Full Judgment Text
2024 INSC 221
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2024
(@ SPECIAL LEAVE PETITION (CRIMINAL) NO.
2044 OF 2021)
PUNEET SABHARWAL …Appellant (s)
Versus
CBI ...Respondent(s)
WITH
CRIMINAL APPEAL NO. OF 2024
(@ SPECIAL LEAVE PETITION (CRIMINAL) NO.
2685 OF 2021)
R.C. SABHARWAL …Appellant (s)
Versus
CBI ...Respondent(s)
J U D G M E N T
K.V. Viswanathan, J.
1. Leave granted.
Signature Not Verified
Digitally signed by
Deepak Singh
Date: 2024.03.19
16:25:23 IST
Reason:
1
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.
2
Brief Facts:
3. On 23.08.1995, based on source information, the Anti-
Corruption Bureau, New Delhi, District New Delhi registered
a First Information Report in Crime No.RC-74(A)/95-DLI.
4. On 28.08.1995, a charge-sheet was filed against both the
appellants. In substance, the allegations, as set out in the
charge-sheet, were as follows:
(i) That the appellant R.C. Sabharwal was Additional
Chief Architect in New Delhi Municipal Corporation;
(ii) That while being posted in various capacities from the
year 1968 onwards, he had amassed huge assets which
are disproportionate to his known sources of income;
(iii) That the assets were acquired by R.C. Sabharwal
either in his name or in the name of his family
members. Details of the assets were set out.
(iv) The check period was taken from the date when the
appellant R.C. Sabharwal joined as an Assistant
3
Architect in NDMC i.e. 20.08.1968 to the date of the
search i.e. 23.08.1995.
(v) That the total income of the appellant R.C. Sabharwal
from salary was Rs. 10,00,042/-. Detailed breakup of
salary for the years was given. The income from the
salary of his spouse was Rs. 8,72,249.42
(vi) Apart from the above salaried income, income
accruing to the accused R.C. Sabharwal from several
enterprises, companies and trusts was also set out.
Rental income was also mentioned as well as income
from insurance policies and income arising out of
interest. After computing all the income, it was
mentioned that the total income was of Rs.
1,23,18,091/-
(vii) Expenditure was provided to the extent of Rs.
18,23,108/-. Movable assets to the tune of Rs.
4,25,450/- was mentioned. It was also alleged that
there were bank balances in the name of appellant
4
R.C. Sabharwal and in the name of his family
members to the tune of Rs. 82,63,417/-.
(viii) As far as the immovable assets are concerned, a set of
twenty-four properties were set out which were in all
valued at Rs. 2,27,94,907/-.
(ix) That the appellant R.C. Sabharwal could not
satisfactorily account for the assets disproportionate
to his known sources of income.
(x) That the appellant R.C. Sabharwal was a party to the
criminal conspiracy with his son, being appellant
Puneet Sabharwal, who had received Rs. 79 lakhs
through encashment of Special Bearer Bonds and he
facilitated commission of the offence 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.
5
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
6
discharge. The learned Judge rendered the following findings
in the order on charge:
(i) The expression “known sources of income” can only
have reference to the sources known to the
prosecution;
(ii) The prosecution cannot be expected to know the firms
of the accused persons;
(iii) The income from firms of the accused persons would
be within the special knowledge of the accused, under
Section 106 of the Evidence Act and it was for the
accused to ‘satisfactorily account’ for the charge of
owing disproportionate assets, which can only be
discharged at trial;
(iv) Insofar as the appellant Puneet Sabharwal is
concerned, reliance was placed on the statement of
Chartered Accountant Anil Mehta to the effect that
the properties were purchased benami by appellant
R.C. Sabharwal in the name of his son and sister;
7
(v) The learned judge relied upon P. Nallamal v. State,
(1996) 6 SCC 559, wherein this Court held that a non-
public servant can be tried in the same trial along with
the public servant for abetment of offence under
Section 13(1)(e) r/w 13(2) of the PC Act.
(vi) There was sufficient material to show the existence of
grave suspicion arising out of the material placed
before the Court regarding involvement of both the
appellants for commission of offences under Section
109 IPC read with Section 13(1)(e) r/w 13(2) of the
PC Act as far as the appellant Puneet Sabharwal was
concerned and under Section 13(1)(e) read with 13(2)
of the Prevention of Corruption Act, 1988 as far as
R.C. Sabharwal was concerned.
