Madras HC orders notices to nephew and niece of Jayalalithaa regarding his income tax and wealth tax obligations

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The issue relates to expenses of more than ₹50 lakh for decorating the wedding venue of her adopted son VN Sudhakaran, appraisal of her jewelry, etc.

The issue relates to expenses of more than ₹50 lakh for decorating the wedding venue of her adopted son VN Sudhakaran, appraisal of her jewelry, etc.

Madras High Court ordered notices to former Chief Minister Jayalalithaa’s niece J. Deepa and nephew J. Deepak in three appeals filed by the Income Tax Department against the court orders in favor of the deceased with respect to his income tax and wealth tax liabilities for the 1996-97 and 1997-98 tax years respectively.

Judges R. Mahadevan and Mohammed Shaffiq also authorized permanent IT department counsel Karthik Ranganathan to take private opinions, reimbursable by two weeks, to the legal heirs. The department had appealed in 2018 challenging the orders made by the Income Tax Appeal Tribunal (ITAT) in September 2016. Meanwhile, Jayalalithaa died in December 2016.

Nonetheless, appeals were preferred as the Supreme Court had, in February 2017, upheld the orders made by a trial court in a disproportionate property case against him and affirmed the four-year prison sentence for his close aide. and co-accused VK Sasikala. . The computer procedure had relied heavily on the facts of the disproportionate assets case.

Even after the appeals were filed, the department had to wait for High Court Justices N. Kirubakaran (since retired) and Abdul Quddhose to declare Ms. Deepa and Mr. Deepak legal heirs to Jayalalithaa on May 27, 2020. , the courts began to operate in a restricted manner due to COVID-19 and therefore there was a delay in the registration of legal heirs.

Subsequently, the department filed motions to condone the more than 1,763-day delay in going to court to reverse the abatement of the three appeals, due to the failure to include legal heirs in the 90 days from the date of death of the assessee. , and it was on these claims that the bench headed by Judge Mahadevan ordered notices to the legal heirs.

The first tax appeal by the department concerned ₹54.99 lakh allegedly spent by Jayalalithaa to decorate the wedding venue of his adopted son VN Sudhakaran in 1995. After extensive investigations, the Assessing Officer (AO) , by order dated March 30, 1999, included the amount of his income for the 1996-97 taxation year.

However, on appeal the Commissioner of Income Tax (Appeals) on 29 December 1999 set aside the assessment order based on a claim made by 12 MPs and MPs that they were the ones who had spent ₹57.52 lakh for wedding decoration. place after collecting it from party supporters.

He ordered a new expertise. Subsequently, the AO considered the matter again and passed another order on March 28, 2002 stating that details of expenses seized from the premises of artistic director Thotta Tharani and his manager Ramesh Kumar indicated that it was Jayalalitha who incurred the expenses. He also concluded that the assertion of the deputies and deputies was unfounded.

In the second round of assessee’s appeal, the Commissioner of Income Tax (Appeals) upheld the assessment order on June 27, 2008. Jayalalitha appealed to the ITAT which in September 2016 , set aside the assessment order and, therefore, the Department preferred the present appeal based on the judgment in the disproportionate assets case.

The second of the department’s three appeals was for the addition of ₹8 lakh to Jayalalithaa’s income in 1996-97 based on the value of ornaments presented by her to Sudhakaran at the time of her engagement on June 12, 1995. relied on a report from the Vigilance and Anti-Corruption Department (DVAC) to reach such a conclusion.

The third appeal concerned the failure to file a declaration of assets for the 1997-1998 taxation year. Consequently, an assessment under the Wealth Tax Act 1957 was completed on March 27, 2000, determining his net worth at ₹4.67 crore. However, in 2002 the Wealth Tax Commissioner found the assessment to be incorrect and detrimental to the interests of the department.

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

The Commissioner also found that the Wealth Tax Officer valued the gold jewelery belonging to Jayalalitha at only ₹1.85 crore instead of ₹3.83 crore as revealed by the DVAC report. Accordingly, it rescinded the assessment order and referred the matter back to the WTO for reconsideration.

Jayalalitha appealed the commissioner’s review order to ITAT after 2,225 days. The court tolerated the delay after accepting her reasoning that she had received the review order very late and could not file the appeal in time because she was pursuing various litigations in several courts and was also in the civil service.

The court also quashed the commissioner’s order on the merits. Consequently, the ministry had appealed now contesting the tolerance of the delay as well as the order made on the merits.

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