TaxTMI 
TaxTMI 
2020 (2) TMI 804
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....nblemished career; her service record has always been excellent, outstanding and she never faced any departmental or disciplinary enquiry in her entire career of more than two and half decades. The 2nd petitioner is the husband of the 1st petitioner. He was also a Civil Servant in Indian Railways Accounts Service. He held high positions as Deputy Financial Advisor and Chief Accounts Officer in the Indian Railways. He took voluntary retirement in the year 2009. At present he is a sitting Member of Legislative Assembly of Andhra Pradesh having been elected from Santhanutalapadu Constituency and representing the political party, YSRCP. He was a Member of Committee of Assurances, Member of Committee on Scheduled Caste and Scheduled Tribe Welfare and is also a member of Committee on Public Accounts. It is further submitted that the petitioners reside in their house at Plot No. 126, Road No. 11, Jubilee Hills, Hyderabad and that both of them are Income Tax Assesses and the PAN number of the 1st petitioner is ABAPT0991J and the PAN number of the 2nd petitioner is ACLPA5607N and they have filed their Income Tax Returns regularly for all these two and half decades. Both the petitioner....
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....lly and even without any prima facie case. Obviously, as the 2nd petitioner belongs to a rival political party to the ruling party, the impugned F.I.R. was registered mechanically without there being any prima facie case. It is further submitted that Annexure-1 to 6 filed herein along with this Writ Petition are the Income Tax Returns of the 1st petitioner for the financial years 2010-11 to 2015-16 and she had disclosed all the particulars of taxable income regularly. Annexure-7 to 14 are the immovable property declarations for the period 2010 to 2017 made by the 1st petitioner as a Government servant, as required under C.C.A. Conduct Rules and in the said I.P.Rs, she had declared all the assets held by her, whether acquired or inherited along with their values thereof. It is also submitted that Annexure-15 is a copy of the Affidavit filed by the 2nd petitioner herein as required under the Representation of Peoples Act, 1951 and the Rules made there under while contesting to the State Legislative Assembly in the year 2014. In this also, as required under the Rules and as per the Proforma indicated therein, he had declared the properties held by him, in his name or in the name of th....
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....s are: Western and Eastern side portions of their house in Plot No. 126. These items were purchased even as per the Statement-A in the F.I.R. in 1995-96 by the father of the 1st petitioner, late Sri T. Santhosham. In the said Statement-A, these two items value was shown as Rs. 9,50,000/- and Rs. 6 lakhs respectively. In Statement-B, these two items were valued at Rs. 2,59,50,000/- and Rs. 2,56,00,000/- respectively. These two portions, put together, was valued at Rs. 5,15,50,000/-. These values were mentioned at the end of Sl. No. 7 of the Statement-B and that they are as per the valuation report, dated 11th March, 2016 which is filed herewith as Annexure-22. This Annexure-22 is the same valuation report which was filed by the 1st petitioner and which was accepted by the Department. As per this valuation report, the entire construction on both Eastern and Western side - i.e., Sl. Nos. 6 and 7 was valued at Rs. 4,14,21,800/- but without any basis, without referring to and without relaying upon the said Valuation Report, the items at Sl. Nos. 6 and 7 have been arbitrarily valued at Rs. 5,15,50,000/- instead of Rs. 4,14,21,800/-. These two items are included in the Statement-B in t....
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....hat the petitioners have assets disproportionate to their known sources of income. In this regard, properties in Sl.Nos.23, 24, 25 and 30 of the Statement-B, the approximate current market values were taken, though the assets were inherited by the 2nd petitioner long back. It is further submitted that substantially all the items mentioned as assets are either acquired long back by the petitioners or by their family members or were inherited by them decades ago. Those cannot be the basis for the impugned F.I.R. Even prima facie to conclude that the petitioners are guilty of offence under Section 13 (1) (e) of Prevention of Corruption Act, 1988 is ex-facie illegal. The declarations made by the petitioners about their values are as per the relevant Rules and Regulations mentioned by them either in the Income Tax Returns or in the I.P.Rs. or in the affidavits before the concerned authorities. As per the relevant provisions, Rules and Regulations, the petitioners are obliged to mention the Current Market Values to the assets. This cannot be the basis for the F.I.R. under the Prevention of Corruption Act, 1988 as if it is the value of the asset as indicated in the F.I.R. during the check....