Charges:
6. Thereafter, by order dated 28.2.2006, charges were also
framed. For the sake of convenience, the charges against both
the appellants are set out hereinbelow:
8
“ CHARGE NO. 1
That you being a public servant employed as Additional
Chief Architect, NDMC, New Delhi, during the period
20.8.1968 to 23.08.1995 were found in possession of assets
to the tune of Rs. 3,10,58,324/- as against your income and
that of your family members Income, to the tune of Rs.
1,23,18,091/- and expenditure of Rs. 18,23,108/-and you
were found in possession of total assets to the tune of Rs.
2,05,63,341/- which were disproportionate to your known
sources of income and which you could not satisfactorily
account for and thereby you committed an offence U/s.
13(1)(e) punishable U/s. 13(2) of the PC Act, 1988 and
within my cognizance.
And I hereby direct you to be tried by this court for the said
offence.
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]
9
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 took place on the
income tax front.
8. The Income Tax Appellate Tribunal pronounced its judgment
on 31.08.2007 in appeals and cross appeals filed by the
assessees [which included the Appellants herein] and the
department, with regard to the reopening of the assessments
for the years 1989-1990 to 1995-1996 and 1997-1998 to 2001-
2002.
9. Earlier, the Assessing Officer had reopened the assessment for
Assessment Year 1996-1997 and made certain additions and
deletions in the hands of the Appellants herein and other
assessees. Thereafter, the CIT (Appeals) had upheld the
validity of the reopening while approving or disapproving
some of the additions and deletions made by the Assessing
10
Officer. However, the Tribunal had, on 07.03.2005, held that
the reopening of the assessment for the Assessment Year
1996-1997 was not justified since the conditions precedent for
reopening the assessment were not fulfilled. Consequently, the
issues regarding the merits of additions or deletions were not
adjudicated by the Tribunal in the said Order.
10. However, the Tribunal in its order dated 31.08.2007, while
hearing appeals and cross-appeals concerning the reopening of
assessment for the years 1989-1990 to 1995-1996 and 1997-
1998 to 2001-2002, found that materials did exist for
reopening the assessment for the said assessment years.
Thereafter, it examined the merits of the additions made on
substantive basis and additions denied, in the years under
consideration in the hands of appellant R.C. Sabharwal. It
noted that the Tribunal was required to examine the additions
and deletions carried out by the Assessing Officer and the CIT
(Appeals) in the assessment year 1996-1997 because, in the
view of the Tribunal, the issue of additions in all the other
11
years under consideration flowed from the base assessment
year of 1996-1997.
11. While considering the various additions and deletions, the
Tribunal inter alia considered the addition carried out by the
Assessing Officer [which was thereafter deleted by the CIT
(Appeals)] in the hands of the appellant R.C. Sabharwal herein
with respect to income of M/s Morni Devi Brij Lal Trust. The
Assessing Officer had justified these additions on the grounds
that:
(i) The source of investment made by the founders of the
said trust being Smt. Morni Devi and Sh. Brij Lal was
not explained.
(ii) The special bearer bonds 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.
12
(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 to disclose, for any purpose whatsoever,
13
the nature and source of acquisition of such bonds and
that complete immunity has been granted to the bond
holders. The presumption of the Assessing Officer
that the bearer bonds were acquired by the trust was
held to be not correct;
(iv) Reference is made by the Tribunal to the findings of
the CIT (Appeals) that the special bearer bonds were
tendered for encashment by the trust and that
Assessing Officer exceeded his jurisdiction in making
an enquiry and calling upon the trust to explain the
nature and source of acquisition of such bonds.
(v) Reference is made by the Tribunal to the findings of
the CIT (Appeals) that the trust would be a person
within the meaning of the Special Bearer Bonds
(Immunities and Exemptions) Act, 1981.
(vi) The Tribunal then quotes the findings of the CIT
(Appeals) whereunder it was held that once the
assessment has been made and the department has
14
accepted the existence of the trust it could not be
reversed without bringing on record any adverse
material. The onus was on the department to show that
the trust was benami and there was no evidence in that
regard.
