TMI Blog2011 (6) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... ence under section 35-B of the Act and that this aspect was not at all considered by the sanctioning authority. Prosecution starts when the complaint or final report, in case of a police case is taken on file by the court. Here the prosecution has been sought to be initiated by a complaint in writing, as required by the provisions of the Act. According sanction for prosecution has to precede the launching of prosecution. Therefore, there is no question of applying the presumption at the time of considering "whether sanction has to be accorded or not?". petitioner had legal advice even from one of the retired judges of the Supreme Court that the tax liabilities of the previous years can be deducted to find out the net taxable wealth. - the cumulative effect of all the above said aspects will go to justify the stand taken by the petitioner that failure to submit the return within the time allowed by the statute was not wilful. Regarding continuing offence - the failure to submit a return within a time has led to the assessment of the wealth tax to the best of the judgment of the Assessing Officer. After such an assessment, there is no question of the assessee filing a retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the petitioner. Hence, a further notice was issued on 10.02.1995 inviting the attention of the petitioner to the notice dated 18.01.1994 and requesting the petitioner to file the wealth tax return for the Assessment Year 1993-94 immediately. Since the said reminder also did not invoke a response by the filing of the wealth tax return for the concerned year, the Deputy Commissioner of Income Tax, Special Range XI, Chennai 34, issued a further notice on 31.07.1995 requesting the petitioner to file the details of assets and also the debts/liabilities of the petitioner as on 31.03.1993, the corresponding accounting year for the Assessment Year 1993-94. The auditor of the petitioner, in response to the said notice, sent a reply on 18.08.1995 to the Deputy Commissioner of Income Tax, Special Range XI, Madras requesting further time upto and inclusive of 15.09.1995 for complying with the direction and requested for the postponement of the case of wealth tax assessment of the petitioner after 18.09.1995. The Deputy Commissioner of Income Tax, Special Range XI, Madras issued a reply dated 23.08.1995 reposting the Wealth Tax assessment of the petitioner for the Assessment year 1993-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the debts would include also the tax liabilities as per the pre-amended law and that the petitioner was entitled to claim deduction of the Income Tax liabilities of the Assessment Year and the earlier years attributable to the assets which were included in the net wealth. Thereafter, the Assessing Officer, namely the Assistant Commissioner of Wealth Tax, Central Circle (II) (2), Chennai 34, passed a fresh assessment order fixing the net taxable wealth at Rs. 1,34,99,600/- and the total wealth tax including interest at Rs.1,91,993/-. The said order was also challenged again in an appeal before the Commissioner of Income Tax (Appeals) I, Chennai 34. The said appeal was allowed holding that the tax liabilities of the petitioner, whether they pertain to the gifts or otherwise, should be deducted in computing the taxable net wealth of the petitioner, if such tax liabilities subsisted on the date of valuation. It had also been directed in the said order that 15% of the value of the silver wares should be allowed as deduction towards impurities as it was done in case of gold jewelry. With the said observations, the appeal was allowed and the Assessing Officer was directed to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice the amount of the Wealth Tax worked out penalty under Section 18(1)(c). v) Even before such a final assessment and a final order fixing the tax liability and the penalty indicated supra, sanction for prosecution of petitioner under Section 35-B of the Wealth Tax Act, 1957 was sought for from the Commissioner of Income Tax, Central Central II (2), Chennai under Section 35-I(1) of the Wealth Tax Act, 1957. The Commissioner of Income Tax, Central Circle -II (2), Chennai passed an order on 12.11.1997 under Section 35-I(1) of Wealth Tax Act, 1957 according sanction for prosecution of the petitioner for an offence under Section 35-B of the Wealth Tax Act, 1957 for the failure to file return of wealth for the Assessment Year 1993-94. In the said order also, the Commissioner of Wealth Tax, Central II, Chennai 34 authorized and directed Sri. N.Sundara Rajan, Assistant Commissioner of Wealth Tax, Central Circle II (2), Chennai to file the complaint in the Court of Additional Chief Metropolitan Magistrate, (E.O-I), Egmore, Chennai, or such other competent Court having jurisdiction. On the strength of the said sanction order, the said officer filed a complaint under Section 35-B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file the return shall not be a punishable offence. Section 35-I of the Wealth Tax Act, 1957 prescribes a condition that previous sanction of the Commissioner or Commissioner (Appeals) shall be obtained for prosecuting a person for an offence under the Act. Section 35-J of the Wealth Tax Act, 1957 makes an offence under Section 35-B of the said Act a non-cognizable offence within the meaning of the code of criminal procedure and that is the reason why the criminal proceedings against the petitioner herein was instituted on a complaint in writing made by the respondent herein. 