TMI Blog1992 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Penal Code and the Income-tax Act. The facts leading to the prosecution case are well set out in the judgments of the courts below. Nevertheless, we think it necessary to recapitulate the basic matrix, though not in detail, in order to enable us to give our own reasons for the findings which we will be arriving at. The first appellant who is the brother-in-law of the second appellant, received cash of Rs. 6 lakhs, brought by a person from Bombay for distributing the said amount to various persons as per instructions received from a person at Singapore. While he was engaged in the said illegal transaction, the Enforcement Directorate, Madras, raided his premises at No. 34, Appu Maistry Street, Madras-1, on October 19, 1966, and recovered a sum of Rs. 4,28,713 and certain documents in coded language relating to the disbursement of the cash. After the search, the first appellant, K. T. M. S. Mohammed, was interrogated by Shri Amritalingam, Enforcement Officer of Madras (PW-4) and the second appellant, Jamal Mohammed, was interrogated by Shri Panchaksharam, Enforcement Officer on October 19, 1966, and their statements were recorded under exhibits P-39 and P-40. The first appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his mother's jewels and Rs. 70,000 being his father's money and, therefore, the said amount should be returned to him. Thereafter, the third appellant gave a statement before the Enforcement Officers on December 22, 1966, reiterating what he had stated in his letter dated November 4, 1966. In view of the subsequent developments, proceedings were initiated against the third appellant under the provisions of the Income-tax Act. The third appellant submitted his return of income for the years 1967-68 to the Income-tax Officer accompanied by statements showing the business income at Rs. 4,000 and stating that a sum of Rs. 2,79,000 was realised by him by sale of rubies and jewels belonging to his mother, Smt. A. M. Safia, who was arrayed as accused No. 4 in the complaint. PW-8, on enquiry, found that the third appellant was not in affluent position and as such he could not have accumulated such huge sum and that his statement about the sale of the family jewels was false. After-rejecting the claim of the third appellant, the amount of Rs. 6 lakhs said to have been received by the first appellant has been treated as the income of the first appellant from some undisclosed sources an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, namely, the first appellant, and dismissed the cross-objection of the Department. In the meantime, the criminal proceedings against these three appellants were initiated in January, 1977. To substantiate the case, the prosecution examined 12 witnesses and marked exhibits P-1 to P-87. The appellants did not examine any witness but filed exhibits D-1 to D-4. The trial court, accepting the evidence adduced by the prosecution, convicted and sentenced the appellants by its judgment which was confirmed in C.A. Nos. 221 and 222 of 1980, on the file of the Fifth Additional judge, Madras. In the result, the three appellants stood convicted under sections 120B read with section 193, Indian Penal Code and section 277 of the Income-tax Act besides under section 193, Indian Penal Code, and appellants Nos. 1 and 3 separately under section 277 of the Income-tax Act. But, coming to the question of sentence, the trial court, taking into consideration the fact that the appellants were detained under the COFEPOSA Act in respect of the amount seized and they have also undergone the ordeal of enquiries and trial for a considerable length of time, sentenced each of them to undergo imprisonment till t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om appellants Nos. 1 and 2 under exhibits P-39 and P-40 by the Officers of the Enforcement Directorate fall only within the meaning of section 39 of the Foreign Exchange Regulation Act and those statements, therefore, cannot be made use of for initiating a criminal case of perjury in the absence of any legal fiction bringing the investigation or proceedings as a judicial proceeding within the meaning of sections 193 and 228, Indian Penal Code, as contemplated under section 40(4) of the Foreign Exchange Regulation Act. 5. The Income-tax Officer, in exercise of his power under section 136 of the Income-tax Act, cannot make use of the statements recorded by the Enforcement Directorate (an independent authority) under the provisions of the special Act, namely, the Foreign Exchange Regulation Act, for prosecuting the deponents of those statements in a separate and independent proceeding under another special Act, namely, the Income-tax Act, on the ground that the deponents have retracted their statements given before the authorities of the Enforcement Directorate. 6. If any criminal proceeding is initiated under the Foreign Exchange Regulation Act, against appellants Nos. 1 and 2 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he was the owner of the said amount of Rs. 4,28,713 and asked for the return of the same. On December 22, 1966, the third appellant gave a statement before the Enforcement Officers explaining how the said amount came into his possession. But that explanation was not accepted. In view of the above developments, proceedings were taken against the third appellant under the provisions of the Income-tax Act. The third-appellant, on March 1, 1967, submitted his return of income dated February 27, 1967, for the assessment year 1967-68 accompanied by a statement showing the business income at Rs. 4,000. The fourth accused before the trial court who died during the proceedings gave a sworn statement on May 2, 1967, before the Income-tax Officer stating that she gave a cash amount of Rs. 70,000 to the third appellant and also one necklace studded with red stones and two bangles studded with blue stones besides some ornaments. The statement of the fourth accused was also not accepted. The fifth accused (since acquitted) gave a statement