TaxTMI 
TaxTMI 
2024 (3) TMI 907
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....Thakur, Adv. Mr. Yogya Rajpurohit, Adv. Mr. Aayush Saklani, Adv. Mr. Shubham Mishra, Adv. Mr. Abhinav S. Raghuvanshi, AOR JUDGMENT K. V. Viswanathan, J. 1. Leave granted. 2. The present appeals call in question the correctness of the judgment of the High Court of Delhi at New Delhi dated 01.12.2020 in Writ Petition (Criminal) No. 200 of 2010 and Writ Petition (Criminal) No. 339 of 2010. These proceedings in the High Court, in turn, challenged the Order on charge dated 21.02.2006, as well as the charges framed on 28.02.2006, by the Special Judge, Delhi. While the charge against the appellant Puneet Sabharwal was under Section 109 IPC read with Section 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988, the charge against appellant R.C. Sabharwal was under Section 13(1)(e) read with 13(2) of the Prevention of Corruption Act, 1988. In substance, the charge was that appellant R.C. Sabharwal owned assets disproportionate to known sources of income and the appellant Puneet Sabharwal, son of R.C. Sabharwal, has abetted him in the commission of the said offence. The High Court, by the impugned order, dismissed the petitions. Aggrieved, the appellants are before us. ....
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....ffence as a conspirator. (xi) That in furtherance of the said criminal conspiracy, assets were acquired by R.C. Sabharwal in the name of M/s Morni Devi Brij Lal Trust, M/s Morni Merchants and other firms in which the sole beneficiary was appellant Puneet Sabharwal, his son. It was further alleged that appellant R.C. Sabharwal dealt with all the financial matters of the said trusts/firms. (xii) It was concluded that a criminal case was made out against appellant R.C. Sabharwal and Puneet Sabharwal for offence punishable under 120-B IPC r/w 5(2) r/w 5(1)(e) of PC Act, 1947 corresponding to 13(2) r/w 13(1)(e) of PC Act, 1988. (xiii) Further, it was concluded that against R.C. Sabharwal a case under Section 5(2) r/w 5(1)(e) of PC Act, 1947 corresponding to 13(2) r/w 13(1)(e) of PC Act, 1988 was made out for possession of assets worth Rs. 2,05,63,341/- disproportionate to his known sources of income. Order on Charge : 5. On 21.02.2006, the Special Judge pronounced an order on charge after elaborately discussing the principles governing discharge. The learned Judge rendered the following findings in the order on charge: (i) The expressio....
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.... CHARGE NO. 2 That while your father Shri R.C. Sabharwal being a public servant employed as Additional Chief Architect, NDMC, New Delhi during the period 20.08.1968 to 23.08.1995 you intentionally aided him in commission of the offence U/s 13(1)(e) read with 13(2) of the PC Act as he was found in possession of assets to the tune of Rs. 3,10,58,324/- as against his income and that of his family members income, to the tune of Rs. 1,23,18,091/- and expenditure of Rs. 18,23,108/- and he was found in possession of total assets of the tune of Rs. 2,05,63,341/, which were disproportionate to his known sources of income and which he could not satisfactorily account for and thereby you committed an offence, of abetment U/s 109 IPC read with 13(1)(e) and Sec. 13(2) of the PC Act, 1988 and within my cognizance. And hereby direct you to be tried by this court for the said offence." [emphasis supplied] Orders on the income tax front : 7. After the order of the Trial Court, both with regard to the order on charge and the framing of charges, and before the High Court disposed of the Petitions before it, leading up to the impugned order, certain developments ....
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....which were encashed in the account of the said Trust were not out of investments from the Trust since the said bonds were purchased prior to the formation of the Trust itself. Some other person had invested the amount and encashed it in the hands of the trust. (iii) The founder of the trust was not shown to have the income necessary to purchase the said bonds. 12. The CIT (Appeals) had deleted these additions. In examining this issue and approving the said deletion, the Tribunal rendered the following findings: (i) The Appellant R.C. Sabharwal had no obligation to explain the source of investment of the founders of the trust being Smt. Morni Devi and Sh. Brij Lal. (ii) The Trust itself had been filing its return of income since it came into existence and had been assessed separately. No evidence was produced to show that the assessee was the benami owner of the trust. (iii) As regards the credits representing deposits of Special Bearer Bonds, relying upon Section 3 of the Special Bearer Bonds (Immunities and Exemptions) Act, 1981 it was held that no person who has subscribed to or has otherwise acquired Special Bearer Bonds shall be required t....
