THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR Criminal Appeal Nos. 522 and 610 of 2003 Date: 18.03.2010 Crl.A. No. 522 of 2003 Between: A. Swamy Naidu, S/o late A. Suryanarayana, Income-Tax officer (Retd), Vizianagaram. .. Appellant/A1 And State of A.P. rep. by the Inspector of Police, CBI/SPE, Visakhapatnam. .. Respondent/Complainant THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR Criminal Appeal Nos. 522 and 610 of 2003 Common Judgment: These appeals are filed by A1 and A2 respectively against the judgment dated 15.05.2003 passed in C.C. No. 13 of 1999 by the Special Judge for CBI Cases, at Visakhapatnam, whereunder and whereby the learned Special Judge found both the accused Nos.1 and 2 guilty for the offences punishable under Sections 120(B), 420, 465 and 471 IPC. A1 was also found guilty for the offence punishable under Section 13(1)(d) read with 13(2) of the Prevention of Corruption Act, 1988 (for short ‘the Act’). A2 was further found guilty for the offences punishable under Sections 419 and 468 IPC. A1 was sentenced to suffer simple imprisonment for one year and also to pay a fine of Rs.1000/-, in default to undergo simple imprisonment for one month for the offence under Section 13(1)(d) read with 13(2) of the Act. A1 was further sentenced to undergo simple imprisonment for one year for each of the offences under Sections 120(B), 420, 465 and 471 IPC. A2 was sentenced to undergo simple imprisonment for one year for each of the offences punishable under Sections 120(B), 420, 419, 468, 465 and 471 of IPC. A2 was also sentenced to pay a fine of Rs.5,000/-, in default to suffer simple imprisonment for one month in so far as the offence under Section 420 IPC. All the substantive sentences were ordered to run concurrently. The appellants hereinafter will be referred to as accused Nos.1 and 2 for the sake of convenience. The case of the prosecution, in brief, is as follows. Accused No.1 was working as Income Tax Officer at Vizianagaram during the relevant period. His duties, inter alia, included assessing of the income tax on the returns submitted by the assesses and to issue refund orders as and when it is due basing on the documents such as tax collected at source certificates issued by the competent authority showing collection of tax at source and its remittance to the Government. Accused No.1 retired from service during March 1994. Accused No.2 is resident of Vizianagaram and he is an income tax practitioner by profession. He was authorized to submit income tax returns on behalf of different assessees before the income tax officer concerned i.e., accused No.1. One M. Rama Rao was a forest contractor and he was known to accused No.2. Accused No.2 was filing the income tax returns of the said M. Rama Rao. The specific allegation of the prosecution is that accused No.1 entered into a criminal conspiracy with accused No.2 and the above referred M. Rama Rao during the year 1993 to cheat the income tax department. In pursuance of the said criminal conspiracy, accused No.2 and M. Rama Rao submitted 12 numbers of income tax returns in the names of 12 fictitious and non-existent persons claiming income tax refunds amounting to Rs.2,58,285/- basing on forged and fake tax collected at source certificates purported to have been issued by the Forest Range Officer, Yelamanchili. Accused No.1, knowing fully well that the refund claims were bogus in nature, issued refund orders equivalent to the said amount in the names of 12 fictitious assessees, on that the refund orders were encashed by accused No.2 by opening 12 benami/fictitious accounts at Bank of Baroda branch, Vizianagaram. Thus the amount was misappropriated by the accused thereby caused wrongful loss to the income tax department. Both the accused pleaded not guilty to the charges framed against them. In order to prove its case, the prosecution has examined PWs.1 to 26 and got marked Exs.P1 to P120 and the material objects MOs.1 and 2. None were examined and no documents have been marked on behalf of the accused. The prosecution case, as seen from the evidence let in, is as follows. Accused No.1 was working as income tax officer, Vizianagaram and accused No.2 was an income tax practitioner. If any income tax assessee has paid more tax than what he is expected to pay or if any assessee is not liable to pay tax, but some tax was deducted at source by the authority in his name, such excess tax will be refunded to those assessees on the claims submitted by them. The assessee, who claims for refund of the tax has to file return of his income including the details of tax deduction and also the certificate about the tax deduction and the refund orders