(vii) The Tribunal then quotes the findings of the CIT
(Appeals) whereunder it was concluded that the
Assessing Officer had not been able to prove that the
Trust was benami and that the income of the trust
belonged to R.C. Sabharwal. Holding so, the additions
to the tune of Rs. 8,14,230/- was deleted. No further
comments were given by the Tribunal in regard to this
addition/deletion.
13. Thereafter, on the issue of appellant Puneet Sabharwal having
received funds from the Morni Devi Brij Lal Trust which was
held to belong to appellant R.C. Sabharwal, it was found that
since Morni Devi Brij Lal Trust was a separate entity and since
the appellant Puneet Sabharwal was running its business, its
15
income could not be added in the hands of the appellant R.C.
Sabharwal. The Tribunal also considered the
additions/deletions with regard to various other firms and
assessees which we do not seek to set out herein for the
purposes of brevity.
14. Ultimately, only on the aspect of deposits in the joint bank
accounts of minors, so far as it fell within the limitation period,
the Tribunal restored the matter back to the Assessing Officer
for deciding the issue afresh and the appeal of the revenue was
allowed to 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
16
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 Special Bearer Bonds
(Immunities and Exemptions) Act, 1981, the
immunities under the Act are inapplicable to offences
committed under the Prevention of Corruption Act or
similar offences;
17
(iii) Prosecution has sought to rely upon statements of
several witnesses;
(iv) In State of Karnataka v. Selvi J. Jayalalitha & Ors.
(2017) 6 SCC 263, this Court had held that income tax
assessment orders are apropos tax liability on income
and they do not necessarily attest to the lawfulness of
the sources of income;
(v) That what was relevant was whether there was a
strong suspicion that the accused has committed the
offence and that in the view of the High Court there
was indeed a case for trial. Holding so, the Writ
Petitions were dismissed.
Contentions:
17. Before us Mr. Mukul Rohatgi and Mr. Siddharth Agarwal,
learned senior counsel for the appellants reiterated the
contentions raised before the High Court.
18. Insofar as the appellant Puneet Sabharwal was concerned, it
was contended as follows:
18
(i) That the High Court erred in holding that merely
because for a large part of the period of investigation,
the appellant was a minor, it would not be by itself a
reason to disregard the fact that for at least seven years
of the investigation period he was a major;
(ii) That the courts below erred in, without more,
endorsing the allegations against the appellant(s)
solely on account of being named as a beneficiary in
the trust deed of M/s Morni Devi Brij Lal Trust.
Further, the Court erred in endorsing the allegation
that the trust was holding benami properties of which
appellant R.C. Sabharwal was a beneficial owner;
(iii) That since out of the twenty years of the check period
except 7 years of the said period the appellant Puneet
Sabharwal was a minor, it belied logic as to how the
said appellant could have conspired with his father.
This indicated gross abuse of process of law.
19
(iv) That the charge as framed indicates that criminal
proceedings have been saddled against appellant
Puneet Sabharwal merely by virtue of being his
father’s son and none of the ingredients under Section
109 of the Indian Penal Code were attracted;
(v) That the High Court erred in not taking into account
the exoneration of the appellant’s father by the
Income Tax Appellate Tribunal; that the Income Tax
Appellate Tribunal, 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
20
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 a case of reliance on income
tax return but the returns which were subjected to an
inquisition.
21
(v) The High Court exercising power under Article 226,
227 of the Constitution of India and Section 482 of
Cr.P.C. has power to look into material placed by the
accused in arriving at its conclusion for discharge.
20. For both the appellants, reliance was placed on Radheshyam
Kejriwal v. State of West Bengal & Anr., (2011) 3 SCC 581,
Ashoo Surendranath Tewari v. CBI & Anr. (2020) 9 SCC
636 and J. Sekar v. Directorate of Enforcement, (2022) 7
SCC 370 to contend that where there is exoneration on merits
in a civil adjudication, criminal prosecution on the same set of
facts and circumstances cannot be allowed to continue since
the underlying principle is that the standard of proof in
criminal cases is higher.
21. The submissions of the appellants were strongly refuted by
Mr. K.M. Nataraj, learned Additional Solicitor General.