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....asis for taking his income approximately when his Income Tax Returns are available and which have been filed. There is no reference to the income of the 1st petitioner as declared by her in her Income Tax Returns. If these are taken into consideration, there will not be any asset disproportionate to their known source of income. It is a glaring irregularity and ex-facie illegal and arbitrary exercise of powers by the respondents to conclude without any basis that the petitioners are in possession of assets disproportionate to their known source of income. It is also submitted that as required under C.C.A. Conduct Rules, the 1st petitioner had also declared all transactions in financial instruments viz., fixed deposits, mutual funds, PPF, LIC, etc., from time to time. The same has been taken on record by the Department of the 1st petitioner and the said particulars are filed as Annexure-27. As these particulars were furnished as per C.C.A. Rules, the same should also be taken into account while examining their known sources of income. The impugned F.I.R. was registered stating that on oral information, the petitioners have been guilty of possessing assets and pecuniary resources dis....
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....r the Crime Manual of C.B.I. and it was not registered in a mechanical manner as there was prima facie evidence to conduct detailed investigation. During the course of investigation, the respondents would verify the actual assets, income and expenditure on the immovable properties vis-à-vis immovable property returns, income tax returns and the explanation of the petitioners, for assessing its truthfulness. The disproportionate assets as alleged in the F.I.R. are sufficient enough to register F.I.R. against the petitioners to set law into motion and to conduct detailed investigation and there is no illegality in registration of the case. It is also stated that the respondents are not conducting roving enquiry against the petitioners and the investigation is limited to the assets, income and expenditure pertaining to the petitioners and their family members which includes all their financial transactions. It is further stated that the investigation is in advance stage and is being conducted in fair and transparent manner and the petitioners would be given opportunity to explain their positions based on the outcome of the investigation. Heard Sri S.S.Prasad, learned Senior ....
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....respectively in Statement-A, whereas in Statement-B, these two items were valued at Rs. 2,59,50,000/- and Rs. 2,56,00,000/- respectively. Without any basis and without relying upon the valuation report which was filed as Annexure-22, the respondents arbitrarily valued at Rs. 5,15,50,000/- instead of Rs. 4,14,21,800/-, thus an amount of Rs. 85,78,200/- was shown in excess as value for the items at Sl.Nos.6 and 7. He further submits that the asset mentioned in Sl.No.26 is Ac.2.00 of land, which was sold at Rs. 1.00 Crore, as is evident from Statement-C at Sl.No.9, but the respondents arbitrarily shown the income earned as Rs. 72,50,000/-. He further submits that it is apparent on the face of record that the assets have been arbitrarily valued ignoring the Valuation Report, I.T. Returns and I.P.R. Returns filed by the petitioners. He also submits that the impugned F.I.R. seems to have been registered with an oblique motive and with mala fide intention and out of political considerations, as the 2nd petitioner belongs to an opposition party to the Ruling party in the State. It is apparent that there are serious errors in the F.I.R. as pointed out in the affidavit filed in support of th....
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.... in the investigation stage and the investigation is in progress. He further submits that the contentions raised by the petitioners are pure questions of fact and the same cannot be adjudicated in this writ petition. He further submits that the Income Tax Returns cannot be made basis to set aside the F.I.R., whether the source of income is lawful or not is a matter of investigation, evidence and trial to be adduced by both the parties. He further submits that even before collection of material, the petitioners have exclusive knowledge, which needs thorough investigation and at this preliminary stage, drawing a logical conclusion would not be fair and that the petitioners ought to have cooperated for the investigation in a fair and transparent manner. He has also argued that the law is very clear that power of quashing the F.I.R. in economic offences should be used by the Courts very sparingly. Learned Special Public Prosecutor in support of his contentions relied upon the judgments of the Supreme Court in State of Madhya Pradesh v. Awadh Kishore Gupta and others (2004) 1 SCC 691 and State of Orissa and another v. Saroj Kumar Sahoo (2005) 13 SCC 540. Power of High Court to quash ....
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....iated by the Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 of the Constitution of India or the inherent powers under Section 482 of Cr.P.C. gave the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of the Court or otherwise to secure the ends of justice. The Supreme Court in Bhajan Lal case ((1992) Supp. (1) SCC 335 supra) made it clear that it may not be possible to lay down any precise, formulae and to give an exhaustive list to myriad kinds of cases wherein such power should be exercised. According to this judgment, the High Court would be justified in exercising its power in cases of following categories: (1) Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused; (2) Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police offic....
