2025 (9) TMI 657 - HC - Income Tax

Accused discharged under s.245 CrPC due to territorial jurisdiction defect and defective sanction beyond s.276CC

Solaimalai Kumari Versus State through Income Tax Department, Karaikudi.

The HC set aside the trial court's order and allowed the criminal revision, discharging the accused under s.245 CrPC. The court found substantial doubt ... Addition of Sections 276 and 276C in the complaint without their inclusion in the sanction order - petitioner/accused u/s 227 and 245 of the Code of Criminal Procedure, 1973 - Criminal Revision Case is filed, on the principal grounds that the learned Trial Court failed to consider the effect of Section 280B(a) of the Income Tax Act, 1961, which mandates that such offences are triable only by a designated Special Court - Trial Court dismissed the discharge petition on the grounds that the petitioner appeared and participated in the proceedings and the matter had progressed to the stage of P.W.1’s examination. HELD THAT:- Territorial Jurisdiction - As per Section 124(1)(b) of the Income Tax Act, the jurisdiction is determined by the location where the assessee resides or carries on business. In the present case, the petitioner claims residence at Krishnagiri and the assessment also took place there. The property sale also occurred within Krishnagiri. These facts raise a substantial doubt on the jurisdiction of the Madurai Court. Territorial jurisdiction is a fundamental issue and its absence vitiates proceedings. Sanction Order and Offences - The sanction order marked as Ex.P1, mentions only Section 276CC, while the complaint includes Sections 276, 276C, and 276CC. In Mohd. Iqbal Ahmed v. State of Andhra Pradesh [1979 (1) TMI 238 - SUPREME COURT], the Hon'ble Supreme Court held that prosecution without valid sanction is void ab initio. Thus, the inclusion of charges beyond the scope of the sanction makes the complaint legally untenable at the threshold. Presumption u/s 278E - While Section 278E of the Income Tax Act provides for a presumption of culpable mental state, the same is rebuttable. In Prakash Nath Khanna [2004 (2) TMI 3 - SUPREME COURT] it was held that mere late filing of returns does not absolve an assessee of criminal liability. However, whether the delay was wilful or due to bona fide reasons is a matter for trial, not summary rejection at discharge stage. Delay in Filing Discharge Petition - The learned Trial Court erred in treating 53 month delay as fatal. In Smt.Nagawwa v. Veeranna Shivalingappa Konjalgi [1976 (4) TMI 213 - SUPREME COURT] the Hon'ble Supreme Court held that discharge under Section 245 of Cr.P.C., can be sought at any time before charge is framed, especially in summons cases. Conclusion - Trial Court misdirected itself by rejecting the discharge petition without properly appreciating the jurisdictional objections and the infirmities in the sanction order. While this Court does not adjudicate on factual aspects requiring evidence, the foundational lack of territorial jurisdiction and invalid sanction make out a prima facie case for discharge under Section 245 of Cr.P.C. The impugned order passed by the learned Additional Chief Judicial Magistrate, Madurai is hereby set aside and the Criminal Revision Case is allowed. The petitioner is discharged from the proceedings. ISSUES PRESENTED AND CONSIDERED 1. Whether the trial court erred in refusing discharge under Section 245 Cr.P.C. where the alleged cause of action, residence of the accused and assessment proceedings were within another territorial jurisdiction, raising substantial doubt on the territorial competence of the forum. 2. Whether the complaint is maintainable when the sanction order does not refer to all penal provisions charged in the complaint, and whether prosecution is vitiated where prosecution is initiated by an authority lacking territorial competence under the Income Tax Act. 3. Whether the presumption of culpable mental state under the Income Tax Act affects the scope of inquiry at the discharge stage under Section 245 Cr.P.C. 4. Whether delay in filing a discharge petition (53 months in the present matter) is fatal to seeking discharge under Section 245 Cr.P.C. in a summons/complaint case. 5. Whether issues of territorial jurisdiction and validity of sanction are to be treated as triable issues of fact or as matters to be decided at the stage of discharge. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Territorial Jurisdiction under the Income Tax Act and its effect on Criminal Proceeding Legal framework: Territorial jurisdiction under the Income Tax Act is determined by statutory provisions identifying the jurisdiction of assessing authorities and the competent forum for prosecution; criminal proceedings must be instituted before courts competent for the territorial area where the assessee resides or carries on business as prescribed by the statute. Precedent Treatment: The Court relied on established principles that absence of territorial jurisdiction is a fundamental defect which can vitiate proceedings ab initio. The Court treated such precedent as applicable and binding on the question of jurisdiction. Interpretation and reasoning: The material on record indicated residence, assessment and the impugned transaction occurred within a different territorial unit (Krishnagiri) than the forum where complaint was filed (Madurai). These facts raise a substantial doubt on territorial competence. The Court held that where the statutory scheme assigns territorial competence to a particular authority/court, that competence cannot be disregarded at the threshold; such foundational defects require prima facie determination at the discharge stage because they go to maintainability. Ratio vs. Obiter: Ratio - territorial incompetence is a ground for discharge where prima facie facts demonstrate cause of action and residence/assessment lie outside the forum's territorial jurisdiction. Obiter - none addressed beyond application to facts. Conclusion: The trial court erred in refusing discharge without addressing the prima facie territorial incompetence; this