nal Appeals Nos
176 of 1959 and 40 of 1960
Appeals by special leave from the judgment and order dated August 26 1959 of the Bombay High Court in Cr A No 1638 of 1958
A section R Chari J B Dadachanji O C Mathur and Ravinder Narain for the appellant in Cr A No 176 of 59
Erenny Parekh and K R Choudhri for the appellant in Cr A No 40 of 60
Jai Gopal Sethi R L Mehta and R H Dhebar for the respondents
April 24
The Judgment of the Court was delivered by GAJENDRAGADKAR J
A criminal conspirac
to which according to the prosecution MG Agarwal 407 M K Kulkarni and N Laxminarayan hereafter called accused Nos 1 2 and 3 respectively were parties between December 1954 and June 1955 at Bombay has given rise to the criminal proceedings from which the two present appeals arise
At the relevant time the three accused persons were attached to the office of the Income tax Officer Ward No A III in Greater Bombay
Accused No
I was designated as the First Income tax Officer and accused Nos 2 and 3 worked under him as second and third Assessment Clerks respectively
The main charge against these persons was that during the relevant period they had entered into a criminal conspiracy by agreeing to do or cause to be done illegal acts by corrupt and illegal means and by abusing their position as public servants to obtain for themselves pecuniary advantage in the form of income tax refund orders and this criminal object was achieved by issuing the said refund orders in the names of persons who either did not exist or were not assessees entitled to such refunds
The prosecution case was that after the said refund orders were thus fraudulently issued they were fraudulently cashed and illegally misappropriates
The ten persons in whose names these refund orders were fraudulently issued were GM Thomas PN Swamy K section Patel section R Bhandarkar section P Jani D M Joshi C B Kharkar Ramnath Gupta V M Desai and K V Rao
It appears that twenty five bogus vouchers were issued in respect of these ten fictitious cases  eleven accounts were fraudulently opened in different Banks in Bombay and misappropriation to the extent of Es
54000 has thereby been committed
That in
substance is the main charge which was levelled against the three accused persons
Nine other subsidiary charges were also framed against them
Charges 2 3 and 4 wore in respect of the income tax refund order issued on 408 the 7th January 1955 in favour of Mr G M Thomas
The prosecution alleged that by their several acts in respect of the issuance of this refund order the three accused persons had committed offences under sections 467 and 471 read with section 34 IPC as well as section 52 of the Prevention of Corruption Act read with section 51d of the said Act and a 34 of the Indian Penal Code
Similarly charges 5 6 and 7 were framed under the same sections respectively in regard to the income tax refund order issued in favour of Mr G M Thomas on the 2nd April 1955
In regard to the income tax refund order issued in favour of Mr section R Bhandarkar on 2nd April 1955 charges 8 9 and 10 were framed under the said respective sections
That is how the case against the three accused persons under ten charges was tried by the Special Judge  Greater Bombay
It would thus be seen that in substance the prosecution case if that in order to carry out the criminal object of the conspiracy the three accused persons adopted a very clever and ingenious modus operandi in defrauding the public treasury
They decided to take adequate steps to issue income tax refund orders in the names of non existing persons and to misappropriate the amounts by encashing the said refund certificates issued in pursuance of the said refund orders
In furtherance of the conspiracy and in furtherance of the common intention of all the conspirators steps were taken to forge the signatures of the said fictitious persons as claimants wherever necessary to prepare some of the supporting documents and to deal with the cases as though they were cases of genuine assessees submitting a return and making a claim for refund
It is by adopting this clever device that all the accused persons have succeeded in misappropriating such a large amount as Re
54000 
409 It appears that when a return or refund application is received in the Income tax Office first goes to the assessment refund clerk who in ue course puts it up for orders before the Incometax Officer
In ordinary course the Income tax Officer sends a notice to the assessee examines him and the accounts produced by him to see if the return is correct
That done an assessment order is passed by the Income tax Officer
Thereafter a form known as IT 30 form is prepared
This form contains several columns which when filled in give details about the income tax payable by the assessee the tax paid by him the refund ordered by the income tax Officer or the collection demanded by aim
After this form is duly filled it is sent to another clerk for preparing the refund order
At that stage the refund order is prepared and the said order together with the demand and collection register and IT form 30 are sent back to the Income tax Officer who examines the record and signs the refund order and the IT form 30 and himself makes or causes to be made an entry in the demand and collection register
At this time he also cancels the refund certificates such as dividend warrants
The Income tax Officer also receives the advice memo prepared by the refund clerk and signs it
The said memo is sent to the Reserve Bank and the refund order is sent to the assessee
After the refund voucher is cashed by the Reserve Bank the advice memo is received back in the Income tax Office