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....on facts, that it is not proper for the High Court to analyse the case of the complainant in the light of all probabilities in order to determine whether a conviction would be sustainable and on such premises, arrive at a conclusion that the proceedings are to be quashed. The Court said that it was erroneous to assess the material before it and conclude that the complaint cannot be proceeded with, because the material annexed to the Petition under Section 482 of the Code cannot be termed as "evidence" without being tested and proved. (Vide para 13 of the report). In the latter case, the Supreme Court expressed the view that in a petition under Section 482 of the Code, and where the investigation is not completed, the Court shall not look into the materials, the acceptability of which is essentially a matter of trial. The learned Special Public Prosecutor exerted thrust upon the fact that the petitioners herein are producing certain documents to substantiate their plea that the F.I.R. referred assets, income etc., but they cannot be relied upon at the present stage as their truth has to be tested only during investigation. A reading of those two judgments show that the documen....
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....xtracted for ready reference. "(1) A public servant is said to commit the offence of criminal misconduct,- (a) if he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person any gratification other than legal remuneration as a motive or reward such as is mentioned in section 7; or (b) if he habitually accepts or obtains or agrees to accept or attempts to obtain for himself or for any other person, any valuable thing without consideration or for a consideration which he knows to be inadequate from any person whom he knows to have been, or to be, or to be likely to be concerned in any proceeding or business transacted or about to be transacted by him, or having any connection with the official functions of himself or of any public servant to whom he is subordinate, or from any person whom he knows to be interested in or related to the person so concerned; or (c) if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or under his control as a public servant or allows any other person so to do; or (d) if he,- ....
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....oyment and it is mentioned then as a sort of mentioning the 'misconduct' of the petitioners, as below: "During the period 01.04.2010 to 29.02.2016 Smt. T.H.Vijaya Lakshmi and herhusband Dr.A.Suresh have accumulated assets and pecuniary resources and hence the Check period has been taken from 01.04.2010 to 29.02.2016." The F.I.R. gives statements A to D, and lastly summed up that- "Thus Smt. T.H.Vijaya Lakshmi (A-1) and her husband Shri A.Suresh (A-2), have acquired assets/pecuniary advantage to the tune of Rs. 5,95,58,322/- (Assets Rs. 5,55,25,000/- and expenditure Rs. 40,33,322/-_ against an income of Rs. 4,84,76,630/- earned during the check period. Thereby Smt. T.H.Vijaya Lakshmi and her husband Shri A.Suresh have amassed disproportionate asset to the tune of Rs. 1,10,81,692/- which is 22.86% of the income earned by them, which they cannot satisfactorily account for". (Emphasised by me) Thus, except the statements, there is no other material to support the above conclusion of the respondents, as per the F.I.R. Further it is also significant to note that a remark is made in the above emphasised portion that the petitioners cannot satisfactorily account for....
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.....R. and consequent investigation. It is appropriate to make little reference to the relevant rules in the C.B.I. Manual for appreciation of arguments advanced by both the learned Counsel. Paragraphs 27 to 31 of the Writ Petition, the petitioners have made reference to various clauses of the Manual and contended that these mandatory clauses have been observed in utter violation by the respondents and that will vitiate the entire process of registration of the F.I.R. To be more specific, the contention of the petitioners is that preliminary enquiry postulated by Chapter 9 of the Manual is not conducted by the respondents before registration of F.I.R. Chapter 8 of the Manual deals with the complaint and source information. Every complaint from any source shall be entered in a register and that shall be treated as confidential at all stages (8.1) Verification of complaints is required in cases falling within Clause 8.6. They are (i) complaints pertaining to the subject matters which fall within the purview of C.B.I. either received from official channels or from well established and recognized public organisations or from individuals who are known and who can be traced and examin....
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....The objective of the same is only to ensure that a criminal investigation process is not initiated on a frivolous and untenable complaint. That is the test laid down in Lalita Kumari ( supra). On the question whether the C.B.I. Manual shall necessarily be followed, again the Supreme Court in Vineet Narayan v. Union of India (1998) 1 SCC 226, held: "The CBI Manual based on statutory provisions of the Cr. P.C. provides essential guidelines for the CBI's functioning. It is imperative that the CBI adheres scrupulously to the provisions in the Manual in relation to its investigative functions, like raids, seizure and arrests. Any deviation from the established procedure should be viewed seriously and severe disciplinary action taken against the officials concerned. In Shashikant v. Central Bureau of Investigation and another (2007) Crl.L.J. 995, the Court observed as under: - "CBI Manual provides for a preliminary inquiry. By reason thereof a distinction has been made between a preliminary inquiry and a regular case. A preliminary inquiry in terms of Para 9.1 of the CBI Manual may be converted into a regular case as soon as sufficient material becomes availab....
