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

Issue relates to expenditure of over ₹50 lakh to decorate her foster son V.N. Sudhakaran’s marriage venue, valuation of her jewellery and so on

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.