It is thereafter that an entry is made in the Daily Refund Register
The prosecution case is that the conspirators purported to adopt all steps which they deemed necessary to carry out their criminal object in order formally to comply with the procedure prescribed by the department in making refund orders
At this stage it is relevant to state briefly how according to the prosecution the fraud of the 410 conspirators was discovered
In April  1955 Mr Sundararajan who was then the Commissioner of Income tax Bombay City received a report that many irregularities were being committed in respect of refund orders issued by A III Ward
On receiving this report he told Mr Gharpure who was the Inspecting Assistant Commissioner of Income tax A Range to carry out an inspection of the work of accused No 1
He however cautioned Mr Gharpure to carry out his assignment as if he was making an inspection in the normal course in order that no suspicion should arise in the mind of accused No 1
Mr Gharpure accordingly made inspection and submitted his report on the 6th Tune 1955
It is common ground that Mr Gharpure was not able to discover any fraud
On the 10th June 1955 Mr Sundararajan asked Mr Gharpure to produce before him all the refund books kept in A III Ward
They were accordingly produced before him
On examining these books Mr Sundararajan found certain sus picious features
He came across one counter foil of the refund order in the Dame of G M Thomas and he noticed that the relevant postal acknowledgment did not bear any postal stamp and presented a clean and fresh appearance
That appeared to Mr Sundararajan to be suspicious
He also found that a number of refunds were made in round figures which was very unusual
The files showed that on the back of the counter foils the postal acknowledgments were not stuck up nor were advice notes stuck up
His suspicions having been raised by these unusual features of the files Mr Sundararajan conducted a further scrutiny of the six counter foil books particularly to find out whether the refund orders were in respect of round figures and he found that such refund orders had been passed in the names of Messrs G M Thomas K section Patel P N Swamy D N Joshi and S R Bhandarkar
411 After the refund orders were encashed they we re sent to the Accountant General s Office by the Reserve Bank and so Mr Sundararajan thought that he could got them from the said office
All this happened in the evening of the 10th June 1955
On the 11th June 1955 which was a Saturday Mr Sundararajan called for the income tax files of some of the persons named above including G M Thomas and K section Patel along with the files of twenty other regular assessees
The files of the twenty regular assessees were submitted to him but not of the ten fictitious persons
On enquiry he was told that those files were not available  The non production of the said files confirmed his suspicion that something irregular must have happened in respect of them
That is why he sent for accused No 1 at 2 p m but he was not in his office
He came at 3 p m
Mr Sundararajan showed him the relevant counter foils and examined him
The statement made by accused No I was duly recorded by Mr Sundararajan
As a result of the enquiry made by him Mr Sundararajan was satisfied that the three accused persons had fraudulently brought into existence several documents as a result of which a large amount had been misappropriated and so he requested the Central Board of Revenue to suspend accused No 1
At that stage Mr Sundararajan naturally wanted to search the office of A III Ward but he could not carry out the search since he was told that the key of the A III Ward Office had been taken way by accused No 3
He then left instructions with the police guard of his office that nobody should be allowed to enter the room of A III Ward without his permission
Next day he attended his office but he found that no person in A III Ward had gone to work
Before he left the office he got the office of A III Ward sealed and 412 left word with the Inspector on duty that if any person came to work in that office thereafter it should be reported to him
After Mr Sundararajan reached home he received a telephone message that accused No 3 had come to A III Ward Office with the keys
Mr Sundararajan directed the Inspector to take charge of the keys from accused No 3 and ask him to attend office the next day
Next day was a Monday 13 6 1955
On that day Mr Sundararajan accompanied by certain other officers went to the office of A IlI Ward opened the seal and the lock and after going inside attached six registers
He also made a search for the assessment records of the ten persons in question but he did not find them
He then transferred accused No 1 to an unimportant charge and instructed the Banks that no withdrawals should be allowed from any of the eleven accounts since the said accounts appeared to him to be suspicious
He then sent for accused No 3 and examined him
He also sent for accused No 2 but he was not available since he had gone on leave
He directed one of his inspectors to enquire whether the said ten persons were real persons or were merely fictitious Dames
All this happened on the 13th June 1955
On the 14th June 1955 Mr Sundararajan went to A III Ward Office along with accused No 3
He wanted to search for the missing papers viz the assessment record of the ten persons in question
Accused No 3 waited for some time and then opened accused No 2 s table and took out some papers
A list of these papers was made and they were taken in charge
This list has been signed by Mr Sundararajan and the officers who accompanied him as well as by accused No 3