Learned ASG contended as follows:
22
(i) That at the stage of framing of charges what is
relevant is material as is available on the date of
framing of the charge;
(ii) That a court of law is not required to appreciate
evidence at the stage of framing of charges to
conclude whether the materials produced are
sufficient or not for convicting the accused;
(iii) That it was settled law that probative value of material
on record cannot be gone into at the stage of framing
of charges since the court was not conducting a mini
trial;
(iv) Relying on Sheoraj Singh Ahlawat & Ors. v. State of
U.P. & Anr., (2013) 11 SCC 476 , it was contended
that all that has to be seen is whether there is a ground
for presuming that the offence has been committed
and not whether there was ground for convicting the
accused;
23
(v) That even a strong suspicion founded on material
which leads the court to form a presumptive opinion
as to the existence of the factual ingredients
constituting the offence would justify the framing of
the charge.
(vi) Reliance placed on the order of the Income Tax
Appellate Tribunal dated 21.08.2007 is subsequent to
the framing of charges and even otherwise cannot be
the basis for the discharge of the accused;
(vii) That the criminal prosecution does not depend upon
the order passed by the Income Tax Appellate
Tribunal and, most importantly, the prosecution was
not and could 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
24
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
25
refusing to quash and set aside the order on charge dated
21.02.2006 and the charges as framed on 28.02.2006?
Analysis:-
23. Having heard learned counsels for the parties and perused the
records, we are of the opinion that the appellants have not
made out a case for interference with the order on charge
dated 21.02.2006 and the order of framing charge dated
28.02.2006. We say so for the following reasons.
24. The case of the prosecution is that the appellant R.C.
Sabharwal, the father of appellant Puneet Sabharwal, owned
assets to the tune of Rs. 2,05,63,341/- and that this was
disproportionate to his known sources of income which was
computed at Rs. 1,23,18,091/-. The allegation against the son
Puneet Sabharwal was that he had received Rs. 79 lakhs
through encashment of Special Bearer Bonds and he facilitated
commission of offence inasmuch as assets were acquired by
appellant R.C. Sabharwal in the name of M/s Morni Devi Brij
Lal Trust, M/s Morni Merchants and other firms in which the
26
sole beneficiary was appellant Puneet Sabharwal. The order
framing charge invokes Section 109 IPC to be read with
Section 13(1)(e) read with Section 13(2) of the PC Act against
Puneet Sabharwal.
25. The main plank of the arguments of the appellants is that the
Income Tax Appellate Tribunal order dated 31.08.2007, has,
while allowing the appeals of the assessees and dismissing the
cross appeals of the department (except to a small extent which
too got settled with the assessment order of 30.12.2009), held
that no case was made out to justify that the income and assets
of the entities such as the Morni Lal Brij Trust were to be
added to the income of R.C. Sabharwal. In view of the same,
it is argued that there is no case for prosecuting them for own-
ing disproportionate assets.
26. It is argued that per se the Income Tax Appellate Tribunal
order should result in quashment of proceedings and the
discharge of the accused. Additionally, it is argued that on the
ground that analogous tax proceedings have ended in favour of
27
the appellants, a criminal prosecution on identical facts cannot
continue. For this, reliance is placed on the judgments
mentioned hereinabove.
27. We have already discussed the substance of the Income Tax
Appellate Tribunal order of 31.08.2007. In law, the
submissions of the appellants ought to fail on both the counts
as there is no basis to nip the criminal prosecution in this case
in its bud.
28. As far as the first 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
28
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 the disclosed available cash was
noticeable and further several deposits had been made
in the names of others. The assessee's explanation that the
excess expenditure was met from the amounts deposited
with him by other shopkeepers but were not entered in his
book, was not accepted and penalty proceedings were
taken out against him holding that the items of cash deficit
and cash deposit represented concealed income resulting
from suppressed yield and low selling rates mentioned in
the books. The Appellate Tribunal, however, allowed
the appeal of the assessee and set aside the penalty order.
The High Court reversed [ CIT v. Anantharam
Veerasingaiah & Co. , 1971 SCC OnLine AP 262 : (1975)
99 ITR 544] the decision of the Appellate Tribunal and the
matter reached the Supreme Court.