on August 11, 1970, before the Income-tax Officer denying the receipt of any amount from the appellants Nos. 1 and 2 on October 18, 1966. Thereafter, ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership of the amount contrary to the version in exhibit P-39 and appellant No. 2 has repudiated the statement given tinder exhibit P-40 and that appellant No. 3 made a false claim and that, thus, all the three appellants did so only in pursuance of a conspiracy. Though a specific ground is taken in the grounds of appeal that exhibits P-39 and P-40 are clearly relatable to the provisions of section 39 of the Foreign Exchange Regulation Act and that no other statement was taken on oath, the respondent, namely, the Union of India, represented by the Commissioner of Income-tax, Central Circle, Madras, has not filed any counter denying that plea. Therefore, we are constrained to hold that exhibits P-39 and P-40 were recorded by the Officers of the Enforcement Directorate in exercise of the power conferred under section 39 of the Act. Section 39 of the Foreign Exchange Regulation Act empowers the Director of Enforcement or any other Officer of the Enforcement Directorate authorised by the Central Government in this behalf, (i) to require any person to produce or deliver any document relevant to the investigation or proceeding, and (ii) to examine any person acquainted with the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd P-40 cannot be treated as having been recorded in " a judicial proceeding " so as to make use of them as the basis for fastening the makers of those statements with the criminality of the offences under section 193 and/or section 228 of the Indian Penal Code on the ground that the deponents of those statements have retracted from their earlier statements in a subsequent proceeding which is deemed to be " a judicial proceeding". It is pertinent to note in this connection that, in the manner of recording a statement under section 40 of the Foreign Exchange Regulation Act, there are no safeguards as in the case of recording a statement of an accused under section 164 of the Criminal Procedure Code by magistrate. Nevertheless, before receiving that statement in evidence and making use of the same against the maker, it must be scrutinised to find out whether that statement was made or obtained under inducement, coercion, threat, promise or by any other improper means or whether it was voluntarily made. There are a catena of decisions of this court that the statements obtained from persons under the provisions of the Foreign Exchange Regulation Act or the Customs Act should not be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Incometax Act can launch a prosecution for perjury on the basis of a statement recorded by the Enforcement Officer, then, on the same analogy, the Enforcement Authority can also, in a given situation, launch a prosecution for perjury on the basis of any inculpatory statement recorded by the Income-tax Authority, if repudiated subsequently before the Enforcement Authority. In our opinion, such a course cannot be and should not be legally, permitted. Even if the Officers of the Enforcement Directorate intend to take action against the deponent of a statement on the basis of his inculpatory statement which has been subsequently repudiated, the officer concerned must take both the statements together, give a finding about the nature of the repudiation and then act upon the earlier inculpatory one. If, on the other hand, the officer concerned bisects the two statements and makes use of the inculpatory statement alone conveniently bypassing the other, such a stand cannot be legally permissible because the admissibility, reliability and the evidentiary value of the inculpatory statement would depend on the bench mark of the provisions of the Evidence Act and the general criminal law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law that this court, in several decisions, has ruled that, even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the Foreign Exchange Regulation Act or the Customs Act, etc., the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order be vitiated. Reference may be made to a decision of the Full Bench of the Madras High Court in Roshan Beevi v. Joint Secretary to the Government of Tamil Nadu, Public Deptt. etc. [1983] Mad LW (Crl.) 289 ; [1984] 15 ELT 289, AIR 1984 NOC 103, to which one of us (S. Ratnavel Pandian, J.) was a party. In this context, reference may be made to section 340 of the Code of Criminal Procedure under Chapter XXVI under the heading " Provisions as to of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The mere fact that a deponent has made contradictory statements at two different stages in a judicial proceeding is not by itself always sufficient to justify a prosecution for perjury under section 193 of the Indian Penal Code, but it must be established that the deponent has intentionally given a false statement at any stage of the " judicial proceeding " or fabricated false evidence for the purpose of being used at any stage of the judicial proceeding. Further, such a prosecution for perjury should be taken only if it is expedient in the interest of justice. From the facts of the present case, when examined in the light of the above proposition of law, it can be safely concluded that the statements, exhibits P-39 and P-40, were recorded only in exercise of the powers under section 39 of the Act and that the prosecution has not established that those statements were recorded by any Gazetted Officer of the Enforcement Directorate under the provisions of section 40 of the Foreign Exchange Regulation Act, 1973, for bringing them within the meaning of "judicial proceeding". Even assuming for the sake of argument that those statements fall within the mischief of section 40 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Amritalingam, who recorded the statement from the first appellant alone has been examined as PW-4 and the other Enforcement Officer, Shri Panchaksharam, who recorded the statement