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.... that limited extent. Holding so, the appeals were disposed of. Consequently, on 30.12.2009, the Assessing Officer passed an assessment order accepting the explanation of the assessee on the aspect remitted and the income of the assessee Puneet Sabharwal was fixed at Rs. 67,550/-. Proceedings in the High Court : 15. These orders which came subsequent to the orders of the Trial Court were placed before the High Court. It was contended that in view of the orders made by the Income Tax Appellate Tribunal in the reopening proceedings, which reopening was based on the search conducted by the CBI, there is absolutely no ground to proceed with the criminal trial. It was further argued, with respect to the appellant Puneet Sabharwal, that he was a minor for a large portion of the check period and therefore could not be made an accused. 16. Repelling the contentions, the High Court held as follows: (i) Simply because for a large part of the period of investigation, the appellant Puneet Sabharwal was a minor, would not by itself be a reason to disregard the fact that at least for the seven years of the investigation period he was a major; (ii) Under Section 3(2) of....
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....bunal, by its order of 31.08.2007, rendered a categorical finding that the father did not hold the properties of the said trust as benami and even the limited issue on which the Income Tax Appellate Tribunal remanded the matter, by the order of 30.12.2009, the assessment officer found the deposits to be income of the son. 19. Insofar as the appellant R.C. Sabharwal is concerned, the argument was substantially on the basis of the Income Tax Appellate Tribunal order of 31.08.2007. The contentions were as follows: (i) The order of Income Tax Appellate Tribunal categorically held that income arising from properties of various entities were wrongly added to the income of the appellant; (ii) The appellant was not the owner of those entities and consequently the properties and money held by those entities could not be held to be under the ownership of the appellant R.C. Sabharwal; (iii) The reassessment for thirteen years was carried out on the complaint of CBI itself; (iv) The courts below misapplied the judgment of this Court in Selvi J. Jayalalitha (supra) and failed to notice the distinguishing feature namely that, in the present case, it was not....
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....d not have been a party before the Income Tax Authorities and the ITAT; (viii) That the Income Tax Appellate Tribunal order can be at best, if permissible in law, used as a piece of evidence and the Income Tax Appellate Tribunal order will not have the effect of nullifying the order framing charges by a criminal court. Reliance has been placed on Selvi J. Jayalalitha (supra), Vishwanath Chaturvedi (3) v. Union of India & Ors., (2007) 4 SCC 380 and State of T.N. v. N. Suresh Rajan & Ors., (2014) 11 SCC 709 to contend that the findings of the Income Tax Authorities are not binding on a criminal court to readily accept the legality or lawfulness of the source of income. (ix) The power to quash a proceeding and nip the same in the bud has to be exercised with great caution and circumspection. So contending, the learned ASG prayed that no case has been made out to set aside the order on charge and the charges and the appeals deserve to be dismissed. Question : 22. Under the above circumstances, the question that arises for consideration is: Whether the courts below were justified in refusing to quash and set aside the order on charge dated 21.02.2006 and the c....
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....argument about the criminal proceedings losing its efficacy in view of the Income Tax Appellate Tribunal order of 31.08.2007 is concerned, we accept the submission of the respondent CBI that the prior rulings of the court ending with the judgment in Selvi J. Jayalalitha (supra) have clearly concluded the issue against the appellants. 29. This Court, in Selvi J. Jayalalitha (supra), was concerned with an appeal against an order of acquittal passed in a case of disproportionate assets under Section 13 of the Prevention of Corruption Act. The accused persons therein had sought to place reliance on income tax returns and income tax assessment orders. In that context the Court had concluded that income tax returns and orders are not by themselves conclusive proof that they are lawful sources of income under Section 13 of the Prevention of Corruption Act and that independent evidence to corroborate the same would be required. The Court held: "188. In Anantharam Veerasinghaiah & Co. v. CIT, 1980 Supp SCC 13 : 1980 SCC (Tax) 274] , the return filed by the petitioner assessee, who was an Abkari contractor, was not accepted by the ITO as amongst others, excess expenditure over th....