189. It was held that as per Section 271(1)( c ) of the Income
Tax Act, 1961, penalty can be imposed in case where any
29
person has concealed the particulars of his income or has
deliberately furnished inaccurate particulars of such
income. The related proceeding was quasi-criminal in
nature and the burden lay on the Revenue to establish that
the disputed amount represented income and that the
assessee had consciously concealed the particulars of
his income or had deliberately furnished inaccurate
particulars. The burden of proof in penalty proceedings
varied from that involved in assessment proceedings and
a finding in assessment proceedings that a particular
receipt was income cannot automatically be adopted as a
finding to that effect in the penalty proceedings . In the
penalty proceedings, the taxing authority was bound to
consider the matter afresh on the materials before it, to
ascertain that whether a particular amount is a revenue
receipt. It was observed that no doubt the fact that the
assessment year contains a finding that the disputed
amount represents income constitutes good evidence in the
penalty proceedings, but the finding in the assessment
proceedings cannot be regarded as conclusive for the
purpose of penalty proceedings . Before a penalty can be
imposed, the entirety of the circumstances must be taken
into account and must lead to the conclusion that the
disputed amount represented income and that the assessee
had consciously concealed the particulars of his income or
had deliberately furnished inaccurate particulars.
190. The decision is to convey that 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
30
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 had not been
objected to by the prosecution and further it (prosecution)
as well had called in evidence the income
tax returns/orders and thus, it cannot object to the
admissibility of the records produced by the defence. To
reiterate, even if such returns and orders are admissible,
the probative value would depend on the nature of the
information furnished, the findings recorded in the orders
and having a bearing on the charge levelled. In any view
of the matter, however, such returns and orders would not
ipso facto either conclusively prove or disprove the charge
and can at best be pieces of evidence which have to be
evaluated along with the other materials on record.
Noticeably, none of the respondents has been examined on
oath in the case in hand. Further, the income tax returns
relied upon by the defence as well as the orders passed in
the proceedings pertaining thereto have been filed/passed
after the charge-sheet had been submitted.
Significantly, there is a charge of conspiracy and abetment
against the accused persons. In the overall perspective
therefore neither the income tax returns nor the
orders passed in the proceedings relatable thereto, either
definitively attest the lawfulness of the sources of income
of the accused persons or are of any avail to them to
satisfactorily account the disproportionateness of their
pecuniary resources and properties as mandated by
Section 13(1)( e ) of the Act.
199. The import of this decision is that in the tax regime,
the legality or illegality of the transactions generating
31
profit or loss is inconsequential qua the issue whether the
income is from a lawful source or not. The scrutiny in an
assessment proceeding is directed only to quantify the
taxable income and the orders passed therein do not certify
or authenticate that the source(s) thereof to be lawful and
are thus of no significance vis-à-vis a charge
under Section 13(1)( e ) of the Act.
200. In Vishwanath Chaturvedi (3) v. Union of India ,
(2007) 4 SCC 380 : (2007) 2 SCC (Cri) 302], a
writ petition was filed under Article 32 of the Constitution
of India seeking an appropriate writ for directing the
Union of India to take appropriate action to prosecute R-2
to R-5 under the 1988 Act for having amassed
assets disproportionate to the known sources of income by
misusing their power and authority. The respondents were
the then sitting 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 income
and whether the tax was paid or not and, therefore, only
an independent agency or CBI could,
32
on court direction, determine the question of
disproportionate assets . CBI was thus directed to conduct
a preliminary enquiry into the assets of all the respondents
and to take further action in the matter after scrutinising
as to whether a case was made out or not.
201. This decision is to emphasise that submission of
income tax returns and the assessments orders passed
thereon, would not constitute a foolproof defence against
a charge of acquisition of assets disproportionate to
the known lawful sources of income as contemplated
under the PC Act and that further scrutiny/analysis thereof
is imperative to determine as to whether the offence as
contemplated by the PC Act is made out or not.”
