J. Jayalalitha vs The Assistant Commissioner of Wealth Tax Central Circle II (2)

P.R. Shivakumar, J.—This Criminal Revision case has been preferred u/s 397 r/w.401 Code of Criminal Procedure by the Petitioner herein,

who figures as the accused in E.O.C.C. No. 263 of 1997 on the file of the Additional Chief Metropolitan (E.O-I), Egmore, Chennai questioning

the legality of the order of the said Court dated 08.07.2010 made in M.P. No. 240 of 2010 in E.O.C.C. No. 263 of 1997. The said petition, filed

seeking an order of discharge, was dismissed by the trial Court by the impugned order. The same is challenged in the present criminal revision

case.

The brief facts leading to the filing of the present criminal revision case can be stated as follows:

i) The Petitioner was assessed to Wealth Tax since the Assessment Year 1966-67. The Wealth Tax return for the Assessment Year 1993-94 was

not filed as per the requirement u/s 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 u/s 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 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 1993-94 finally to be heard on 09.09.1995 at 10.30 a.m. Again the auditor of

the Petitioner sent a letter dated 16.09.1995 requesting adjournment of the case and reposting of the same on or after 09.10.1995 stating the

hearing dates fixed before the said date in a number of appeals before the Income Tax Appellate Tribunals. A reply was sent by the Deputy

Commissioner of Income Tax on 27.09.1995 giving one more opportunity, reposting the Income Tax/Wealth Tax assessment for the Assessment

year 1993-94 to 11.10.1995 at 10.30 a.m. Again a further prayer for reposting the matter to 20.10.1995 was made by a letter dated 07.10.1995

sent by the auditor of the Petitioner on her behalf. Even thereafter, the wealth tax return for the said Assessment year was not filed. Therefore, the

Deputy Commissioner of Income Tax, Special Range XI, Madras - 34 proceeded to assess Wealth Tax u/s 16(5) of the Act to the best of his

judgment. By the assessment, the total taxable wealth of the Petitioner was assessed at Rs. 3,17,43,100 and wealth tax was levied as follows:

Wealth Tax : Rs. 3,02, 431.00

Interest u/s 17-B of the Wealth : Rs. 1,69,344.00

Tax Act, 1957

Total Wealth Tax : Rs. 4,71,775.00

It has also been stated in the assessment order that penalty proceedings u/s 18(1)(b) and 18(1)(c) were also initiated.

ii) Thereafter, the Assistant Commissioner of Wealth Tax, Central Circle II (5), Madras - 34 issued a Show Cause Notice dated 30.07.1996 to

show cause as to why proceedings should not be launched against the Petitioner u/s 35-B of the Wealth Tax Act, 1957. Meanwhile an appeal was

filed against the Assessment Order before the appellate authority, appending a formal return 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 u/s 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 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 make a fresh assessment. Thereafter, the Assessing Officer,

namely the Assistant Commissioner of Wealth Tax, Central Circle II (2), Chennai - 34 reassessed the assets and passed an order on 03.08.1999

holding that the Petitioner was having a deficit wealth of Rs. 24, 97,939/-and thereby holding that the Wealth Tax liability for the Assessment year

1993 -94 was ''nil''.

iv) Meanwhile, an appeal was filed before the Income Tax Appellate Tribunal, Chennai Bench ""A"", Chennai by the Assessing Officer in W.T.A.

No. 293(Mds)/1997 (Assessment Year 1993-94) challenging the order of the Commissioner of Income Tax (Appeals) - IV, Chennai dated

16.06.1997. The Appellate Tribunal held that deduction was permissible only if the debts owed could be said to be incurred in relation to the

assets and that the liability to make payment of tax cannot be construed as debt owed in relation to the assets and allowed the appeal by its order

dated 16.12.2005. A similar appeal filed by the Deputy Commissioner of Wealth Tax, Central Circle II(2) challenging the order of the

Commissioner of Income Tax (appeals) dated 11.06.1999 was also allowed by an order even dated. An appeal filed by the Petitioner in W.T.A.

