Circumstantial evidence failed where contemporaneous records did not prove cessation of partnership, and convictions were set aside.

A prosecution based on circumstantial evidence failed because the foundational fact was not proved: the evidence did not establish that the third petitioner had ceased to be a partner of the firm after 31 March 1977. Contemporaneous books of account and the petitioner's assessment records indicated a continuing share in the firm's income, and the entries relied on by the prosecution were capable of an innocent explanation. The handwriting expert's opinion was treated as weak and insufficient to displace the documentary material. As the circumstances did not exclude a reasonable hypothesis other than innocence, the convictions and sentences could not stand.

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Issues: Whether the prosecution proved that the third petitioner had ceased to be a partner of the firm after 31 March 1977, so as to sustain the convictions for the alleged conspiracy, forgery, false verification and offence under the Income-tax Act.

Analysis: The prosecution case depended entirely on establishing that the third petitioner was no longer a partner after 31 March 1977. The Court found that the books of account and other contemporaneous documents, including the third petitioner's own assessment records, reflected his continuing share in the firm's income and were created long before the search. The entries relied on by the prosecution were capable of an innocent explanation and did not lead only to the conclusion that he had ceased to be a partner. The handwriting expert's opinion was treated as weak and insufficient to displace the documentary material. On the evidence as a whole, the foundational fact necessary for all the convictions was not proved.

Conclusion: The prosecution failed to prove that the third petitioner was not a partner after 31 March 1977, and the convictions and sentences could not stand.

Ratio Decidendi: In a prosecution resting on circumstantial evidence, the incriminating circumstances must be such as to exclude every reasonable hypothesis other than guilt; where the foundational fact is not proved by reliable contemporaneous evidence, the convictions based on that fact must be set aside.

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