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....though the IT returns and the orders passed in the IT proceedings in the instant case recorded the income of the accused concerned as disclosed in their returns, in view of the charge levelled against them, such returns and the orders in the IT proceedings would not by themselves establish that such income had been from lawful source as contemplated in the Explanation to Section 13(1)(e) of the PC Act, 1988 and that independent evidence would be required to account for the same. 191. Though considerable exchanges had been made in course of the arguments, centring around Section 43 of the Evidence Act, 1872, we are of the comprehension that those need not be expatiated in details. Suffice it to state that even assuming that the income tax returns, the proceedings in connection therewith and the decisions rendered therein are relevant and admissible in evidence as well, nothing as such, turns thereon definitively as those do not furnish any guarantee or authentication of the lawfulness of the source(s) of income, the pith of the charge levelled against the respondents. It is the plea of the defence that the income tax returns and orders, while proved by the accused persons h....
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....ting Chief Minister of U.P. and his relatives. Having noticed that the basic issue was with regard to alleged investments and sources of such investments, Respondents 2 to 5 were ordered by this Court to file copies of income tax and wealth tax returns of the relevant assessment years which was done. It was pointed out on behalf of the petitioner that the net assets of the family though were Rs 9,22,72,000, as per the calculation made by the official valuer, the then value of the net assets came to be Rs 24 crores. It was pleaded on behalf of the respondents that income tax returns had already been filed and the matters were pending before the authorities concerned and all the payments were made by cheques, and thus the allegation levelled against them were baseless. It was observed that the minuteness of the details furnished by the parties and the income tax returns and assessment orders, sale deeds, etc. were necessary to be carefully looked into and analysed only by an independent agency with the assistance of chartered accountants and other accredited engineers and valuers of the property. It was observed that the Income Tax Department was concerned only with the source of inc....
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....inherent merit of the materials on record relatable thereto. Not only this aspect was totally missed by the High Court, no attempt seems to have been made by it to appraise the evidence adduced by the parties in this regard, to come to a self-contained and consummate determination." 31. These submissions do not appeal to us for the following reasons: (i) First of all, the inquisition mentioned in Paragraph 309 of the said decision, is the inquisition to be made by the criminal court. That is clear from a complete reading of the above-said paragraph. In that case, the High Court, while acquitting the accused, had merely gone by the income tax records which were produced by the accused persons. However, the Trial Court had independently examined the issue and had not mechanically gone by the income tax records. It was while commenting on this that this Court said an inquisition ought to have been made on the material. (ii) Secondly, this Court in J. Jayalalitha (supra), before arriving at a conclusion regarding the probative value of the income tax returns, has examined in detail the previous decisions of this Court where there were not only assessment orders but....
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....the same set of facts and circumstances cannot be allowed to continue. In our opinion, none of the above-referred decisions are applicable to the facts of the present case. 35. In Radheshyam Kejriwal (supra), this Court was concerned with a fact situation where the Petitioner therein was being prosecuted under the Foreign Exchange Regulation Act, 1973 for payments made by him in Indian currency in exchange for foreign currency without any general or specific exemption from the Reserve Bank of India. The Enforcement Directorate had commenced both an adjudication proceeding and a prosecution under the provisions of the Foreign Exchange Regulation Act, 1973. It so transpired that the Adjudicating Officer found that no documentary evidence was available to prove the foundational factum of the Petitioner therein entering into the alleged transactions which fell foul of the Act and thereafter directed that the proceedings be dropped. The question which fell for the consideration before this Court was whether the result of this adjudication proceeding would lead to exoneration of the Petitioner in the criminal prosecution. 36. In this background, this Court noticed that the adjudica....
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.... recorded that the e-mail sent by the Petitioner therein had clearly been sent to the principal accused for the purpose of verification since the latter was the officer for verification and that this showed that there was no role that the Petitioner played in perpetrating the offence. Thereafter, relying upon the decision in Radheyshyam (supra), the Court concluded that since the allegation has been found to be "not sustainable at all", the criminal prosecution could not be continued. 40. The decision in Ashoo Surendranath (supra) is not applicable to the present case because the decision in Ashoo Surendranath (supra) concerned a singular prosecution under the provisions of the Indian Penal Code where the sanctioning authority had, while denying sanction, recorded on merits that there was no evidence to support the prosecution case. In that context, the Court was of the opinion that a criminal proceeding could not be continued. However, in the present case, the charges were framed under the Prevention of Corruption Act, while the appellants seek to rely upon findings recorded by authorities under the Income Tax Act. The scope of adjudication in both the proceedings are markedly ....