2021 (8) TMI 92 - DSC - Income Tax

Offences u/s 276C(1) and Section 277 Income Tax Act - tax evasion and giving false statement before the authorities - reliance on admission made by the accused in his statement u/s 132(4) - Show cause notice u/s 279 of the Income Tax Act was issued to accused and it was duly replied by the accused as stated that the accused admitted the existence of foreign bank account and the undisclosed income and therefore has committed the offence u/s 276C(1) read with Section 277 of the Income Tax Act - HELD THAT - Alleged admissions in the statement u/s 132 (4) of the Income Tax Act Ex. CW-1/G were retracted and were not unequivocal. It is apparent that the statements were made under the belief that no further harassment will be caused to the accused as he wanted to earn peace. The admissions were not unequivocal and were retracted. Once the retraction of a confessional statement takes place the burden to prove that the statement was voluntary is on the prosecution which burden has not been discharged - it was prudent for the complainant department/investigating agency to look forward for other concrete evidence to support its allegations which unfortunately was not done. Therefore, the sanction order u/s 279 (1) of the Income Tax Act which relies upon the admissions of the accused as one of the premises cannot be held valid in the eyes of law. There is a prerequisite of the certification of foreign record by the legal-keeper thereof or by an officer having legal custody of the original as a cardinal indispensable rule. In present case, the bank record in question (page no. 83 to 92) is neither certified by the bank concerned and nor it is clarified that the French Authorities were having possession of the originals. Further, the record is neither certified by the French Authorities or Indian Consulate. The letter from the French Government at page no. 48 is silent regarding the source of document and also about the fact of verification / cross checking of the data from the concerned bank. From the record, it is clear that neither the French Authorities nor the Indian authorities got the data verified from the bank concerned. The source of data is also not clear. In warrants trial cases instituted on the basis of complaint, the quantum of proof which is required for framing of charge is much higher than the state case. Section 245(1) Cr.P.C mandates that charge could be framed only when the evidence adduced by the complainant in pre-charge evidence is such of nature that if left unrebutted would result in conviction. In present case the prosecution has failed to satisfy said ingredients. The prosecution is launched on the basis of retracted admissions. The data obtained from French Authorities is not certified as per section 78 (6) of the Indian Evidence Act. Neither the Indian Authorities nor the French Authorities verified the data from the bank in question. No bank account opening form and KYC documents is obtained during investigation. No transaction from the account of accused to the foreign account is shown. Prosecution has failed to show any link of the accused with the said bank account. Even in the case of prosecution proceeds further on the basis of admitted documents on record, accused cannot be convicted merely on the basis of unauthenticated and unverified printouts obtained from third party. The said documents may create suspicion against the accused but are not sufficient to proceed further by framing of charge and to force the accused to face ordeal of criminal trial. In these circumstances, the aforesaid analysis of testimonies of witnesses and considering the documents available on record, it is clear that the complainant is unable to make out the case and the accused is discharged for the offences U/s 276C(1) and Section 277 Income Tax Act, 1961.

Summary

Issues Involved:
1. Application for discharge under Section 245(2) Cr.P.C.
2. Alleged violation under Section 276C(1) read with Section 277 of the Income Tax Act, 1961.
3. Use of data received from French authorities under the Double Taxation Avoidance Convention (DTAC).
4. Authenticity and certification of data under the Indian Evidence Act.
5. Adequacy of evidence for framing charges under Section 245(1) Cr.P.C.

Detailed Analysis:

1. Application for Discharge Under Section 245(2) Cr.P.C.:
The accused filed an application under Section 245(2) Cr.P.C. seeking discharge, which was contested by the complainant department. The court examined whether the evidence presented was sufficient to frame charges against the accused.

2. Alleged Violation Under Section 276C(1) Read with Section 277 of the Income Tax Act, 1961:
The complaint alleged that the accused had undisclosed income in a foreign bank account during the assessment year 2007-2008. The information was received from the Government of France, indicating a peak credit balance of USD $40,842 in an HSBC Geneva account. The accused initially agreed to pay the tax but later denied knowledge of the account, attributing it to his deceased wife.

3. Use of Data Received from French Authorities Under DTAC:
The defense argued that the data from the French authorities could only be used for taxation purposes and not for prosecution. However, the court referred to a circular from the Ministry of Finance clarifying that information obtained under DTAC could be used for prosecution purposes. Thus, the court rejected the defense's contention.

4. Authenticity and Certification of Data Under the Indian Evidence Act:
The defense challenged the authenticity of the data received from the French authorities, arguing it did not meet the criteria under Sections 76 and 78(6) of the Indian Evidence Act. The court noted that the data was not certified by the bank or any legal keeper and lacked verification from the French authorities. The prosecution admitted that no inquiry was made to authenticate the data from the concerned bank, and the agent mentioned in the data was not examined.

5. Adequacy of Evidence for Framing Charges Under Section 245(1) Cr.P.C.:
The court emphasized that in warrant trial cases instituted on the basis of a complaint, the quantum of proof required for framing charges is higher than in state cases. The evidence must be such that if left unrebutted, it would result in conviction. The court found that the prosecution's case was based on retracted admissions and unauthenticated data. The court cited the case of Suresh Khullar Vs. Vijay Khullar, which held that evidence adduced by the complainant at the pre-charge level must be of such a nature that it would result in conviction if left unrebutted.

Conclusion:
The court concluded that the prosecution failed to provide sufficient evidence to link the accused with the foreign bank account. The data from the French authorities was not authenticated or verified, and the accused's retracted statements were not unequivocal. The court held that the prosecution could not rely on unauthenticated and unverified printouts obtained from a third party to frame charges. Consequently, the accused was discharged for the offenses under Sections 276C(1) and 277 of the Income Tax Act, 1961.