No. 277 (Mds)/1997 was also dismissed on 16.12.2005. Thereafter, the Assessment Officer, namely the Assistant Commissioner of Wealth Tax,

Central Circle (II)(2), Madras - 34 passed a fresh order based on the orders of the Income Tax Appellate Tribunal dated 16.12.2005 made in

W.T.A. No. 293(Mds)/1997. By the said order, the wealth tax liability with interest was fixed at Rs. 5,95,617/-. By an order dated 03.07.2006,

the Assessing Officer assessed the Wealth Tax at Rs. 2,55,33,800/-to which a sum of Rs. 1,58,286/-was added as interest u/s 17B. A sum of Rs.

1,91,993/-was also added to make the total wealth tax payable Rs. 5,95,617/-. A Notice u/s 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 u/s

18(1)(b) of the Wealth Tax Act, 1957 stating the failure to furnish the return of wealth in response to the notice issued u/s 16(4) of the Wealth Tax

Act, 1957 and also the failure to furnish the return u/s 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 u/s 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

u/s 35-B of the Wealth Tax Act, 1957 was sought for from the Commissioner of Income Tax, Central Central II (2), Chennai u/s 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 u/s 35-I(1) of Wealth

Tax Act, 1957 according sanction for prosecution of the Petitioner for an offence u/s 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 u/s 35-B of the Wealth Tax Act, 1957 against the Petitioner herein before the Additional

Chief Metropolitan Magistrate, (E.O-I), Egmore, Chennai, and the same was taken on file as E.O.C.C. No. 263 of 1997 on the file of the said

Court. The case is now in a part heard stage before the trial Court.

vi) While so, the Petitioner preferred a miscellaneous petition in M.P. No. 240 of 2010 on the file of the trial Court seeking an order of discharge

u/s 245(1) of the criminal procedure code, contending that there was no liability on the part of the Petitioner to submit a return on the premises that

she possesed only a negative wealth to the tune of Rs. 24, 97,939/-; that the complaint itself was premature and that the sanction order for

prosecution was also invalid. The learned trial Judge, after hearing both sides rejected the contention of the Petitioner and dismissed the petition by

order dated 08.07.2010 and the same is impugned in this Criminal Revision Case.

The point that arises for consideration in this criminal revision case is ""whether the order of the learned Additional Chief Metropolitan Magistrate

(Economic Offence - I), Egmore, Chennai dated 08.07.2010 made in M.P. No. 240 of 2010 in E.O.C.C. No. 263 of 1997 is liable to be set

aside in exercise of the revision powers of this Court u/s 397 r/w. Section 401 of the Code of Criminal Procedure .?

The arguments advanced by Mr. A. Navaneetha Krishnan, representing the learned Counsel on record for the Petitioner and that of Mr. Mr. K.

Ramasamy, Senior Spl. Public Prosecutor for Income Tax were heard. The material records placed were also perused. This Court paid its anxious

consideration to the same.

The Petitioner figures as the sole accused in E.O.C.C. No. 263 of 1997 on the file of the learned Additional Chief Metropolitan Magistrate

(Economic Offence - I), Egmore, Chennai, a case instituted on the complaint preferred u/s 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 Sub-section (i) of Section 14 or by a

notice issued under Sub-section (2) of Section 14 or Sub-section (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 u/s 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.

The gist of the complaint is that the Petitioner herein wilfully failed to file the return of wealth u/s 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 u/s 35-B of the

Wealth Tax, 1957.

The complaint was dated 05.12.1997 and it was received in the Court on 09.12.1997. Paragraph 2 refers to the order of sanction dated

12.11.1997 passed by the Commissioner of Income Tax, Central II, Chennai. The Court below took it on file, issued process and proceeded with

the trial of the case and the matter is now in the part heard stage. At such point of time, a petition u/s 245(1) Code of Criminal Procedure for

discharge was filed as M.P. No. 240 of 2010 in E.O.C.C. No. 263 of 1997 and the same was dismissed by the trial Court by the impugned

order.

The learned Counsel for the Petitioner, in support of his contention that the impugned order of the Court below cannot be sustained in law and

the same deserves to be set aside, has made the following submissions:

i) 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.

