The income-tax department has slapped a Rs 1,156-crore (Rs 11.56 billion) tax claim on Reliance Industries chairman Mukesh Ambani for the 2004-05 assessment year.

The issue dates back to March 2004 when Reliance Communications Infrastructure transferred 500 million shares of Reliance Infocomm to Ambani at par value of Re 1 each. RCIL was the promoter of Reliance Infocomm.

The I-T department had begun investigation into the matter a few months ago. However, the order, which was issued a couple of days back, followed a letter written by Rajya Sabha MP and Samajwadi Party leader Amar Singh to the Prime Minister seeking his intervention in this matter.

In a letter dated September 12, Singh said: "I have been associated with the Ambani family for a long time and have cordial relations with them but I am certain that due justice will prevail by punishing the guilty and sparing none, howsoever high and mighty."

Sources in Reliance Industries said the I-T order was bad in law and would be challenged in the appropriate forum.

However, sources close to the developments said the government had yielded to Singh's pressure and had sought to tax "notional income" by ignoring the facts of the transaction. Ambani had given up the sweat equity shares in Reliance Infocomm in December 2004.

The income-tax department notice said that going by Reliance Infocomm's valuation at Rs 53.71 per share in November 2002, the 500 million shares were worth Rs 2,685 crore (Rs 26.85 billion).

The I-T notice pointed out that on March 13, 2004, two days after Ambani became the managing director of RCIL, the company desired to obtain a temporary secured interest-free loan of Rs 50 crore (Rs 500 million) from him.

According to the I-T department, Ambani had accrued an income gain of Rs 2,635 crore or Rs 26.35 billion (subtracting Rs 50 crore from Rs 2,685 crore).

In his letter to the prime minister, Singh has also said the Left parties had named Mukesh Ambani as the largest non-contractual beneficiary of the Iraq oil-for-food scam.