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TMI Blog2011 (6) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 14(1) of the Wealth Tax Act, 1957 on or before 31.08.1993, the last date for filing the same. Consequent to the failure to submit the return on or before the said date, a notice was issued to the petitioner by the Assistant Commissioner of Income Tax, Film Circle, Madras 34 on 18.01.1994 under Section 16(4) of the Wealth Tax Act, 1957 directing the petitioner to produce the return of wealth of the petitioner for the Assessment Year 1993 94. Even after the receipt of the said notice, the return of wealth for the assessment of Wealth Tax was not submitted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn showing nil wealth tax. Citing the same, a reply was sent to the show-cause notice to the effect that there was no wilful failure in furnishing the return in time and that the proceedings sought to be initiated under Section 35-B might be dropped. iii) In the appeal, it was contended that the tax liability of the petitioner for the previous years ought to have been deducted from the assets to find out the net taxable wealth, besides the challenges made on other grounds also. The appellate authority, namely Commissioner of Income Tax (Appeals) IV, Chennai allowed the appeal in part, holding 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make the total wealth tax payable Rs.5,95,617/-. A Notice under Section 18(1)(b) of the Wealth Tax Act, 1957 came to be issued by the Assessing Officer on 03.07.2006 calling upon the petitioner to show-cause why an order imposing penalty should not be made under Section 18(1)(b) of the Wealth Tax Act, 1957 stating the failure to furnish the return of wealth in response to the notice issued under Section 16(4) of the Wealth Tax Act, 1957 and also the failure to furnish the return under Section 14(2) of the Wealth Tax Act, 1957. Subsequently, an order was passed on 28.07.2006 fixing an amount equal to twice 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 prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional Chief Metropolitan Magistrate (Economic Offence I), Egmore, Chennai, a case instituted on the complaint preferred under Section 35-B of the Act by the Assistant Commissioner of Wealth Tax Central Circle II (2), Chennai 34, the respondent herein. Section 35-B of the Wealth Tax Act, 1957 makes it a punishable offence if a person wilfully fails to furnish in due time the return of his net wealth which he is required to furnish under subsection (i) of Section 14 or by a notice issued under sub-section (2) of Section 14 or subsection (i) of Section 17. The proviso therein contains the exemptions wherein the failure to 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 respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 on 23.06.1994 transferring the case of the petitioner from Assistant Commissioner, Film Circle, Madras to the Deputy Commissioner, Special Range XI, Madras as Assessing Officer was made only in respect of the Income Tax assessment and no separate notification for transferring the case of wealth tax assessment of the petitioner was issued. Hence the Assessment Order dated 15.02.1996 passed by the Deputy Commissioner of Wealth Tax, Special Range-XI, Madras was without jurisdiction. iii) Again by a notification dated 21.06.1996, the Chief Commissioner of Income Tax, Chennai 34 transferred the case of the petitioner from Deputy Commissioner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Prosecutor for income tax cases has made the following submissions:- i) It is not correct to say that the net wealth of the petitioner for the assessment year 1993-94 was a negative wealth and the debts exceeded the assets to the tune of Rs.24,97,937/-. In fact under Ex.P18-assessment order made in accordance with the best judgment of the Assessing Officer pursuant to the failure of the petitioner to submit the return, the net wealth of the petitioner was assessed at Rs.1,38,99,600/- and the wealth tax for the year 1993-94 was fixed at Rs.1,19,986/- together with an interest of Rs.71,997/- making the total tax liability to Rs.1,91,993/-. In view of the said 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 jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the order of the trial court has got to be sustained. 10. This court paid its anxious considerations to the above said points urged on both sides. 11. Let us now consider whether the contentions raised on behalf of the petitioner can be sustained. The first contention raised on behalf of the petitioner is to the effect that the petitioner had a negative wealth to the tune of Rs.24,97,939/- for the concerned assessment year, namely 1993-94 and the tax liability for the said year was "Nil" and that in view of the same, the protection provided in the proviso to section 35-B of the Wealth Tax Act, 1957 is available to the petitioner since the proviso says that an assessee is liable to be prosecuted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eputy Commissioner of Income Tax, Special Range-XI, Madras to the Assistant Commissioner of Income Tax, Chennai-II(5), Madras only in respect of income tax and not in respect of wealth tax and that therefore, the consequential assessment order passed and the complaint preferred against the petitioner for an alleged offence under section 35-B of the Wealth Tax Act, 1957 by the said Assistant Commissioner before the learned Additional Chief Metropolitan Magistrate (E.O.I), Egmore, Chennai are to be construed as orders passed and the complaint