from the second appellant has neither been cited as a witness in the complaint nor appears to have been examined before the court. Hence, for all the reasons stated supra, we hold that the convictions recorded by the courts below, under sections 120B read with section 193, Indian Penal Code and section 193 (simpliciter) as against appellants Nos. 1 and 2 cannot be sustained. It is very surprising and shocking to note that the complainant has stepped into the shoes of the Enforcement Directorate and appears to have assumed the authority under the Foreign Exchange Regulation Act, 1973, and levelled a charge stating that appellants Nos. and 2, by sending the letter of retraction on October 20, 1966, denying their earlier statements dated October 19, 1966, have made themselves liable to be convicted under section 193, Indian Penal Code (vide paragraph 25(i) of the complaint). Still more shocking, the trial court has not only convicted appellants Nos. 1 and 2 for sending the letter of retraction dated Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed and cross-objections dismissed. " This finding has not been challenged and it reached finality. A close reading of the order of the Tribunal shows that the first appellant has been exonerated completely from the specific case of the Income-tax Officer that he is the owner of the entire amount of Rs. 6 lakhs. Therefore, now the point that arises for consideration is whether the conviction recorded by the subordinate courts as affirmed by the High Court under section 120B read with section 277 and section 277 of the Income-tax Act, 1961, are or are not liable to be set aside in the light of the judgment of the Tribunal. Mr. A. T. M. Sampath very strenuously contended that the convictions recorded by the subordinate courts as affirmed by the High Court under section 120B read with section 277 and section 277 of the Incometax Act, 1961, are liable to be set aside in view of the judgment of the Tribunal completely exonerating the appellants from the liability to income-tax. We shall examine this contention and dispose of the same on the ratio of the decisions of this court in P. Jayappan v. S. K. Perumal, First ITO [1984] 149 ITR 696 (SC) ; [1985] 1 SCR 536. In that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Though, as held in jayappan's case [1984] 149 ITR 696 (SC), a criminal court has to judge the case before it independently on the materials placed before it, there is no legal bar in giving due regard to the result of the proceedings under the Income-tax Act, 1961. In the present case, on two occasions, the Tribunal has held that the amount of Rs. 6 lakhs was not owned by the first appellant. In exhibit D-4, the Tribunal has further held that section 69A dealing with unexplained money, etc., has no application to the facts of the case. Taking this finding of the Tribunal into consideration, we are constrained to hold that the appellants cannot be held to be liable for punishment under section 120B read with section 277 and section 277 (simpliciter) of the Income-tax Act, 1961, as the very basis of the prosecution is completely nullified by the order of the Tribunal which fact can be given due regard in deciding the question of the criminal liability of appellants Nos. and 2. Now, coming to the case of the third appellant, it is his specific case throughout that the entire amount of Rs. 4,28,712 belonged to him. It appears from paragraphs 70 and 71 of the judgment of the trial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the complaint leaves an impression that it has been ill-drafted and the necessary ingredients to make out a case for conspiracy are not brought out in the complaint. It is true that, in case of conspiracy, an agreement between the conspirators need not be directly proved but it can also be inferred from the facts established in the case. As pointed out by this court in Bhagwan Swarup Lal Bishan Lal v. State of Maharashtra AIR 1965 SC 682 ; [1964] 2 SCR 378, the offence of conspiracy can be established either by direct evidence or by circumstantial evidence and this section will come to play only when the court is satisfied that there is reasonable ground to believe that two or more persons have conspired to commit an offence or an actionable wrong, that is to say, there should be prima facie evidence that a person was a party to the conspiracy. The charges levelled in the complaint in paragraphs 25(i), (ii) and (iii) read that the first and the second appellants, by sending the letter through their lawyer on October 20, 1966, committed an offence under section 193, Indian Penal Code, and that they, thereafter, individually committed an offence tinder section 193, Indian Penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fabricated false evidence or wilfully made a false return before the Income-tax Officer. Merely because the third appellant happens to be related to the first appellant and claimed that amount as owner thereof, no irresistible inference can be safely drawn that there was conspiracy among all the three appellants and accused Nos. 4 and 5. Moreover, the evidence, direct or circumstantial, is very much lacking to bring all the three and the other two accused under the charge of conspiracy. Hence the third appellant cannot be put on a joint trial along with appellants Nos. 1 and 2 and others under the charge of conspiracy. Therefore, the conviction of the third appellant under the conspiracy charge has to fail. It is pertinent to note, in this connection, that the trial court, in paragraphs 87 and 88 of its judgment, after finding appellant No. 3 guilty of the conspiracy charge along with appellants Nos. 1 and 2, A-4 (since dead), and A-5 punishable under section 120B read with section 193, Indian Penal Code, and section 120B read with section 277 of the Income-tax Act, 1961, has acquitted the fifth accused (Bhaskar alias Kannan) of all the charges in paragraph 89 of its judgment. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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