Jayalalithaa

New Delhi: The Supreme Court on Wednesday stayed all further proceedings initiated by the Income Tax department against former Tamil Nadu Chief Minister Jayalalithaa before the Additional Chief Metropolitan Court, Economic Offences-1, Egmore, Chennai, for not filing income tax returns.

A Bench of Justice B.N. Agrawal and Justice P.P. Naolekar stayed the proceedings until further orders while admitting a batch of appeals filed by Ms. Jayalalithaa, her close aide N. Sasikalaa and Sasi Enterprises (of which both were partners) against a Madras High Court judgment rejecting their plea for discharge from three cases.

The department launched criminal proceedings in 1996 and 1997 against Ms. Jayalalithaa for not filing income tax returns for the assessment year 1993-94, though she had taxable income. Cases were also filed against her associate Sasikalaa and Sasi Enterprises for 1991-92 and 1992-93. The trial court dismissed the discharge applications filed by Ms. Jayalalithaa and Ms. Sasikalaa and the Madras High Court dismissed their appeals against the trial court order. Subsequently, the court directed the two to appear in the court on January 29 stating that the trial would be conducted on a day-to-day basis. Special leave petitions were directed against the December 2, 2006 judgment of the High Court.

Appearing for Sasi Enterprises, senior counsel Harish Salve submitted that the appellate authority in appeal had assessed the tax liability of the firm at nil, rendering the entire prosecution malicious. The appeal filed by the department against this order was pending before the Tribunal and had not attained finality.

"Not a criminal offence"

Counsel contended that the obligation to file returns would arise only if there was taxable income, and when there was no income or there was no tax evasion, non-filing of returns would not be a criminal offence. He said the determination of the quantum of tax liability and of finality of assessment proceedings were important for invoking Section 276 CC of the Income Tax Act. Appearing for the department, Additional Solicitor General Gopal Subramanian submitted that the proceedings related to non-filing of returns and not tax evasion. He said non-filing of returns itself would be punishable irrespective of whether there was nil income or not. Observing that the matter required examination, the Bench admitted the SLPs and stayed all further proceedings.

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