will be issued by the income tax department basing on the claims made by the assessees and on the strength of the tax deducted at source certificates issued by the competent authority. Every refund order shall be crossed as ‘account payee’ and it will be sent to the concerned asseessee by registered post. If a request is made by the asseessee to issue uncrossed voucher for refund of the tax amount, the concerned income tax officer may issue uncrossed voucher, if he is satisfied. However, if uncrossed refund order is issued, the bank should be insisted for identification of the assessee. Ex.P14 is the Photostat copy of the extract of the income tax manual Volume II, Section 2. PW.6, M. Prameela, was working as dispatch clerk in the income tax office, Vizianagaram. According to her, accused No.2 filed income tax returns in the name of 12 assessees namely (1) T. Venkatanarayana, (2) L. Sankara Reddy, (3) P. Parameswara Rao, (4) S. Gopala Rao, (5) G. Rambabu, (5) J.A.K. Raju, (7) Sanyasi Rao, (8) K.V.N. Raju, (9) R. Subba Rao, (10) D. Narasimham, (11) G. Srirama Murthy and (12) K.V. Sankara Rao. She made entries about the said income tax returns in the register, volume-2 marked as Ex.P20. The above said 12 returns were noted between Sl.Nos.7017 and 7051. PW.17 A. Simhachalam Naidu was the President of Grampanchayat, Lakshmipuram, Salur Mandal for about 10 years. The CBI Inspector enquired about the above referred 12 names, who are shown as residents of Lakshmipuram, and PW.17 stated that nobody in the names of the above referred 12 persons were in his village Lakshmipuram. PW.23 S. Swami Babu, who was working as the Mandal Revenue Officer, Salur, furnished the voters list Ex.P107 of Salur village on the request made by the CBI officials. According to PW.23 the voters list Ex.P107 does not contain the above referred 12 names. The learned counsel for the accused has also not disputed that the above referred 12 names are fictitious names and no such persons were in existence. Thus, though no such persons were in existence income tax returns were filed in the name of those 12 persons. PW.6 who was working as receive clerk made entries about filing of returns in the returns register volume-2 marked as Ex.P20 between Serial Nos.7017 and 7051. Accused No.1 had put his initials as token of the receipt of the returns and they were distributed among different UDCs area wise. In all these 12 income tax returns, there was a stamp appearing the name of accused No.2. PW.7 was working as steno in the office of accused No.1. He had processed the returns Exs.P1 to P12 after the concerned Head Clerks had verified those returns. PW.7 prepared the refund vouchers and all the refund vouchers were signed by accused No.1. He says that accused No.2 filed all these 12 returns. PW.8 A. Joga Rao, who was working as Head Clerk in the office of the income tax office, Vizianagaram, verified Exs.P1 to P12 returns and sent them back for issuing refund vouchers. All the refund vouchers were dispatched to the addresses of the assessees. Ex.P22 is the tapal register of the income tax office, Vizianagaram. Except the cover addressed to D. Narasimham all other covers of 11 assessees containing refund vouchers were sent by registered post with acknowledgment due. All the 11 registered letters bearing S.Nos.701 to 711 were received by the RTC Complex post office for onward transmission to Lakshmipuram in 11 different names. One Sannibabu, who was working as sub-post Master signed at page 3 of Ex.P22 to that effect. He further deposed that normally the registered letters received in the post office will be entered in the long registers which will be preserved for one and half years and later it will be destroyed as per the destruction rules. According to PW.9, the long register, containing the particulars of the 11 registered letters, was destroyed. Therefore, it is not clear how those covers came into the possession of accused No2. All the refund orders were said to be endorsed by the assessees (fictitious persons) to pay to Sri D. Prabhakara Rao (A2). According to PW.11 G.V. Jagannadha Swamy, who was working as Branch Manager, Bank of Baroda branch, Vizianagaram during the relevant period, A2 was having one S.B. Account No.67 and Current Account No.81. He has identified the signatures of A2 on the account opening forms. Ex.P31 are the specimen signature form and account open form of A2 with regard to Account No.81 and Ex.P32 is the ledger extract of account No.81 of A2. Exs.P33 to P37 are the Photostat copies of the orders of refund of tax. Exs.P24 to P26 are also the orders of refund of tax. Those parties were not having accounts in the Bank of