Thereafter accused Nos
2  3 were suspended and as a result 413 of the investigation which followed all the three accused persons were put up for their trial before the learned Special Judge for Greater Bombay on the charges already indicated
Before the learned trial Judge accused No 3 pleaded guilt to all the charges framed against him whereas accused Nos 1 and 2 denied that they had anything to do with the alleged commission of the offences charged
The prosecution sought to prove its case against all the three persons by producing before the learned trial Judge the relevant documents including the files kept in A III Ward office and it examined four witnesses from the department for the purpose of showing the procedure that is followed in passing assessment orders and granting refunds and with the object of showing that the conspiracy could not have succeeded without the active assistance and co operation of accused No 1
These witnesses are Sundararajan P W 1 Nagwekar P W 2 Subramanian PW 5 and Downak P W 21
It also
examined Das Gupta P W 26 to prove the handwriting of the accused persons
Eleven other witnesses were examined to prove the identity of accused Nos 2 and 3 in respect of the steps taken by them to open accounts in different banks in order to encash the refund vouchers issued in pursuance of the refund orders passed by accused No 1
The learned trial Judge held that the evidence accused by the prosecution did not establish beyond a reasonable doubt the existence of the criminal conspiracy between the three accused
He was not inclined to hold that the ten alleged persons were non existent
Even so he proceeded to deal with the case on the basis that the ten persons were non assesses and yet the refund orders had been passed in their favour
According to the 414 learned trial Judge accused No
I may have innocently signed the relevant documents without looking to them in a hurry to dispose of cases placing confidence in his staff and so it would be difficult to hold that he was a member of the conspiracy
The utmost said the learned Judge that can be argued against him is that he was negligent
That is how he acquitted accused No 1 of the principal charge of conspiracy under section 120 B ad as a result the other charges as well
In regard to accused No 2 the learned Judge was likewise not satisfied that the evidence adduced by the prosecution to prove his signatures on the relevant documents established the fact that he had signed those documents and he was not impressed by the other evidence led before him to show that he assisted accused No 3 in the matter of encashing the refund vouchers
On these findings accused No 2 was acquitted of all the charges framed against him
Since accused No 3 had pleaded guilty to the charges the learned Judge convicted him under sections 47 1 of the I PC and section 5 2 of the Prevention of Corruption Act and sentenced him to different terms of imprisonment which were ordered to run concurrently
 He however acquitted accused No 3 so far as the charge of conspiracy was concerned and he acquitted accused Nos 1 and 2 of all the offences
Against the order of acquittal passed by the learned Judge in favour of accused Nos 1 and 2 the State of Maharashtra preferred an appeal in the Bombay High Co art and this appeal succeeded
The High Court has found that the learned trial Judge a misdirected himself by assuming that accused No
I had pleaded that he had negligently signed the relevant documents and passed the relevant orders in a hurry placing confidence in his staff
The High Court has pointed out that far from pleading negligence accused No 1 had definitely stated 415 in his written statement filed in the trial Court that before he directed the issue of refund in the ten cases be had examined the files containing the supporting documents and had satisfied himself that it was proper to allow the refund in each one of those cases
This position was conceded by the learned Advocate who appeared for accused No 1 in the High Court
The High Court then examined the question as to whether the ten assessees were existing persons or were fictitious names and it came to the conclusion that the ten names given for the eleven accounts in which refund orders were passed were fictitious names
The High Court then examined the circumstantial evidence on which the prosecution relied in support and proof of its main charge of conspiracy between the three accused persons and it came to the conclusion that the said charge had been proved against all the three accused persons beyond a reasonable doubt
That is how the High Court partially allowed the appeal preferred by the State and convicted all the three accused persons under section 120 B of the Indian Penal Code
It also convicted accused No 2 of the offences under sections 467 471 I P C and section 52 of the Prevention of Corruption Act
In regard to the other offences charged the order of acquittal was confirmed
Having convicted accused Nos 1  2 under section 120 B the High Court has sentenced each one of them to suffer rigorous imprisonment for 18 months for the said offence
Accused No 2 has also been directed to suffer RI for 18 months in respect of each of the offences under sections 467 471 I P C and section 5 2 of the Prevention of Corruption Act
These sentences are ordered to run concurrently with the sentence ordered under section 120 B
It is against this order of conviction and sentence passed by the High Court in appeal that accused Nos 1  2 have come to this Court by special leave by their appeals Nos 176 of 1959 and 40 of 1960