24,97,939/-and therefore, there was no wealth tax liability attached to the Petitioner. The proviso to Section 35-B of the Wealth Tax Act, 1957

makes the failure of a person to file a return u/s 14(1) of the Wealth Tax Act, 1957, a punishable offence only if the tax payable by such person on

his net wealth exceeds Rs. 3,000/-. The Petitioner had only a negative wealth and the tax liability was nil for the assessment year 1993-94. Hence

the initiation of prosecution for an offence u/s 35-B is against the said provision and hence the Petitioner is entitled to discharge.

ii) The initial assessment order was passed by the Deputy Commissioner of Wealth Tax, Special Range - XI, Madras-34 on 15.02.1996. The

notification issued by the Commissioner of Income Tax, Tamil Nadu - IV, Chennai-34 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 u/s 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 the earlier years. The consequential assessment order of the

Assistant Commissioner of Income Tax dated 30.06.1997 has not been referred to in the sanction order. The said order is also not one of the

documents noted as 1 to 12 in the sanction order, as the documents considered by the sanctioning authority. The 13th document is general in its

terms, which states simply ""other connected documents"". The omission to 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 the sanctioning authority, without application of

mind, mechanically signed the order prepared by the officers subordinate to him

vi) The sanctioning authority failed to verify whether any appeal against the consequential assessment order dated 30.06.1997 was preferred and

the same will show non-application of mind vitiating the order of sanction.

Vii) An Assessee shall be guilty of an offence u/s 35-B of the Wealth Tax Act, 1957 only if his/her failure to file return is wilful. The Petitioner, on

the advice of experts in law and auditors, genuinely believed that she was entitled to claim deduction of the income tax and wealth tax liabilities of

the previous years and since the final assessment of the income tax and the wealth tax for the previous assessment years had not been finalised, she

was waiting for the same to file a proper and correct return of wealth and that was the reason why time was taken repeatedly on her behalf for the

filing of the particulars of the assets and liabilities.

In reply to the above said points raised by the learned Counsel for the Petitioner, the learned Senior Special 16 Public 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 u/s 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 consideration and item No. 13 of the list of documents considered found in the sanction

order would include the assessment order dated 30.06.1997 also.

v) The contention raised on behalf of the Petitioner that the failure to file the return within the stipulated time was not wilful, cannot be canvassed at

this stage in view of Section 35-O of the Wealth Tax Act, 1957, which says that the mental element is to be presumed and the person claiming

absence of mental element has to take it as a plea of defence and establish it in the trial and that the same cannot be taken as a ground for

discharge. The fact that the Petitioner failed to submit the return even after the notices u/s 16(4) of the Act would show that the default was wilful.

vi) The failure to file return within the time stipulated in the Act is a continuing offence. The offence continues even today, since till date the

Petitioner has not filed her return of wealth pertaining to the assessment year 1993-94.

vii) Tax evasion should not be lightly dealt with and the persons inclined to evade tax liability should not be spared and that is the reason why

stringent clauses have been incorporated in the tax legislation.

viii) The Petitioner had earlier filed a criminal original petition u/s 482 Code of Criminal Procedure for quashing the criminal proceedings and later

filed a revision after unsuccessfully moving a criminal miscellaneous petition for discharge and both the criminal original petition and the criminal

revision case went against the Petitioner. Once again the Petitioner has approached the court for discharge and hence the dismissal of the petition

by the trial court cannot be found fault with and the order of the trial court has got to be sustained.

This Court paid its anxious considerations to the above said points urged on both sides.

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 u/s 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 Petitioner. Admittedly, after the disposal of the appeals by the Tribunal, the Petitioner was assessed to wealth tax

for the concerned assessment year, which was more than 3,000/- rupees. Hence, the protection found in proviso to Section 35-B of the Wealth

Tax Act, 1957 is not available to the Petitioner. Therefore, the first contention raised on behalf of the Petitioner that the prosecution is obnoxious,

because the Petitioner possessed only a negative wealth of her tax liability for the assessment year 1993-94 did not exceed Rs. 3,000/-,deserves

to be rejected.

The second contention of the learned Counsel for the Petitioner is that the initial assessment order dated 15.02.1996 was passed by the

Deputy Commissioner of Wealth-Tax, Special Range.XI, Madras.600034; that the notification issued by the Commissioner of Income Tax, Tamil

Nadu-IV, Madras-34 on 23.06.1994 transferring the case of the Petitioner from the Assistant Commissioner of Income Tax, Film Circle, Madras

to the Deputy Commissioner of Income Tax, Special Range-XI, Madras and designating him as the Assessing Officer, was effected only in respect

of the income tax assessment and no separate notification for transferring the case of the wealth tax assessment of the Petitioner was issued and

that for the said reason the initial assessment order of the Deputy Commissioner of Wealth Tax, Special Range-XI, Madras dated 15.02.1996 was

one without jurisdiction.

