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TMI Blog2024 (3) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Authorities. In RADHESHYAM KEJRIWAL VERSUS STATE OF WEST BENGAL [ 2011 (2) TMI 154 - SUPREME COURT] , 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. There are no merit in these appeals and the appeals are dismissed. - Vikram Nath And K. V. Viswanathan , JJ. For the Petitioner : Mr. Mukul Rohatgi, Sr. Adv. Mr. Siddharth Agarwal, Sr. Adv. Mr. Ardhendu Mauli Prasad, Sr. Adv. Mr. Ninad Laud, Adv. Ms. Ranjeeta Rohatgi, AOR Ms. Shrika Gautam, Adv. Mr. Karan Mathur, Adv. Ms. Rashika Narain, Adv. For the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The check period was taken from the date when the appellant R.C. Sabharwal joined as an Assistant 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 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. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: 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 satisfactori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (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 categorica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 owning 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x regime, the legality or illegality of the transactions generating 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- -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 po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been a delay in the submission of the income tax returns but accepted the plea of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Surendranath Tewari (supra) and J. Sekar (supra) to argue that once there is an exoneration on merits in a civil adjudication, a criminal prosecution on 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 exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 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 sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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