416 Since the impugned order of conviction and sentence was passed against the appellants by the High Court in exercise of its powers under section 423 of the Criminal Procedure Code while hearing an appeal against their acquittal the first question which calls for our decision relates to the extent of the High Court s powers in interfering with orders of acquittal in appeal
This question has been discussed and considered in several judicial decisions both by the privy Council and this Court
In dealing with the different aspects of the problem raised by the construction of section 423 emphasis has sometimes shifted from one aspect to the other and that is likely to create a doubt
about the true scope and effect of the relevant provisions contained in section 423
Therefore we propose to deal with that point and state the position very briefly
Section 423 1 prescribes the powers of the appellate Court in disposing of appeals preferred before it and clauses a and b deal with appeals against acquittals and appeals against convictions respectively
There is no doubt that the power conferred by clause a which deals with an appeal against an order of acquittal is as wide as the power conferred by clause b which deals with an appeal against an order of conviction and so it is obvious that the High Court s powers in dealing with criminal appeals are equally wide whether the appeal in question is one against acquittal or against conviction
That is one aspect of the question
The other aspect of the question centres round the approach which the High Court adopts in dealing with appeals against orders of acquittal
In dealing with such appeals the High Court naturally bears in mind the presumption of innocence in favour of an accused person and cannot lose sight of the fact that the said presumption is strengthened by the order of acquittal passed in his favour by the trial Court and so the fact that the accused person is 417 entitled to the benefit of a reasonable doubt will always be present in the mind of the High Court when it deals with the merits of the case
As an appellate Court the High Court is generally slow in disturbing the finding of fact recorded by the trial Court particularly when the said finding is based on an appreciation of oral evidence because the trial Court has the advantage of watching the demeanour of the witnesses who have given evidence
Thus though the powers of the High Court in dealing with an appeal against acquittal are as wide as those which it has in dealing with an appeal against conviction in dealing with the former class of appeals its approach is governed by the overriding consideration flowing from the presumption of innocence
Sometimes the width of the power is emphasized while on other occasions the necessity to adopt a cautious approach in dealing with appeals against acquittals is emphasised and the emphasis is expressed in different words or phrases used from time to time
But the true legal position is that however circumspect and cautious the approach of the High Court may be in dealing with appeals against acquittals it is undoubtedly entitled to reach its own conclusions upon the evidence adduced by the prosecution in respect of the guilt or innocence of the accused
this position has been clarified by the Privy Council in Sheo Swarup vs The King Emperor 1 and Nur Mohammad vs Emperor In some of the earlier decisions of this Court however in emphasizing the importance of adopting a cautious approach in dealing with appeals against acquittals it was observed that the presumption of innocence is reinforced by the order of acquittal and so the findings of the trial Court which had the advantage of seeing the witnesses and hearing their evidence can be reversed only for 1 1934 LR 61 1
A 398
2 AIR 1945 PC 151 418 very substantial and compelling reasons vide Surajpal Singh vs The State 1
Similarly in Ajmer Singh vs State of Punjab 2 it was observed that the interference of the High Court in an appeal against the order of acquittal would be justified only if there are very substantial and compelling reasons to do so  In some other decisions it has been stated that an order of acquittal can be reversed only for good and sufficiently cogent reasons or for strong reasons
In appreciating the effect of these observations it must be remembered that these observations were not intended to lay down a rigid or inflexible rule which should govern the decision of the High Court in appeals against acquittals
They were not intended and should not be read to have intended to introduce an additional condition in clause a of section 423 1 of the Code
All that the said observations are intended to em phasise is that the approach of the High Court in dealing with an appeal against acquittal ought to be cautious because as Lord Russell observed in the case of Shoo Swarup the presumption of innocence in favour of the accused is not certainly weakened by the fact that he has been acquitted at his trial Therefore the test suggested by the expression substantial and compelling reasons should not be construed as a formula which has to be rigidly applied in every case
That is the effect of the recent decisions of this Court for instance in Sanwat Singh vs State of Rajasthan 2 and Harbans Singh vs The State of Punjab 4 and so it is not necessary that before reversing a judgment of acquittal the High Court must necessarily characterise the findings recorded therein as perverse
Therefore the question which we have to ask ourselves in the present appeals is whether on the material produced by the prosecution the High Court was justified in reaching the conclusion that the 1   201
