The income tax department has recommended to the Centre that a thorough probe should be conducted to find out the reasons that made different companies invest in the loss making Jagathi Publications Pvt Ltd owned by the YSR Congress party president Mr YS Jaganmohan reddy.

The probe will find out why the loss making shares of Jagathi Publications were bought with a high premium by some companies. The Jagathi Publications runs the Sakshi daily and the Sakshi TV channel.

In the show-cause notice issued to Jagan, the IT department asked him to explain why valuation reports, based on which the company shares were sold at a premium of Rs.350 per share, were unrealistic when it suffered a heavy loss of Rs.319.84 Cr as on March 2010 eroding its total share capital.

The notice also asked him to pay Rs.122 .78 Cr towards penalty for the illegal investments made into the company.

The department has also asked Jagan how a group of promoters led by him could hold 90 per cent of the company shares by investing only 20 per cent of the total share capital.

The promoters are Jagan, Mr Harish C. Kamarthy and Caramel Asia Holdings Pvt. Ltd who owned a mere  7,35,67,800 shares in the company on March 31 in 2008. They acquired them at a face value of Rs. 10 each equaling to Rs 73.56 Cr.

The outside share holders were allotted 83,47,201 shares representing only 10 per cent of the total shares of the company but equaling to a total investment leveling with 80 per cent of the total share capital.