The next contention of the learned Counsel for the Petitioner is that again on 21.06.1996, another notification was issued by the Chief

Commissioner of Income Tax, Chennai-34 transferring the case of the Petitioner from the Deputy 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 u/s 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 Petitioner and for the

rejection of the said contentions as unsustainable.

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 copy of the sanction order was not furnished to the Petitioner. The learned Senior Special

Public Prosecutor for Income Tax Cases submits that the said contention is not open to be canvassed in the present revision case, since the very

same contention was raised earlier in Crl.O.P. No. 27245/2007 filed u/s 482 Code of Criminal Procedure for quashing the proceedings and the

said Crl.O.P was dismissed accepting the contention of the prosecution that the sanction order was filed along with the complaint. Now, on

verification of the records, it is found that the sanction order is available with the case file and it bears the court seal of the trial court exhibiting the

very same date on which the complaint was filed. Therefore, the contention raised on behalf of the Petitioner that the complaint was preferred

without annexing the order of sanction is not sustainable. It is also pertinent to note that the said point was canvassed in the earlier proceedings and

it was decided against the Petitioner in the criminal original petition and criminal R.C. No. 666/2008. Hence, this Court is of the view that the

contention that the complaint was preferred without enclosing the sanction order cannot be sustained.

The next contention of the learned Counsel for the Petitioner is that the consequential assessment order dated 30.06.1997 was not placed

before the sanctioning authority and the same is obvious from the fact that the same is not specifically shown to be one of the documents

considered by the sanctioning authority. Of course, the consequential assessment order marked as Ex.P18 was passed by the Assistant

Commissioner of Income Tax, Central Circle II (2), Chennai 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 th as to whether sanction for

prosecution should be granted. The learned Counsel also pointed out the fact that the 13item 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 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-assessment order, cannot be the ground on which

the Petitioner can canvas that the order of sanction was passed without application of mind and hence invalid. This Court is not in a position to

accept the above said contention of the learned Senior Special Public Prosecutor for Income Tax Cases on behalf of the prosecution. As rightly

pointed out by the learned Counsel for the Petitioner, a vital document, namely the assessment order dated 30.06.1997 under which alone the

wealth tax liability of the Petitioner was ascertained, has not been specifically referred to by the sanctioning authority in his sanction order marked

as Ex.P29. The omission to specifically refer to Ex.P18 and include the same in the list of documents considered by the sanctioning authority, will

also strengthen the case of the Petitioner that the said order could not have been placed before the sanctioning authority and the sanctioning

authority, without application of mind, ought to have signed the order prepared by the subordinates. It should also be noticed that PW-3 examined

on the side of the prosecution has admitted that he was aware of the fact that, on receipt of the order of assessment dated 30.06.1997, an appeal

was preferred. Even then, he has not placed the fact before the sanctioning authority for its consideration. The sanctioning authority, as rightly

contended by the learned Counsel for the Petitioner, has not adverted to the fact whether any appeal was preferred and if so, whether the same

was pending. The same will also show non-application of mind and mechanical signing of the order on the part of the sanctioning authority, which

will vitiate the order of sanction.

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. Ameer Jan, 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 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 containing the materials collected against the accused should be placed before the sanctioning authority. In

the event, the order of sanction does not indicate application of mind as (sic to) the materials placed before the said authority before the order of

sanction was passed, the same may be produced before the court to show that such materials had in fact been produced.

In Mohd. Iqbal Ahmed Vs. State of Andhra Pradesh, , the Hon''ble Apex Court while referring to the necessity of sanction, has made the

following observation:

Any case instituted without a proper sanction must fail because this being a manifest defect in the prosecution, the entire proceedings are rendered

void, ab initio. What the court has to see is whether or not the Sanctioning Authority at the time of giving sanction was aware of the facts

constituting the offence and applied its mind for the same: any subsequent fact which may come into existence after the grant of sanction is wholly

irrelevant.

An attempt was made on behalf of the prosecution by showing a copy of the letter dated 11.08.1997 from the Additional Commissioner of

Income Tax addressed to the Commissioner of Income Tax, Central II, Chennai, namely the sanctioning authority to the effect that a copy of the

revision order was enclosed. A reading of a copy of the said letter enclosed in the typed set of papers produced by the prosecution shows that the

assessment order dated 30.06.1997 was not sent to the sanctioning authority with the initial letter seeking sanction. The letter was addressed by

the Additional Commissioner to the Commissioner. The 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.

