49. No Prosecution for Belated Filing of Wealth Tax Return if Default is Not Willful

There is a provision in the Wealth-tax Act for the prosecution of an assessee for wilful failure to file Wealth-tax Return on time. But the prosecution has to be launched on the basis of proper evidence that the default in filing the Return was wilful. Where there is no such evidence, the prosecution cannot be considered to be proper. Recently the Madras High Court has given a judgment in the case of I. Jayalalitha v. ACWT (2011) 337 1. In this case it was held that where the sanction for prosecuting a person for belated filing of Wealth-tax Return was given without any evidence that the default was wilful, it was held that the prosecution was not valid. As this is an important case for Wealth-tax payers who due to one reason or the other do not file the Return on time, the facts and the judgment in this case are analysed in this tip below.

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 under Section 14(1) of the Wealth-tax Act, 1957 on or before 31.8.1993, 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 ACIT, Madras-34 under Section 16(4) of the Wealth-tax Act, 1957 directing the petitioner to produce the return of wealth of the petitioner for the A. Y. 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 February 1995, inviting the attention of the petitioner to the notice dated 18.1.1994, and requesting the petitioner to file the wealth-tax return for the A. Y. 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 DCIT, Special Range, XI, Chennai issued a further notice on 31 July 1995 requesting the petitioner to file the details of assets and also the debt / liabilities of the petitioner as on 3 1.3.1993, the corresponding accounting year for the A. Y. 1993-94. The auditor of the petitioner, in response to the said notice, sent a reply on 18.8.1995 to the DCIT, Madras requesting further time up to and inclusive of 15.9.1995 for complying with the direction and requested for the postponement of the case of wealth-tax assessment of the petitioner after 18.9.1995. The DCIT issued a reply dated 23.8.1995 reposting the wealth-tax assessment of the petitioner for the A. Y. 1993-94 finally to be heard on 9.9.1995 at 10.30 a.m. Again, the auditor of the petitioner sent a letter dated 16.9.1995 requesting adjournment of the case and reposting of the same on or after 9 October 1995 stating the hearing dates fixed, before the said date in a number of appeals before the ITAT. A reply was sent by the DCIT on 27.9.1995 giving one more opportunity, reposting the income-tax wealth-tax assessment for the A. Y. 1993-94 to 11 October 1995 at 10.30 a.m. Again, a further prayer for reposting the matter to 20 October 1995 was made by a letter dated 7.10.1995 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 DCIT proceeded to assess wealth-tax under Section 16(5) of the Wealth-tax Act to the best of his judgment. By the assessment, the total taxable wealth of the petitioner was assessed at ` 3,17,43,100 and wealth-tax along with interest was levied at ` 4,71,775. Penalty proceedings were also initiated.


Thereafter, the ACWT issued a show-cause notice dated 30 July 1996 to show cause as to why proceedings should not be launched against the petitioner under Section 35B 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 failure in furnishing the return in time and that the proceedings sought to be initiated under Section 35B might be dropped.

 

The point that arose for consideration in this criminal revision case was whether the order of ACM Magistrate dated 8.7.2010 was liable to be set aside in exercise of the revision powers of this court under Section 397 read with Section 401 of the CPC, 1973. The arguments were heard and the material records placed were perused.


The petitioner figured as the sole accused in E.O.C.C. No. 263 of 1997 on the file of the learned ACM Magistrate, Chennai, a case instituted on the complaint preferred under Section 358 of the WT Act by the ACWT, Chennai. Under Section 358 of the Wealth Tax Act if a person wilfully fails to furnish in due time the return of his net wealth which he is required to furnish under Section 14(1) or (2) or Section 17(1), then only it can be done. There are exemptions in the proviso.


The gist of the complaint was that the petitioner wilfully failed to file the return of wealth under Section 14(1) of the WT Act, 1959 even though she possessed wealth of rupees of over
` 1.34 crore for the AY 1993-94 and the failure to furnish the return in due time for the A. Y. 1993-94 was wilful and deliberate.
 

The complaint was dated 5.12.1997 and it was received in the court on 9.12.1997. The counsel for the petitioner, in support of his contention that the impugned order of the court below could not be sustained in law and the same deserved to be set aside, made various submissions.


The first point submitted was that the net wealth of the petition for the A. Y. 1993-94 was a negative wealth and there was no wealth-tax liability attached to the petitioner. The initial assessment order was passed by the DCWT on 15.2.1996. The notification issued by the CIT, Chennai, transferring the case of the petitioner from the AC, Film Circle, Madras to the DCIT, Special Range, Madras as the 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, it was submitted that the assessment order dated 15.2.1996 passed by the DCWT was without jurisdiction. It was also submitted that the complaint lodged by the Officer before the ACM Magistrate should be construed as a complaint by an officer having no jurisdiction. It was also submitted that the institution of the criminal proceedings itself was vitiated. The sanction order was claimed to have been passed subsequent to the date of assessment order passed by the ACIT, Chennai on 30 June 1997, which was marked before the court. The omission to refer to the subsequent assessment order dated 30.6.1997 would show that the said document was not placed before the sanctioning authority. The sanctioning authority, it was alleged failed to verify whether any appeal against the subsequent consequential assessment order dated 30 June 1997 was preferred and the same would show non-application of mind vitiating the order of sanction. Various other contentions were also made. In reply to the said points raised by the counsel for the petitioner various submissions were made by the Senior Special Public Prosecutor. The court paid its anxious considerations to those points. Then the High Court proceeded to consider whether contentions raised on behalf the petitioner could be sustained. The first contention raised on behalf of the petitioner was to the effect that the petitioner had a negative wealth to the tune of over
` 24 lakh for the said assessment year, namely. 1993-94 and the liability for the said assessment year was “nil”. However, the court held that this contention raised on behalf of the petitioner that the prosecution was obnoxious could not be accepted and therefore, it should be rejected. Other contentions were also examined by the court. The court was of the view that the contention that the complaint was preferred without enclosing the sanction order could not be sustained. The next contention of the counsel for the petitioner was that consequential assessment order dated 30 June 1997 was not placed before the sanctioning authority and the same was obvious from the facts.
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