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....minary Enquiry is compulsory and if it is not done, adverse inference may be drawn against the prosecution. It is also clear that the guidelines given in the C.B.I. Manual have to be substantially complied with by the C.B.I. This being the legal position, there is no dispute that the respondents did not hold any preliminary enquiry as contemplated by the Manual. In the Counter affidavit filed for the respondent, the following statements are made: "11. ..There is no requirement of law to afford opportunity to the accused to explain before registration of the case. There is also no command of law to conduct preliminary enquiry (PE) before the registration of F.I.R. in all cases." "18. It is further submitted that before completion of investigation, the petitioners would be given ample opportunity to explain each and every item/property with regard to assets, income and expenditure of the petitioners and their family members, as per law. It is further submitted that opportunities are not required to be given to the person for registering any F.I.R. against any person for the offence committed by him/her. The same is the position of law in respect of offences under Se....
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....nt, the F.I.R. is unsustainable. In the Writ petition and also during course of arguments, the stand taken by the petitioners is that the 1st petitioner has filed her Income Tax Returns and also annual statements of disclosure of assets and their values to the department as per CCA Rules. Similarly, the 2nd petitioner during his service as IRAS Officer, submitted ITRs and Statements to the Department and later, while contesting for the seat of Member of Legislative Assembly, he has sworn affidavit and submitted the same to the Election Authority under the Representation of Peoples Act. It is argued that the values given in those documents shall be accepted for determining 'known sources of income' but the respondents have arbitrarily valued the assets, either purchase value or sale value and thereby a glaring illegality is committed in the registration of F.I.R. to bring the petitioners within the mischief of Section 13 of the Act. The counter argument of the respondents is that the IT Returns and the Statements of disclosures filed with the Department are not final and the truth of those particulars has to be verified and confirmed during course of investigation. In the ligh....
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....erified and confirmed during course of investigation, is unsustainable and therefore it is repelled. In the F.I.R. itself, the respondents ought to have mentioned how they are not relying upon the I.T.R.s and the statement filed with Department. This could have been done, had the respondents conducted a preliminary enquiry as postulated by the C.B.I. Manual, which was already referred in the earlier paras of this order. It is not disputed in the counter affidavit of the respondent that the petitioners have filed their I.R.T.s and statements of disclosure to the Department as per C.C.A. Rules and the 2nd petitioner filed affidavit with the Election Authority, as required under the Representation of Peoples Act, 1951 and the Rules made thereunder. Annexures-P3 to P6 are the Income Tax Returns of the 1st petitioner for the financial years 2011- 2012 (Assessment year 2012-13) to 2015-2016 (Assessment year 2016-17) and Annexure- P7 is the Acknowledgment along with computation of income issued by the I.T.Department for the financial year 2010-2011 (Assessment year 2011-2012). Annexure-P15 is a letter by the 1st petitioner addressed to the Principal Chief Commissioner of Income Tax ....
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....tioner Dr.Suresh Audimulapu on 16.04.2014 containing acknowledgment of its filing by the Asst. Electoral Registration Officer, S.N.Padu Assemsbly Constituency and Tahsildar, Chimakurthy (M). There is absolutely no dispute that the above documents are true, in the sense they are filed with respective departments and available in the public domain. In view of the law referred above, the income assets and values of assets mentioned in those documents have to be treated as 'known source of income' for the purpose of Section 13 (1) (e) of the Prevention of Corruption Act. It is apposite to mention in this perspective that the respondents in their counter have specifically admitted that the statements A to D in the F.I.R. are prepared totally basing on the Source Information and without verifying the Income Tax Returns and other documents only, because, no preliminary enquiry was conducted. For ready reference, that part of the counter affidavit filed by the respondents is extracted hereunder: "11. The averments made in para No.3 are not correct and hence denied. It is submitted that based on the source information, the said F.I.R. was registered against the petitioners fo....
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....remuneration for the period from March, 2012 to Feb. 2016 of Smt. Vijayalakshmi (Page No.10, Statement C. S.No.3) 67,61,014.00 1,05,28,256.00 37,67,242.00 Extract of year-wise computation of income as per the Income Tax Returns filed for F.Y. 2010-2011 to 2015-2016 In Statement C, Item No.3 the F.I.R. shows that the 1st petitioner received Rs. 17,64,000/- during Financial year 2010- 2012 and for the Financial year 2012-2016 (Feb.) the net amount received by her towards salary and arrears is Rs. 67,61,014/-. As per the I.T.Returns during the check period, the following is shown as total of the income declared in the I.T. Returns for the Financial years 2010-2011 to 2015-2016. The petitioners have filed the I.T. Returns with the relevant annexures which were already referred above and to facilitate easy understanding, they have filed a statement as Annexure-P18 of the Petition in a tabular form which is as follows :- FY Gross salary as per Form- 16 Rental receipts Interest receipts Agricultural Income Total 2010-11 10,33,474 1,80,000 15,484 1,00,000 13,28,958 2011-12 11,25,531 1,30,500 20,996 1,00,000 13,77,027 ....