Baroda. A2 also singed and put his stamp under the endorsement to pay the amount to A2. All the refund vouchers were forwarded from the Bank of Baroda, Kakinada to S.B.I., Vizianagaram for clearance. However, the S.B.I., Vizianagaram returned those refund vouchers without clearance. Then they debited the amount covered by the refund vouchers which were credited to the current account of A2. Ex.P41 is the debit voucher. The refund vouchers received from SBI, Vizianagaram without clearance and the note advices were returned to A2. Then, accounts were opened in the name of those 12 assessees. Exs.P42 to P53 are the relevant documents for opening the accounts. All the account holders covered by Exs.P42 to P53 were introduced by A2 at the time of opening of the accounts. All the documents for opening the accounts were brought and presented by A2. The refund vouchers Exs.P54 to P65, on behalf of the above 12 account holders, were submitted in the Bank with savings bank pay-in-slips to credit the amounts covered by the said pay-in-slips in their respective accounts mentioned therein. Those pay-in-slips accompanied by the refund vouchers were again sent to the SBI for clearance. The SBI, Vizianagaram cleared all the refund vouchers of 12 assessees. Then the amounts were credited covered by refund vouchers cleared by SBI in the respective accounts in the Bank of Baroda. Exs.P66 and P77 are the withdrawal slips withdrawing the amounts from their concerned accounts. The amounts covered by Exs.P68 to P73 contained the signatures of A2 and the amounts covered by Exs.P68 to P73 were transferred into the current account No.81 of A2 and he had the cheque book facility for his current account No.81. Exs.P82 to P88 are the cheques relating to the cheque book of A2 and cash was paid to A2 under those cheques. Exs.P82 to P85 and P88 were passed by PW.11. Exs.P24 to P26 and Exs.P33 to P37 and Ex.P1(A) orders for refund of tax were originally crossed by putting the stamp ‘account payee only’ and signed by the income tax officer (A1) and subsequently that endorsement of account payee was cancelled by A1. According to PW.12 K. Kameswara Rao Exs.P42 to P53 are the account opening forms, specimen signatures etc. which were presented by A2 for opening the accounts in the names of 12 persons. He further says that 12 persons, in whose names accounts were opened, did not come to the Bank and that it is A2 who brought all the documents for opening the accounts. PW.1 working as Income Tax Officer from June 1994 to May 1998. Admittedly, A1 worked as income tax officer prior to PW.1. PW.1 says that Exs.P1 to P12 are the concerned files pertaining to 12 assessees for the assessment years 1990, 1991, 1992 and 1993. All the returns were filed on 31.03.1993 claiming refund of tax collected at source contending that the certificate in Form-D was issued by the Forest Officer, Yelamanchili about collection of tax at source. PW.1 identified the handwriting and signature of A1. A1 passed orders for issue of refund orders in all those files. The refund orders were crossed ‘account payee only’. Subsequently, the said endorsement was struck off by A1 and it contains his initial. According to PW.1, there were no request letters from the assessees that the refund vouchers should not be crossed. According to PW.2, Rule 41(iii) the income tax office manual provides to avoid hardship to the assessees in encashing the crossed refund vouchers, uncrossed vouchers may be issued if the assessee gives a request letter in writing that the refund order should be uncrossed. It is also mentioned in the said rule that when uncrossed refund order is issued, the bank should insist for identification of the assessee. Ex.P14 is the Photostat copy of the extract of the income tax manual Volume II Section-2. According to PW.2 also there was no request letters of the assessees for issuing uncrossed refund vouchers in Exs.P1 to P12 files. Thus, admittedly, initially account payee endorsement was there, but subsequently it was cancelled by A1. Of course, the SBI did not accept and insisted that unless accounts are opened in the name of those 12 assessees the refund vouchers cannot be passed. Accordingly separate accounts were opened in the name of those 12 assessees and the amounts were deposited in those accounts of 12 assessees and subsequently as per the endorsement said to have been made by 12 assessees on the withdrawal forms, the amounts were credited to the account of A2. It is also not in dispute that A1 had opened Account No.548 in the Bank of Baroda. Ex.P89 is the specimen signature card of A1. A2 signed as introducer in the specimen card Ex.P89. Ex.P90 is the certified