6. The gist of the complaint is that the petitioner herein wilfully failed to file the return of wealth under Section 14(1) of the Wealth Tax Act, 1957 even though she was having the assessable wealth of Rs.1,34,99,600/- for the Assessment Year 1993-94 and the failure to furnish the return in due time for the Assessment year 1993-94 was wilful and deliberate, since such default continued even after the issue of statutory notices and reminder letters and that by such an act, namely wilful failure to file the return of wealth, the petitioner herein had committed an offence punishable under Section 35-B of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax, Special Range-XI, Madras to the Assistant Commissioner of Income Tax, Central Circle XI(5) Madras only in respect of income tax and not in respect of wealth tax. Therefore the complaint lodged by the officer under section 35-B of the Wealth Tax Act, 1957 before the Additional Chief Metropolitan Magistrate, Egmore, Chennai, should be construed as a complaint by an officer having no jurisdiction. iv) The complaint was preferred without a valid sanction order and hence the institution of the criminal proceedings itself is vitiated. v) The sanction order is claimed to have been passed subsequent to the date of assessment order passed by the Assistant Commissioner of Income Tax, Central Circle II(2), Chennai on 30.06.1997, which has been marked as Ex.P18 before the court below, the sanction order of the sanctioning authority simply refers to the initial assessment order dated 15.02.1996 and the order of the Commissioner of Income Tax (Appeals) IV dated 16.06.1997, wherein the appeal preferred by the petitioner herein against the assessment was allowed in part and the Assessment Officer was directed to ascertain the income tax liability of the relevant years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, it cannot be said that the petitioner's tax liability was either "Nil" or did not exceed Rs.3,000/- for the assessment year 1993-94 and hence the initiation of prosecution for an offence under section 35-B of the Wealth Tax Act, 1957 is proper and valid. ii) So far as the second and third contentions of the learned counsel for the petitioner is concerned, a notification vesting or transferring the jurisdiction in respect of income tax case under the Income Tax Act shall hold good for vesting the jurisdiction for the wealth tax assessments under the Wealth Tax Act, 1957 also by virtue of section 2(ca) of the Wealth Tax Act, 1957, which refers to sub section (1) and (2) of section 120 of the Income Tax Act or any other provisions of the Income Tax Act and hence the said contentions should be rejected as untenable. iii) The contention that the complaint was preferred without a valid sanction order should be rejected since Ex.P29 was filed along with the complaint. iv) The mere omission to refer to the assessment order dated 30.06.1997, as one of the documents taken into consideration by the sanctioning authority, does not mean that the same was not taken into consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rosecuted for an offence under section 35-B, if the wealth tax on regular assessment does not exceed Rs.3,000/-. The said contention, as rightly contended by the learned counsel for the petitioner, cannot be sustained in view of the following facts. No doubt, the consequential assessment order, based on the remand of the matter by the appellate authority was subsequently challenged and the appellate authority also chose to set aside the consequential assessment order and remand the matter back to the Assessing Officer himself. However, the department filed an appeal W.T.A.No.92(Mds)/1999 before the Income Tax Appellate Tribunal, Chennai Bench, Chennai against the order of the Commissioner of Income Tax (Appeals)-I, Chennai-34 dated 11.06.1999 (Thiru.N.P.Tripathy's order) and an appeal in W.T.A.No.293(Mds)/1997 against the earlier order of the Commissioner of Income Tax, (Appeals) IV, Chennai (Thiru.A.Selvaraj's order) dated 16.06.1997. Similarly, the petitioner filed an appeal in W.T.A.No.277(Mds)/1997 before the said Tribunal against the consequential assessment order. The Tribunal, after hearing, allowed the appeals filed by the department and dismissed the appeal filed by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of "Assessing Officer" found in section 2(ca) of the Wealth Tax Act, 1957, which in turn refers to sub sections (1) and (2) of section 120 or any other provision of the Income Tax Act for the purpose of vesting of jurisdiction in respect of wealth tax. As rightly contended by the learned Senior Special Public Prosecutor for Income Tax Cases, a conjoint reading of the said sections will be a fitting answer to the above said contentions raised on behalf of the petitioner and for the rejection of the said contentions as unsustainable. 14. The next contention raised on behalf of the petitioner is more vital and the learned counsel for the petitioner strongly relies on the said contention. According to the learned counsel for the petitioner, the complaint was lodged without a valid sanction order and hence the criminal proceedings initiated by preferring a complaint is vitiated. In support of his contention, the learned counsel for the petitioner would contend that initially the sanction order was not available with the case bundle and a copy application filed on behalf of the petitioner was returned. It is also the contention of the learned counsel for the petitioner that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted documents". According to the submission made on behalf of the petitioner, the omission to specifically refer to the consequential assessment order dated 30.06.1997 marked as Ex.P18 will show that the said document was not placed before the sanctioning authority and that the sanctioning authority, without application of mind, mechanically signed the order prepared by the officers subordinate to him. It is also the contention of the learned