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....valuation of income from sale of assets : As per Statement-C, the Serial No.9, an immovable property situated in Bengaluru was sold by the 2nd petitioner for One Crore and after deducting a sum of Rs. 27,50,000/- the F.I.R. shows that there is income of Rs. 72,50,000/- earned by him. The contention of the petitioners is that the sale price realized is One Crore, there is no justification to reduce the same by a sum of Rs. 27.50 lakhs. To substantiate this contention, the petitioners rely upon the ITR for the FY 2015- 2016 shown at page No.170 of Annexure-P10. Whereas, it is shown in the ITR for the relevant assessment year, that full value has to be given as consideration by sale, received by the 2nd petitioner instead of discounting certain sum, at the whims and fancies of the respondents. Even according to the respondents, as given in the F.I.R., the value of consideration received by the 2nd petitioners by sale of immovable property is Rs. 1,00,00,000/-. In the petitioner's affidavit at Para No.19 a specific question is raised about the justification of the respondents in deducting a sum of Rs. 27,50,000/- from the consideration actually received. In the Counter affidavit,....
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.... was already sold, in the assets at the end of Check period, and that the sale consideration of the same was also shown as income in Statement-C albeit wrongly. This shows the mechanical way of preparing the F.I.R. by the respodnents. These exercises have to be done before registering the F.I.R. and defending their mistaken deeds by pleading that everything shall be enquired during investigation is not acceptable. This Court, therefore, concludes that a sum of Rs. 27,50,000/- shall be included in the income against item No.9 making it Rs. 1,00,00,000/- instead of Rs. 72,50,000/- ; and Rs. 8.00 lakhs shall be deducted from the total sum of Rs. 6,90,51,066/- mentioned in Statement-B. Over valuation of assets : According to the petitioners, there is a house constructed by the 1st petitioner, both eastern and western portions in Plot No.126, Shaikpet Village, which is purchased by Sri T.Santhosham, father of the 1st petitioner from Smt. Y.Rishikanya vide document No.4330/1995 (Vide Sl.No.4 shown in Annexure-P1 (page-23) of the Writ Petition. This is referred as item Nos.6 and 7 in Statement-B (Assets at the end of the check period 29.02.2016). The value of the asset is shown a....
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.... the counter affidavit, 'during investigation' only the respondents have ascertained the value of items 6 and 7 of Statement-B as against the approved valuer's valuation submitted by the 1st petitioner to her department at Rs. 4,14,21,800/-. The expression used in the statement is 'during investigation' presupposes registration of F.I.R. because, the criminal law is set into motion only after registration of F.I.R. It is not the case of the respondents that they have conducted any preliminary enquiry before registration of F.I.R. Then how the respondents have arrived the value of items 6 and 7 at Rs. 5,15,50,000/- even in the F.I.R., before commencing the investigation is unknown. In all, this Court could perceive that the respondents acted with utter haste in registering the F.I.R. without any basis and rushed to register the F.I.R. even before collecting prima facie material to substantiate the grounds to bring the penal provision of the Act to the fore. As an afterthought, the respondents are propounding a ground that they have got the valuation done by the CPWD Engineers during investigation, forgetting the fact, they cannot commence investigation before registration of the F.I....
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....of Statement-B, resulting in further reduction of the total value. Summary of the above mistakes/irregularities committed by the respondents in the registration of F.I.R. leads to the following conclusions. I. The following values have to be included in the income of the petitioners shown in Statement-C. 1. Difference of Salary and arrears received by the 1st petitioner 37,67,242 2. Difference of Income of 2nd petitioner 70,35,286 3. Difference of sale consideration received by Sale of immovable property in Bengalure 27,50,000 Total amount of income to be added in Statement-C 1,35,52,528 II. The following amounts have to be deducted from Statement-B 1. Difference of value of the Building Constructed by the 1st petitioner 85,78,200 2. Cost of Bengalure property which was already sold away by 2nd petitioner 8,00,000 3. Value of Oscan Elevator which is included in the value of the construction of building by the 1st petitioner 10,00,000 Total amount of deduction to be made to Statement-B 1,03,78,200 a) Total Income as modified (Statement-C) 6,20,29,158 b) Total value of assets possessed at the end of check period as mod....