copy of extract of savings bank ledger account relating to account No.548. Exs.P91 and 92 are the credit slips dated 22.09.1993 respectively relating to S.B. Account No.548 and those credit slips were filled up by A2 and contain his signatures. Rs.20,000/- through cheque No.719863, dated 22.04.1995 and Rs.40,000/- through cheaque No.719862, dated 04.04.1995 were credited into the account of A1 by A2. Ex.P119 are the two cheques for Rs.20,000/- and Rs.40,000/- dated 22.04.1995 and 4.4.1995 respectively, and they were signed by A1 relating to Account No.548. According to PW.13, during 1993 he was working as contractor and that one M. Rama Rao, who is his brother-in-law, introduced A2 to him. He further deposed that A2 had given one cheque dated 13.05.1993 for Rs.1,25,000/-, marked as Ex.P82, in his name for encashing the same and that it contained the signature of A2 and that accordingly he had encashed the amount on 14.05.1993 and handed over the amount to A2. The evidence of PWs.15 and 16 shows that during the course of investigation the CBI officials had entrusted 12 registered letters in Ex.P94 to serve on the addressees, but PW.16 could not serve those letters on the addressees as nobody mentioned on those letters were available in the village Lakshmipuram. PW.16 made an endorsement to that effect. PW.15 says that having received those letters on 25.01.1997 as nobody were available in the address, those letters were unserved and returned to CBI. Those letters bear the signature of PW.16. According to PW.18 M.V. Krishna Rao, as per the instructions of the Assistant Commissioner, Income Tax, he appeared before the Inspector, CBI, who had obtained the specimen handwritings of A2 in his presence. Ex.P95 are the 24 sheets in which the specimen handwritings of A2 were taken by the Inspector, CBI. PW.18 also signed in all 24 pages. PW.18 also identified A2. PW.19 says that in his presence the Inspector of CBI had taken the specimen handwritings of A2 on 42 sheets, marked as Ex.P97 and he signed in all 42 sheets as a witness. He also identified A2. The office premises of A2 were searched and Ex.P105 is the search list containing the signature of PW.22 P. Surya Rao one of the mediator. PW.25 S.N. Guptha, who was working as Deputy Examiner of questioned documents in the Bureau of Police, Research and Development, Ministry of Home Affairs, Government of India, Hyderabad, says that having received the admitted signatures and disputed signatures he compared those signatures and gave his opinion in Ex.P112 along with reasons. He opined that the person who wrote the blue enclosed writings stamped and marked as S-157 to S-199 also wrote the red enclosed writings similarly stamped and marked as Q-294, Q303 to Q-311, Q314 to Q316, Q-318 to Q-321 and Q-323 to Q-343. He also opined that that seal impressions in the read enclosed parts stamped and marked as Q-356 to Q-367 tally with the blue enclosed sample impressions similarly stamped and marked as A-12 to A-18. PW.26 is the investigating officer, who had investigated the case. The learned Special Judge found A1 and A2 guilty and convicted them as referred supra. Sri C. Padmanabha Reddy, learned Senior Counsel, representing Sri C. Praveen Kumar, learned counsel for the appellant/accused No.1, submits that the income tax returns were filed in usual course and the concerned clerk and the Head Clerk had examined them and prepared refund vouchers and that too crossed refund vouchers and that A1 in routine course signed the refund vouchers. His main submission is that there is no evidence to show that A1 had any knowledge that those 12 assessees were fictitious persons and that their claim was bogus or that the Form 27- D filed by them were forged. It is his submission that PW.8 is the Head Clerk who verified Exs.P1 to P12 and sent them for issuing refund vouchers. It is also his submission that PW.7 who worked as Steno deposed that PW.8 had verified all the 12 files and after due verification sent them to him and then he prepared refund vouchers and placed before A1. It is also his submission that there were letters from the 12 assessees requesting to issue uncrossed refund vouchers and that rule 41(iii) of the income tax manual provides to issue uncrossed vouchers. His main submission is that none of the witnesses had stated that they did not see the consent letters in the files before the files were seized by the CBI officials. His submission is that only to strengthen their case, the CBI officials seems to have removed the consent letters and implicated A1 in this case. He refers to the evidence of PW.5 to show that he did not receive the 12 returns personally and that he does not