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.

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 u/s 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 Mohd. Iqbal Ahmed v. State of A.P. reported in 1979 SCC

(Cri) 926. In the said case, the Hon''ble Apex Court has made the following observation:

4.... In the first place there is no question of the presumption being available to the sanctioning authority because at that stage the occasion for

drawing a presumption never arises since there is no case in the court...

Of course it is true that Section 35-O of the Act refers to such a presumption. For better appreciation, the relevant portion of that section,

namely sub Clause (1) is extracted here under:

(1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the

existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act

charges as an offence in that prosecution.

It is pertinent to note that the said sub clause refers to prosecution. 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?"". For the said reason also, this Court accepts the contention of the learned

Counsel for the Petitioner that the sanctioning authority has failed to apply its mind regarding the circumstances 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.

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

u/s 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 mental element required for constituting an offence u/s 35-B of the Wealth Tax Act, 1957 based on the materials already available on

record, without adducing further evidence, it shall be unethical and a waste of exercise of time of the court and the prosecution to ask the Petitioner

to face the entire trial and put-forth such an argument at the end of trial. If such a contention based on the available materials can be accepted, this

Court finds no reason as to why the same cannot be the ground on which the Petitioner can seek discharge before the conclusion of the trial.

It is also pertinent to note that the dismissal of the earlier criminal OP and the criminal RC will not be a bar for the Petitioner to seek discharge

at a subsequent stage. Previously, prayer for discharge was made on the ground that copy of the sanction order was not supplied and the sanction

order was not available in the case bundle. This Court has also observed that the question of the validity of the sanction order had to be gone into,

when the sanction order would be produced. Now, after the sanction order was produced and marked as Ex.P29, the Petitioner approached the

trial court for an order of discharge, which the trial court has chosen to dismiss. This Court, on going through the materials already available on

record, is of the considered view that the Petitioner''s attempt to seek discharge based on the materials already available on record, is well founded

and the same deserves to be accepted.

At the cost of repetition, this Court again points out the fact that the 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. 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.

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 u/s 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 u/s 16(4) of the Wealth Tax Act, 1957,

because the prosecution is sought to be launched for an offence u/s 35-B of the Wealth Tax Act, 1957 and not for an offence u/s 35-C of the Act.

Section 35-B does not refer to any notice u/s 16(4). It simply refers to Sub-Section 14(1) of the Act, Sub-section (2) of Section 14 and Sub-

section (1) of Section 17 of the Act. On the other hand, Section 35-C alone refers to the failure to furnish the particulars sought for by a notice u/s

16(4) and makes it a punishable offence. As rightly pointed out by the learned Counsel for the Petitioner, prosecution has not been launched for an

offence u/s 35-C and the sanction was not accorded for prosecuting the Petitioner for an offence u/s 35-C of the Wealth Tax Act, 1957.

Therefore, the said contention raised on behalf of the Respondent has got to be discountenanced.

The other contention raised on behalf of the Respondent is that the failure to file return is a continuing offence and the persons inclined to evade

payment of tax should be dealt with severely. Of course the evasion of tax has to be viewed seriously as it will cause a dent in the exchequer of the

State. But, this Court is not in a position to accept the contention of the learned Senior Special Public Prosecutor for Income Tax Cases that the

non-filing of the return is a continuing offence u/s 35-B of the Act, because, once the default is committed, the offence becomes complete.

Thereafter, as pointed out supra, even if a return is filed subsequently, that will not absolve the Assessee from the criminal proceedings

contemplated u/s 35-B of the Act. Furthermore, 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 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 u/s 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.

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 u/s 35-B of the Act.

In the result, the Criminal Revision Case is allowed and the order of the learned Additional Chief Metropolitan Magistrate (E.O-I), Egmore,

Chennai dated 08.07.2010 made in M.P. No. 240 of 2010 in E.O.C.C. No. 263 of 1997 is set aside, with the result that the Petitioner shall stand

discharged from the above case.

After completion of the dictation of the order, the learned Senior Special Public Prosecutor for Income Tax Cases, makes an oral application

for issuing a certificate under Article 134-A of the Constitution of India for preferring an appeal before the Supreme Court. This Court considers

the request and upon such consideration, declines the same.