preferred by an officer without jurisdiction. In this regard, the learned Senior Special Public Prosecutor for Income Tax Cases has drawn the attention of the court to the definition 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 petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hennai on 30.06.1997. But, as rightly pointed out by the learned counsel for the petitioner, the sanctioning authority did not make a specific reference in the sanction order to the said assessment order dated 30.06.1997. The learned counsel for the petitioner has also pointed out the fact that the assessment order dated 30.06.1997 is not one of the documents referred to as items 1 to 12 in the sanction order, which were taken into consideration to arrive at a subjective satisfaction as to whether sanction for prosecution should be granted. The learned counsel also pointed out the fact that the 13th item of the list of documents found in Ex.P29-sanction order is general in its terms and it simply refers to "other connected 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 petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanction. 16. The learned Senior Special Public Prosecutor would contend that any defect or infirmity in the order of sanction cannot be canvassed, as a point for discharge and the petitioner relying on such defect or infirmity, should prove that prejudice was caused to her and that the same can be conveniently considered only at the end of the trial and not before that. As an answer for the said submission made by the learned Senior Special Public Prosecutor for Income Tax Cases, the learned counsel for the petitioner has drawn the attention of the court to the judgment of the Hon'ble Apex Court in State of Karnataka vs. Ameerjan reported in (2007) 11 Supreme Court Cases 273 and contended that the necessity of getting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same has not been referred to in Ex.P29-sanction order. Such a document cannot be sought to be pressed into service to explain the absence of reference to the assessment order dated 30.06.1997. 19. It has been repeatedly held that the requirement of getting a sanction order for prosecution is not an empty formality and any vital defect or infirmity in the sanction order will go to the root of the criminal proceedings itself, since such a protection given will be meaningless, if a person is to endure the ordeal of facing the trial and wait till the end of the trial to show that the sanction order is defective, infirm and the proceedings initiated on the basis of the sanction order is vitiated. For the above said reasons, this court is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances leading to the failure on the part of the petitioner to file the return within the time stipulated in the Act. According to the petitioner, she was of the considered view and she had legal opinion from persons of high legal calibre and also from auditors that the tax liabilities of the previous years are allowed to be deducted from the wealth to find out the net taxable wealth and since the income tax and wealth tax assessment for the previous assessment years were not finalised and concluded, the petitioner was forced to take time with an intention to file a correct and complete return. The mere fact that furnishing of the statements of assets furnished by the petitioner was not accepted by the department, is not the ground on which the failure to submit 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 repeat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice 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. It is also pertinent to note that the petitioner was also of the view that the liabilities could be deducted from the wealth irrespective of the fact whether such a liability sought to be deducted was incurred with relation to a particular asset or not and that the same was also the reason why the petitioner had to submit an asset and liability statement along with the appeal showing negative wealth. The condition that the liabilities and debts incurred in relation to the wealth in question alone can be deducted was introduced only by an amendment to the Wealth Tax Act, 1957. Such an amendment was brought into effect 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee filing a return. In such cases, only for the escaped assets, further particulars can be called for and consequential prosecution can be made under other provisions of the Act and not for the offence under section 35-B of the Wealth Tax Act, 1957. Whether there was possibility of granting sanction for any other offence, is not germane for the present revision case. Therefore, this court does not consider the same. 27. For all the reasons stated above, this court is of the considered view that the petitioner has clearly established a case for discharge and the court below has committed an error in rejecting the contention of the petitioner that she is entitled to discharge. Before parting with the case, this court wants to make it on record that, the implementation of the Tax Legislation should be tax payers friendly and at the same time the tax evaders should not be spared. Had the sanctioning authority approached the case, keeping the same in his mind, the sanctioning authority would not have granted sanction for prosecuting the petitioner under section 35-B of the Act. 28. In the result, the Criminal Revision Case is allowed and the order of the learned Additional ..... X X X X Extracts X X X X X X X X Extracts X X X X
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