* Author
[2024] 3 S.C.R. 679 : 2024 INSC 221
Puneet Sabharwal
v.
CBI
(Criminal Appeal No. 1682 of 2024)
19 March 2024
[Vikram Nath and K.V. Viswanathan,* JJ.]
Issue for Consideration
The charges were framed against the appellants. While the
charge against the appellant-P was u/s. 109 IPC r/w. s.13(1)
(e) and 13(2) of the Prevention of Corruption Act, 1988, the
charge against appellant-R was u/s. 13(1)(e) r/w. s.13(2) of the
Prevention of Corruption Act, 1988. In substance, the charge
was that appellant-R owned assets disproportionate to known
sources of income and the appellant-P son of R has abetted him
in the commission of the said offence. The High Court, by the
impugned order, dismissed the petitions for quashing criminal
proceedings. 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 charges as framed
on 28.02.2006.
Headnotes
Prevention of Corruption Act, 1988 – s. 13(1)(e) r/w. s. 13(2)
– Penal Code, 1860 – s. 109 – Income Tax Act, 1961 – The
appellant-R was exonerated by the Income Tax Appellate
Tribunal by order dated 31.08.2007 – It was contended that in
view of the orders made by the Income Tax Appellate Tribunal
in the reopening proceedings, which were 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-P, that he was a minor for a large
portion of the check period and therefore could not be made
an accused – Propriety:
Held: In the instant 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
680 [2024] 3 S.C.R.
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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 has rightly not discharged the appellants based on
the Orders of the Income Tax Authorities – 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 – 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 – As far as the contention about the minority of
the appellant-P is concerned, it need not detain the Court since
for the last seven years of the check period admittedly he was
not minor –Thus, 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. [Paras 32, 37, 40,
23, 44]
Case Law Cited
State of Karnataka v. Selvi J. Jayalalitha & Ors. [2017]
5 SCR 525 : (2017) 6 SCC 263 – relied on.
Radheshyam Kejriwal v. State of West Bengal &
Anr. [2011] 4 SCR 889 : (2011) 3 SCC 581; Ashoo
Surendranath Tewari v. CBI & Anr. (2020) 9 SCC 636;
J. Sekar v. Directorate of Enforcement [2022] 3 SCR
698 : (2022) 7 SCC 370 – held inapplicable.
P. Nallamal v. State (1996) 6 SCC 559; Vishwanath
Chaturvedi (3) v. Union of India & Ors. [2007] 3 SCR
448 : (2007) 4 SCC 380; Sheoraj Singh Ahlawat &
Ors. v. State of U.P. & Anr. [2012] 10 SCR 1034 :
(2013) 11 SCC 476; State of T.N. v. N. Suresh Rajan
[2024] 3 S.C.R. 681
Puneet Sabharwal v. CBI
& Ors. [2014] 1 SCR 135 : (2014) 11 SCC 709; CBI
& Anr. v. Thommandru Hannah Vijayalakshmi & Anr.
[2021] 13 SCR 364 : (2021) 18 SCC 135; Onkar Nath
Mishra & Ors. v. State (NCT of Delhi) & Anr. [2007]
13 SCR 716 : (2008) 2 SCC 561; State of Karnataka
v. L. Muniswamy & Ors. [1977] 3 SCR 113 : (1977)
2 SCC 699 – referred to.
List of Acts
Prevention of Corruption Act, 1988; Penal Code, 1860; Income
Tax Act, 1961.
List of Keywords
Disproportionate Assets; Known source of income; Income tax
return; Income tax proceeding; Evidentiary value; Conclusive proof;
Quashing; Criminal Proceedings; Framing of charge; Discharge;
Exoneration in civil adjudication; Criminal Prosecution; Criminal
trial.
Case Arising From
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.1682
of 2024
From the Judgment and Order dated 01.12.2020 of the High Court
of Delhi at New Delhi in WPCRL No.200 of 2010
With
Criminal Appeal No.1683 of 2024
Appearances for Parties
Mukul Rohatgi, Siddharth Agarwal, Ardhendu Mauli Prasad, Sr.
Advs., Ninad Laud, Ms. Ranjeeta Rohatgi, Ms. Shrika Gautam,
Karan Mathur, Ms. Rashika Narain, Sangramsingh R. Bhonsle,
Zubin Dash, Ms. Samridhi S Jain, Nrupal A Dingankar, Ms.
Pushkara A Bhonsle, Naman Sherstra, Mahesh Jadhav, Advs. for
the Appellant.
K.M. Natraj, A.S.G., Mukesh Kumar Maroria, Sanjay Kumar Tyagi,
Rajan Kumar Chaurasia, Padmesh Mishra, Navanjay Mahapatra,
Shantanu Sharma, B.K. Satija, Manoj K. Mishra, Abhinav S.
Raghuvanshi, Advs. for the Respondent.
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Judgment / Order of the Supreme Court
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.
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.
[2024] 3 S.C.R. 683
Puneet Sabharwal v. CBI
(iv) 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 twentyfour 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. It
was further alleged that appellant R.C. Sabharwal dealt with
all the financial matters of the said trusts/firms.
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(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 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;
(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
[2024] 3 S.C.R. 685
Puneet Sabharwal v. CBI
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
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
686 [2024] 3 S.C.R.
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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 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 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
[2024] 3 S.C.R. 687
Puneet Sabharwal v. CBI
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 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.
(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,
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;
688 [2024] 3 S.C.R.
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(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 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 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
[2024] 3 S.C.R. 689
Puneet Sabharwal v. CBI
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 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;
(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.
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18. Insofar as the appellant Puneet Sabharwal was concerned, it was
contended as follows:
(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.
(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 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;
[2024] 3 S.C.R. 691
Puneet Sabharwal v. CBI
(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.
(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:
(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
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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 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 charges as framed on 28.02.2006?
[2024] 3 S.C.R. 693
Puneet Sabharwal v. CBI
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
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 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.
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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 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 person has concealed the particulars of his income
or has deliberately furnished inaccurate particulars of
[2024] 3 S.C.R. 695
Puneet Sabharwal v. CBI
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 Evidence Act, 1872, we are of the comprehension
that those need not be expatiated in details. Suffice it to
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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
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
[2024] 3 S.C.R. 697
Puneet Sabharwal v. CBI
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, 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.
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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 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
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Puneet Sabharwal v. CBI
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 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 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
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can be relied upon either to quash the criminal proceeding or
to discharge the accused persons.
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 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 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 adjudication proceedings
under the Foreign Exchange Regulation Act, 1973 involved an
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Puneet Sabharwal v. CBI
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 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 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
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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 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 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 prosecution. The proceedings under
the Prevention of Money Laundering Act, being based on the
Income Tax Department’s information 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.
[2024] 3 S.C.R. 703
Puneet Sabharwal v. CBI
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 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.
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
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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.
Headnotes prepared by: Ankit Gyan Result of the case:
Appeals dismissed.
