Tamil Nadu

Madras HC orders notices to Jayalalithaa’s nephew and niece in connection with her income tax and wealth tax liabilities

Jayalalithaa’s niece Deepa and nephew Deepak after they were declared the legal heirs of the former Chief Minister. File

Jayalalithaa’s niece Deepa and nephew Deepak after they were declared the legal heirs of the former Chief Minister. File | Photo Credit: The Hindu

The Madras High Court has ordered notices to former Chief Minister Jayalalithaa’s niece J. Deepa and nephew J. Deepak in connection with three appeals preferred by the income tax department against orders passed by a tribunal in favour of the deceased with respect to her income tax and wealth tax liabilities for the assessment years 1996-97 and 1997-98 respectively.

Justices R. Mahadevan and Mohammed Shaffiq also permitted I-T department standing counsel Karthik Ranganathan to take private notices, returnable by two weeks, to the legal heirs. The department had filed the appeals in 2018 challenging orders passed by the Income Tax Appellate Tribunal (ITAT) in September 2016. In the meantime, Jayalalithaa died in December 2016.

Nevertheless, the appeals were preferred since the Supreme Court had, in February 2017, confirmed the orders passed by a trial court in a disproportionate assets case against her and confirmed the sentence of four years of imprisonment for her close aide and co-accused V.K. Sasikala. The I-T proceedings had relied heavily upon the facts of the disproportionate assets case.

Even after the filing of the appeals, the department had to wait until Justices N. Kirubakaran (since retired) and Abdul Quddhose of the High Court declared Ms. Deepa and Mr. Deepak as the legal heirs of Jayalalithaa on May 27, 2020. Thereafter, the courts began to function in a restricted manner due to COVID-19 and hence there was a delay in bringing the legal heirs on record.

Subsequently, the department took out applications to condone the delay of over 1,763 days in approaching the court to set aside the abatement of the three appeals, due to the failure to include the legal heirs within 90 days from the date of the death of the assessee, and it was on these applications the Bench led by Justice Mahadevan ordered notices to the legal heirs.

The first tax case appeal by the department was with respect to ₹54.99 lakh reportedly spent by Jayalalithaa on decorating the venue for the marriage of her foster son V.N. Sudhakaran in 1995. After extensive enquiries, the Assessing Officer (AO), by an order dated March 30,1999, included the amount to her income for the assessment year 1996-97.

However, on appeal, the commissioner of Income Tax (Appeals) on December 29, 1999 set aside the assessment order on the basis of a claim made by 12 MPs and MLAs that it was they who had spent ₹57.52 lakh towards decoration of the marriage venue after collecting it from party supporters.

He ordered a fresh assessment. Thereafter, the AO considered the matter afresh and passed another order on March 28, 2002 stating that details of expenses seized from the premises of art director Thotta Tharani and his manager Ramesh Kumar indicated that it was Jayalalitha who had incurred the expenditure. He also found the claim of the MPs and MLAs to be unsubstantiated.

On second round of appeal by the assessee, the Commissioner of Income Tax (Appeals) upheld the assessment order on June 27, 2008. Jayalalitha went on further appeal to ITAT which, in September 2016, set aside the assessment order and hence the department had preferred the present appeal by relying upon the judgment in the disproportionate assets case.

The second of the three appeals by the department was with respect to addition of ₹8 lakh to Jayalalithaa’s income in 1996-1997 on the basis of the value of ornaments presented by her to Sudhakaran at the time of his betrothal on June 12, 1995. The department had relied upon a Directorate of Vigilance and Anti corruption (DVAC) report to arrive at such a conclusion.

The third appeal was with respect to non-filing of return of wealth for the assessment year 1997-1998. Hence, an assessment under the Wealth Tax Act of 1957 was completed on March 27, 2000 determining her net wealth at ₹4.67 crore. However, in 2002, the Commissioner of Wealth Tax found the assessment to be erroneous and prejudicial to the interests of the department.

The Commissioner said the Wealth Tax Officer had omitted investments made by Jayalalithaa in construction of her bungalow at Poes Garden in Chennai from an unexplained income of ₹ 58.52 lakh, construction of a farm house in Hyderabad using ₹11.72 lakh, the value of four different motor vehicles owned by her and the bank balance of over ₹6.94 lakh.

The Commissioner also found that the Wealth Tax officer had valued the gold jewellery owned by Jayalalitha to be only ₹1.85 crore instead of ₹3.83 crore as revealed in the DVAC report. Therefore, he set aside the assessment order and remitted the matter to the WTO for fresh consideration.

Jayalalitha took the Commissioner’s revision order on appeal before the ITAT after a delay of 2,225 days. The tribunal condoned the delay after accepting her reasoning that she received the revision order very late and could not file the appeal on time because she was pursuing various litigations before multiple forums and was also in public service.

The tribunal also set aside the Commissioner’s order on merits. Therefore, the department had come on appeal now challenging the condonation of delay as well as the order passed on merits.


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Printable version | Aug 10, 2022 8:34:14 am | https://www.thehindu.com/news/national/tamil-nadu/madras-hc-orders-notices-to-jayalalithaas-nephew-and-niece-in-connection-with-her-income-tax-and-wealth-tax-liabilities/article65749278.ece