counsel for the petitioner that the sanctioning authority failed to verify whether any appeal against the assessment order dated 30.06.1997 was preferred; that there is also absence of any recital to the effect that no appeal had been preferred and that the same would show non-application of mind vitiating the order of sanction itself. In this regard, the contention of the learned Senior Special Public Prosecutor for Income Tax cases is that the above said contention raised on behalf of the petitioner is untenable for the simple reason that the sanction order refers to the figures of net wealth and wealth tax which correspond to the figures found in Ex.P18-assessment order and that therefore, the mere omission to specifically mention Ex.P18-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing sanction for prosecution is not an empty formality and it is a valid right given to the petitioner. In the said case, the Hon'ble Apex Court, after referring to several previous judgments including the one by Privy Council, has made the following observation:- "indisputably, application of mind on the part of the sanctioning authority is imperative. The order granting sanction must be demonstrative of the fact that there had been proper application of mind on the part of the sanctioning authority. We have noticed hereinbefore that the sanctioning authority had purported to pass the order of sanction solely on the basis of the report made by the Inspector General of Police, Karnataka Lokayukta. Even the said report has not been brought on record. Thus, whether in the said report, either in the body thereof or by annexing therewith the relevant documents, IG Police, Karnataka Lokayukta had placed on record the materials collected on investigation of the matter which would prima facie establish existence of evidence in regard to the commission of the offence by the public servant concerned is not evident. Ordinarily, before passing an order of sanction, the entire records cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inclined to accept the contention of the learned counsel for the petitioner that the learned trial judge ought to have considered the above said aspect and decided the said question in favour of the petitioner. To this extent, the order of the trial judge is infirm and defective and the same can be corrected in exercise of the revisional powers of this court. 20. Yet another ground urged on behalf of the petitioner seeking discharge is that the failure on the part of the petitioner to file the wealth tax return in time was not wilful and only a wilful failure to file the return shall be a punishable offence under section 35-B of the Act and that this aspect was not at all considered by the sanctioning authority. To counter the said argument, the learned Senior Special Public Prosecutor for Income Tax Cases, has referred to section 35-O of the Wealth Tax Act, 1957 and contended that the mental element of the assessee in such cases shall be presumed and the assessee, who wants to prove the absence of the mental element, has to take it as a plea of defence and prove it in trial. Per contra, the learned counsel for the petitioner has cited the judgment of the Apex Court in In Moh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return can be held wilful, especially in the light of the reasons stated by the petitioner, which have been discussed above. 22. On the other hand, the learned Senior Special Public Prosecutor for Income Tax cases has taken a stand that though the initial failure to file the return before the appointed date can be said to be with a view to get those particulars, the failure to submit the return even after repeated notices under section 16(4) of the Act, will show that the failure on the part of the petitioner was wilful. This court is of the view that the said contention was raised on behalf of the petitioner to show that the sanctioning authority did not apply its mind to the above said aspect and it simply relied on the presumption found in section 35-O of the Act, which is not available to the sanctioning authority at the pre-prosecution stage. Therefore, on the above said ground also, this court comes to the conclusion that there is non-application of mind on the part of the sanctioning authority and the same shall be a ground on which the petitioner shall be entitled to an order of discharge. Even otherwise, if the petitioner is desirous of proving the absence of menta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only in 1992 to be applied for the assessment year 1993-94, the assessment year concerned in this case. Therefore, the cumulative effect of all the above said aspects will go to justify the stand taken by the petitioner that failure to submit the return within the time allowed by the statute was not wilful. 25. The contention of the learned Senior Special Public Prosecutor for Income Tax Cases that the failure to file the return even after the service of notice under section 16(4) of the Wealth Tax Act, 1957 would show that the same was wilful, is not sound for the simple reason that once the time stipulated in the Act expires, the offence gets completed. Even if a return is filed subsequently, the criminal liability will not get wiped out. It is also pertinent to note that the prosecution has not been launched for non-compliance with the demand made in the notice under section 16(4) of the Wealth Tax Act, 1957, because the prosecution is sought to be launched for an offence under section 35-B of the Wealth Tax Act, 1957 and not for an offence under Section 35-C of the Act. Section 35-B does not refer to any notice under section 16(4). It simply refers to sub section 14(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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