know who filed those income tax returns. His main submission is that there is no evidence to show that the files did not contain the request letters to issue uncrossed vouchers. With reference to the amount deposited into the account of A1 by A2, his main submission is that the said amounts were deposited six months after A2 had withdrawn the amounts and it has no relevance. He submits that it may be the amount of A1 and A1 might have requested A2 to deposit the said amount into his accounts. He submits that merely because some amount is deposited into the account of A1, which has no relevance to the amounts withdrawn by A2 from the accounts of 12 assessees, A1 cannot be found faulted with. It is also his submission that all the refund vouchers were sent by registered post. Sri P. Nageswara Rao, learned counsel for accused No.2, argued that nothing on record to show that accused No.2 filed the returns in the name of 12 fictitious persons. His main submission is that it is M. Rama Rao, who signed those 12 returns and that Exs.P1 to P12 neither contain the signature of A2 nor his hand writing and that the files were processed in routine course and that the refund vouchers were sent to the addresses given by the assessees. It is further submitted that merely because there was stamp of A2 on Exs.P1 to P12, A2 is suspected in this case. It is further submitted that merely because it is endorsed that the amount may be credited to the account of A2 or that subsequently the amount was credited to the account of A2, it does not mean that A2 fabricated those documents. It is also argued that when 12 persons opened their bank accounts, it is not possible to open 12 accounts by any other person without the connivance of the bank officials. It is also submitted that the evidence of PWs.5 and 6 reveals that they passed the refund orders and verified the entire file and without their connivance also the refund vouchers would not have been issued. Sri P. Kesava Rao, learned Special Standing Counsel for CBI, submits that A1 and A2 in conspiracy with one another and along with one Rama Rao committed the offences and cheated the Government to the tune of Rs.2,58,285/-. His main submission is that the returns were filed in the name of 12 non-existent fictitious persons. This itself shows that how the accused committed the fraud and cheated. All the returns were forged and fabricated. It is further submitted that the staff working in the office of A1 without proper verification prepared the refund vouchers and that A1 issued refund vouchers. It is further submitted that admittedly there were no request letters from the assessees to issue uncrossed refund vouchers and in spite of the same the accused officer cancelled the account payee endorsement. The said action of the accused officer proves the criminal conspiracy and his collusion with A2. It is further submitted that when the SBI did not accept the cancellation of account payee endorsement and did not pass the said refund vouchers, A2 had opened 12 bank accounts in the name of 12 fictitious persons, forged the signatures and himself introduced those 12 account holders and after the accounts were opened the amounts in refund vouchers were credited to the respective accounts and then all the amounts were drawn by making false endorsement as if made by the account holders that the amount may be credited into the account of A2 and accordingly the amount was credited to the account of A2 and finally A2 had withdrawn the said amount and some amount was withdrawn with the help of one A. Rajasekhar brother-in-law of Rama Rao. It is also submitted that then a part of the amount Rs.40,000/- was deposited into the account of A1. His main submission is that the oral evidence and documentary evidence adduced by the prosecution clinchingly establishes the charges leveled against the accused. The point that arises for consideration is whether the prosecution has proved its case against A1 and A2. Admittedly, A1 was working as income tax officer at Vizianagaram. The evidence of PWs.1 and 2 shows that if any assessee has paid more tax or excess tax than what is required to be paid by him, then he may file his returns and seek for refund of the excess tax paid by him. Rule 41(iii) enables the income tax officer on the written request made by the assessee to issue uncrossed refund vouchers. However, the concerned bank should be requested to insist for identification of the assessee before passing the said refund vouchers. After deducting the tax at source, the officer, who deducted the tax should issue Form-27 and the details about remission of tax collected at source has to be intimated to the