is against commercial prudence and the established practices in the field of services claimed to be discharged by the company,” the AO had said in an order. The portal was converted from limited liability partnership (LLP) to a private limited company only for the purpose of receiving foreign funding, the AO’s order added.

The portal challenged the December 30 order before the Commissioner of IT (appeals), and approached the Delhi high court against the commissioner’s February 20 and November 3 orders refusing to stay the demand during the pendency of the appeal.

“This court is of the view that the petitioner has not been able to make out a prima facie case in its favour. To put it mildly, the petitioner has a lot to answer in the appeal. The petitioner’s plea of financial stringency based on its balance sheet also inspires no confidence as, according to the assessing officer, the accounts have not been properly maintained,” a bench of acting chief justice Manmohan and justice Mini Pushkarna said in the November 29 order, which was made public on Tuesday.

NewsClick case: ED issues summons to Neville Roy Singham

NewsClick, appearing through senior advocate Devdatt Kamat, had argued that the portal’s service agreement with JEF, the content supplied, and receipts through proper banking channels, were duly disclosed in its IT returns, and the legitimacy the business activity were undisputed. It also argued that the services agreement executed between the parties clearly mentioned the itemised prices of deliverables, and that proprietary rights of the articles, videos and short scripts were to exclusively belong to JEF.

On October 3, 2023, Delhi Police arrested NewsClick founder Prabir Purkayastha and the company’s human resources head Amit Chakraborty for allegedly receiving money for “pro-China propaganda” under sections of the Unlawful Activities (Prevention) Act and the Indian Penal Code (IPC) after raiding about 30 locations in Delhi, Noida, Gurugram, Mumbai and Ghaziabad. Both are in judicial custody till December 22, 2023. Police also questioning 46 people, including journalists and freelance, writers.

The Delhi Police’s economic offences wing (EOW) also registered an FIR against the news portal for allegedly violating foreign direct investment norms under Sections 406 (punishment for criminal breach of trust), 420 (punishment for cheating and dishonestly inducing delivery of property) and 120B of the IPC in August 2020. EOW’s case formed the basis of the Enforcement Directorate (ED) registering a complaint against the portal for allegedly overvaluing shares and diverting funds.

In a statement dated October 4, NewsClick had said, “The Economic Offences Wing of Delhi Police has not been able to file a charge sheet against Newsclick for offences under the Indian Penal Code. The Income Tax Department has not been able to defend its actions before the Courts of law. We strongly condemn these actions of a Government that refuses to respect journalistic independence, and treats criticism as sedition or ‘anti-national’ propaganda.”