[Emphasis Supplied]
30. The appellants herein have contended that the decision in J.
Jayalalitha (supra) would not be applicable to the present
case since, according to them, that decision involved only an
assessment order, while the present case involves the findings
by an Appellate Tribunal after an inquisition into the issues
involved. The Appellants herein seek to rely on Paragraph 309
of the decision in J. Jayalalitha (supra) in support of the
same. Paragraph 309 is set-out hereunder:
“ 309. In contradistinction, the High Court quantified the
amount of gifts to be Rs 1.5 crores principally referring to the
income tax returns and the orders of the authorities passed
thereon. It did notice that there had been a delay in the
submission of the income tax returns but accepted the plea of
33
the defence acting on the orders of the Income Tax
Authorities. It seems to have been convinced as well by the
contention that there was a practice of offering gifts to
political leaders on their birthdays in the State. Not only is
the ultimate conclusion of the High Court, dehors any
independent assessment of the evidence to overturn the
categorical finding of the trial court to the contrary, no
convincing or persuasive reason is also forthcoming. This
assumes significance also in view of the state of law that the
findings of the Income Tax Authorities/forums are not
binding on a criminal court to readily accept the legality or
lawfulness of the source of income as mentioned in the
income tax returns by an assessee without any semblance of
inquisition into the 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
34
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 also decisions of the
Appellate Tribunal and the High Court. It is only after
considering this aspect that the Court laid down that
the Income Tax Returns and Orders passed in IT
Proceedings are not conclusive proof.
(iii) Thirdly , this Court has categorically held that while
income tax returns/ orders may be admissible as
evidence, the probative value of the same would
depend on the nature of the information furnished and
35
findings recorded in the order, and would not ipso
facto either conclusively prove or disprove a charge .
(iv) Fourthly , it is important to note that the decision in J.
Jayalalitha (supra) was in a matter involving a full-
fledged trial and the Court was hearing an appeal
against an Order of acquittal passed by the High
Court. The Court also noted that income tax returns or
orders could at best be evidences which have to be
evaluated along with the other materials on record.
(v) This Court, in cases involving either discharge
[ State of Tamil Nadu v. N. Suresh Rajan & Ors.
(2014) 11 SCC 709 Paragraph 32.3] or quash [ CBI &
Anr. v. Thommandru Hannah Vijayalakshmi &
Anr. (2021) 18 SCC 135 Paragraph 63-64] has noted
that Income Tax Returns are not conclusive proof
which can be relied upon either to quash the criminal
proceeding or to discharge the accused persons.
36
32. Therefore, in the present case, the probative value of the
Orders of the Income Tax Authorities, including the Order of
the Income Tax Appellate Tribunal and the subsequent
Assessment Orders, are not conclusive proof which can be
relied upon for discharge of the accused persons. These
orders, their findings, and their probative value, are a matter
for a full-fledged trial. In view of the same, the High Court,
in the present case, has rightly not discharged the appellants
based on the Orders of the Income Tax Authorities.
33. Insofar as the submission that where there is exoneration in a
civil adjudication, criminal prosecution on the same set of
facts and circumstances cannot be allowed to continue is
concerned, the same is also without merit as far as the present
case is concerned.
34. The appellants herein have placed reliance on the decisions of
this Court in Radheyshyam Kejriwal (supra) , Ashoo Suren-
dranath Tewari (supra) and J. Sekar (supra) to argue that
once there is an exoneration on merits in a civil adjudication,
37
a criminal prosecution on the same set of facts and circum-
stances 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
38
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 adjudication
proceedings under the Foreign Exchange Regulation Act,
1973 involved an adjudication on whether a person had
committed a contravention of any provisions of the Act. It is
in this context, that the Court went on to hold that where the
allegation in an adjudication proceeding and proceeding for
prosecution is identical and the exoneration in the former is on
merits i.e. that there is no contravention of the provisions of
the Act, then the trial of person concerned would be an abuse
of process of the Court.
37. The decision in Radheyshyam (supra) was in a fact situation
where the adjudicatory and criminal proceedings were being
commenced by the same authority in exercise of powers
under the same Act. Further, as this Court had noted, the civil
adjudication proceedings related to an adjudication as to
whether there was contravention of provisions of the Act and
39
the Rules thereunder, which had an impact on the prosecution
under the Act. However, in the present case, the appellants
herein are being prosecuted under the provisions of the
Prevention of Corruption Act while they seek to rely on an
exoneration under the Income Tax Act. The scope of
adjudication in both of these proceedings are vastly different.
The authority which conducted the income tax proceedings
and the authority conducting the prosecution is completely
different (CBI). The CBI was not and could not have been a
party to the income tax proceeding. Given the said factual
background, the decision in Radheyshyam (supra) is not
applicable to the present case.