defect supported discharge under Section 245 Cr.P.C. Issue 2 - Validity and scope of sanction order vis-à-vis the penal provisions charged Legal framework: Prosecution under statutory penal provisions requires prior sanction from the competent sanctioning authority; sanction must cover the penal provisions under which prosecution is launched, and sanction issued by an authority without jurisdiction or not covering the charged offences vitiates prosecution. Precedent Treatment: The Court applied authoritative principle that prosecution without valid sanction is void ab initio and treated that principle as directly controlling. Interpretation and reasoning: The sanction on record referred only to one penal provision, whereas the complaint charged multiple penal provisions. The Court reasoned that adding offences beyond the scope of the sanction cannot stand at the threshold; validity of sanction is a foundational legal requirement and not merely a matter of evidence for trial when the defect is apparent on the face of the sanction and complaint. Ratio vs. Obiter: Ratio - absence of sanction for specific penal provisions charged, or sanction by an incompetent authority, is a ground for discharge at the stage under Section 245 Cr.P.C. Obiter - procedural mechanics for seeking fresh sanction were addressed as directions. Conclusion: The sanction was vitiated insofar as it did not cover all charged provisions and was susceptible to challenge at the discharge stage; this supported discharge of the accused. Issue 3 - Effect of statutory presumption of culpable mental state (Section 278E) at discharge stage Legal framework: The Income Tax Act may create rebuttable presumptions regarding culpable mental state; criminal law principles require assessment of sufficiency of evidence to proceed at the discharge stage. Precedent Treatment: The Court recognized that statutory presumptions exist but are rebuttable; precedents indicate that whether delay was wilful is ordinarily a matter for trial. Interpretation and reasoning: The Court held that the statutory presumption does not operate to preclude discharge where other foundational legal defects (territorial incompetence, invalid sanction) are apparent. The existence of a presumptive culpable mental state affects evidentiary burdens at trial but does not displace the requirement that maintainability and validity of sanction be satisfied prima facie before proceeding to trial. Ratio vs. Obiter: Ratio - statutory presumptions do not foreclose discharge where maintainability or sanction defects are established prima facie. Obiter - assessment of wilfulness remains a trial matter. Conclusion: The presumption under the Act is rebuttable and does not prevent discharge where jurisdictional and sanction infirmities are shown on the record. Issue 4 - Delay in filing discharge petition and its effect on entitlement to discharge Legal framework: Section 245 Cr.P.C. provides for discharge at the stage before framing of charge; in summons cases there is no strict time-bar prescribed for moving for discharge and the Court must consider the merits at the time of application. Precedent Treatment: The Court treated applicable precedents as holding that discharge can be sought at any time before charge is framed and that undue delay, without prejudice, is not necessarily fatal. Interpretation and reasoning: The trial court's emphasis on the 53-month delay as a reason to dismiss the discharge application was held to be misplaced. The Court reasoned that delay alone, absent prejudice or an explanation that overcomes the substance of the objections (territorial incompetence, invalid sanction), cannot justify denying relief where the objection concerns maintainability. Ratio vs. Obiter: Ratio - delay in filing a discharge petition is not per se fatal; the Court must examine substantive objections. Obiter - considerations of prejudice and explanation for delay are relevant but secondary. Conclusion: The delay was immaterial in the face of prima facie jurisdictional and sanction defects; the trial court erred in treating delay as determinative. Issue 5 - Appropriate scope of inquiry at discharge stage: facts for trial versus threshold legal infirmities Legal framework: Section 245 Cr.P.C. requires the magistrate to consider whether there is sufficient ground for proceeding; the magistrate must distinguish between matters requiring full trial and those which are legal or jurisdictional in nature that can be decided on the record. Precedent Treatment: The Court applied the established distinction that matters of fact generally go to trial, while pure questions of law and jurisdictional defects can be adjudicated at the discharge stage. Interpretation and reasoning: The Court held that territorial jurisdiction and validity of sanction are not merely factual disputes but legal prerequisites to maintain prosecution; where these defects are apparent on the record they should be decided at the discharge stage. Conversely, issues such as wilfulness in delay or credibility ordinarily require trial. Ratio vs. Obiter: Ratio - threshold legal defects apparent from the record warrant discharge under Section 245 Cr.P.C.; Obiter - delineation of matters left for trial versus those for summary consideration. Conclusion: The trial court misdirected itself by relegating clear jurisdictional and sanction infirmities to the trial phase; the correct approach is to discharge where such foundational defects are established prima facie. Overall Conclusion and Consequent Relief Because prima facie territorial incompetence of the forum and the infirmity in the sanction order were established on the record, and because statutory presumptions and delay did not cure those foundational defects, the Court concluded that discharge under Section 245 Cr.P.C. was warranted. The impugned order refusing discharge was set aside, the accused was discharged from the pending complaint, and liberty was granted to the complainant to file a fresh complaint before the competent territorial court after obtaining fresh and appropriate sanction.