2  3  4 1962 Supp
ISCR 104
419 prosecution case against the appellants had been proved beyond a reason able doubt and that the contrary view taken by the trial Court was erroneous
In answering this question we would no doubt consider the salient and broad features of the evidence in order to appreciate the grievance made by the appellants against the conclusions of the High Court
But under article 136 we would ordinarily be reluctant to interfere with the finding of fact recorded by the High Court particularly where the said findings are based on appreciation of oral evidence
There is another point of law which must be considered before dealing with the evidence in this case
The prosecution case against accused No 1 rests on circumstantial evidence
The main charge of conspiracy under section 120 B is sought to be established by the alleged conduct of the conspirators and so far as accused No 1 is concerned that rests on circumstantial evidence alone
It is a well established rule in criminal jurisprudence that circumstantial evidence can be reasonably made the basis of an accused person s conviction if it is of such a character that it is wholly inconsistent with the innocence of the accused and is consistent only with his guilt
If the circumstances proved in the case are consistent either with the innocence of the accused or with his guilt then the accused is entitled to the benefit of doubt
There is no doubt or dispute about this position
But in applying this principle it is necessary to distinguish between facts which may be called primary or basic on the one hand and inference of facts to be drawn from them on the other
In regard to the proof of basic or primary facts the Court has to judge the evidence in the ordinary way and in the appreciation of evidence in respect of the proof of these basic or primary facts there is no scope for the application 420 of the doctrine of benefit of doubt
The Court considers the evidence and decides whether that evidences proves a particular fact or not
When it is held that a certain fact is proved the question arises whether that fact leads to the inference of guilt of the accused person or not and in dealing with this aspect of the problem the doctrine of benefit of doubt would apply and an inference of guilt can be drawn only if the proved fact is wholly inconsistent with the innocence of the accused and is consistent only with his guilt
It is in the light of this legal position that the evidence in the present case has to be appreciated
The Court then considered the evidence and the findings of the High Court and dismissed the appeals
Appeals dismissed


Summary:
Appellant Agarwal was an Income Tax Officer and appellant Kulkarni a clerk under him
They were put up for trial along with another clerk of the Department on several charge the principal charge being that they had entered into a criminal conspiracy to obtain for themselves pecuniary advantage in the form of income tax refund orders in the name of fictitious persons and had thereby fraudulently mis appropriated a large amount of Government money
The trial judge held that the prosecution had failed to establish criminal conspiracy and acquitted the appellants of the charge under section 120B and the second appellant of all other charges under the Indian Penal  ode but while acquitting the third person also under section 120B convicted him of other offends as he had pleaded guilty
The State appealed against this order of acquittal
The High Court allowed the appeal in part and convicted all the accused persons under section 120B of the Code and the second appellant also under the other charges
Held that there was no doubt that the powers of the High Court under section 423 1 a of the Code of Criminal Procedure in dealing with an order of acquittal were as wide as those under section 423 1 b in respect of orders of conviction  but in dealing with an appeal against acquittal that Court had to bear in mind the fact that the initial presumption of innocence in favour of the accused person is strengthened by the order of acquittal But however cautious or circumspect the court might be it was nevertheless free to arrive at its own conclusions as to the guilt or innocence of the accused on the evidence adduced before it by the prosecution Sheo Swarup vs King Emperor  934 L R 61 I A 398 and Nur Mohammad vs Emperor AIR 1945 P C 151 referred to
406 Observations made on  this point in certain decided cases of this Court were not intended to lay down a rigid or inflexible rule that should govern all such appeals and it is not necessary that the High Court must characterise the findings as perverse before it can reverse a judgment of acquittal
Surajpal Singh vs The State  and Ajmer Singh vs State of Punjab   considered
Sanwat Singh v State of Rajasthan  and Harbans Singh vs State of Punjab 1962_Supp 1 section C R 104 referred to
It was settled law that a conviction can be reasonably founded on circumstantial evidence if it is wholly inconsistent with the innocence of the accused and Consistent only with his guilt
If the circumstances proved are consistent either with innocence or guilt the accused person is entitled to the benefit of doubt
But in applying this principle a distinction must be made between primary facts  which have to be proved in the ordinary way and the inference of guilt to be drawn therefrom
It is in connection with the latter aspect of the problem that the doctrine of benefit of doubt can apply  and an inference of guilt can be drawn only if the proved facts are wholly inconsistent with innocence and consistent only with guilt