38. In Ashoo Surendranath (supra) , the Petitioner therein was
working as a DGM at the Small Industries Development Bank
of India while there was diversion of funds from the Bank. The
allegation against the Petitioner therein was that he had shared
the RTGS details for the account to which the amount was
diverted, to another official who was the purported kingpin of
40
the crime. The competent authority of the Bank had refused to
provide a sanction for prosecution of the Petitioner therein,
which was supported by the report of the Central Vigilance
Commission. The question therefore posed before the Court
was whether the report of the Central Vigilance Commission
should lead to discharge of the Petitioner therein.
39. In the above-mentioned factual background, this Court set-out
the findings of the Central Vigilance Commission which had
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
41
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 different and therefore the findings in the latter
cannot be a ground for discharge of the Accused Persons in
the former. The proceedings under the Income Tax Act and its
evidentiary value remains a matter of trial and they cannot be
considered as conclusive proof for discharge of an accused
person.
41. The appellants herein have further sought to place reliance on
J. Sekar (supra) to argue that the letter of the Income-Tax
42
Department was relied upon to quash prosecution under the
Prevention of Money Laundering Act, 2002. In our opinion,
this decision is again inapplicable to the present case. In J.
Sekar (supra) , the criminal proceedings had arisen based
upon the information furnished by the Income Tax
Department regarding recovery of unauthorized cash and
other items during their search. It so transpired that the Income
Tax Department accepted the explanation of the accused
regarding the recovered cash which led to closure of the
Income Tax proceedings. Thereafter, even the criminal
proceedings led to filing of a closure report on the ground that
no sufficient evidence was found for continuation of prosecu-
tion. The proceedings under the Prevention of Money Laun-
dering Act, being based on the Income Tax Department’s in-
formation after their search and the registration of FIR, were
found to be unsustainable in view of no violation being found
either by the Department or in the criminal proceeding.
43
42. The decision in J. Sekar (supra) is therefore distinguishable
on facts. In the abovementioned case, there was an
exoneration by not only the Income Tax Department, to the
effect that no case was made, there was also an exoneration in
the criminal proceedings which involved the Scheduled
Offence. In the present case, the proceedings under the Income
Tax Act which are sought to be relied upon relate to the
assessment of income of the assessee and not to the source of
income and the allegation of disproportionate assets under the
Prevention of Corruption Act. The said Orders cannot be the
basis to abort the criminal proceeding in the present case.
43. We are not to conduct a dress rehearsal of the trial at this stage.
The tests applicable for a discharge are well settled by a catena
of judgments passed by this Court. Even a strong suspicion
founded on material on record which is ground for presuming
the existence of factual ingredients of an offence would justify
the framing of charge against an accused person [ Onkar Nath
Mishra & Ors. v. State (NCT of Delhi) & Anr. (2008) 2 SCC
44
561 Paragraph 11]. The Court is only required to consider
judicially whether the material warrants the framing of charge
without blindly accepting the decision of the prosecution
[ State of Karnataka v. L. Muniswamy & Ors. (1977) 2 SCC
699 Paragraph 10]. Applying these principles to the present
case, we accept the submission of the learned ASG that the
appellants have not made out the case to say that the charge is
groundless.
44. The other argument about the minority of the appellant Puneet
Sabharwal also need not detain the Court since for the last
seven years of the check period admittedly he was not a minor.
All the defences are available for the appellants to be placed
before the Trial Court.
45. In view of what we have held hereinabove, we are not called
upon to answer the argument raised by the learned ASG that
the Income Tax Appellate Tribunal order being a document
which has emerged subsequent to the framing of the charge,
it cannot be taken into consideration at all.
45
46. For all the above reasons, we find no merit in these appeals
and the appeals are dismissed. The interim orders stand
vacated. All pending applications stand closed. The trial has
been pending for nearly 25 years. We direct that the trial be
expeditiously concluded and, in any case, on or before
31.12.2024. Needless to mention that the observations made
herein are only in the context of the discharge proceedings.
…....…………………J.
(Vikram Nath)
..…………………J.
(K.V. Viswanathan)
New Delhi;
March 19, 2024.
46