Case: K.T.M.S. Mohammed &amp; Another Vs. Union of India

The Criminal Appeal No. 631/90 is Directed by the two appellants namely, K.T.S. Mohammed and M. Jamal Mohammed and Criminal Appeal No. 632/90 is directed by Amanullah Quareshi. All the three appellants are challenging the correctness of the common order made by the High Court of Madras in Criminal Revision Case Nos. 229/81 and 239/81 respectively dismissing the revisions and confirming the judgment of the lower Appellant Court made in Cr. A. Nos. 221 and 222 of 1980 which in turn affirmed the judgment of the trial Court convicting and sentencing the appellants under the provisions of the Indian Penal Code and the Income-tax Act (hereinafter referred to as `the I.T. Act).2. 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 details, in order to enable us to give our own reasons for the findings which we will be arriving at.3. The first appellant who is the brother-in-law of the second appellant received a cash of Rs. 6 lakhs, brought by a person from Bombay for distributing the said amount to various persons as per the 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 19.10.66 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.D. Mohammed was interrogated by Shri Amritalingam, Enforcement Officer of Madras (PW 4) and the second appellant, Jamal Mohammed was interrogated by Shri Pancheksharan, Enforcement Officer on 19.10.66 and their statements were recorded under Exhs. P 39 and P 40. The first appellant under Exh. P 39 has admitted that he received a sum of Rs. 6 lakhs from a person of Bombay on the previous day for being disbursed to various parties, and that Rs. 50,000 and Rs. 48,000 were paid to one Baskaran alias Kannan and Angappan of Sarathy & Co. respectively and the amounts were disbursed on receipt of instructions from one Gopal of Singapore whose full address he did not know. The second appellant in his statement Exh. P 40 has admitted the receipt of the amount by the first appellant and the disbursement of Rs. 50,000 to Bhaskaran and Rs. 40,000 to Angappan as instructed by the first appellant in compliance of the instructions received from Singapore.4. The Enforcement Officers conducted a further search at the premises of Sarathy and Co., and discovered a cash amount of Rs. 48,100 and three bank drafts. Angappan when examined admitted the receipt of Rs. 49,000 for being disbursed as per the details given in certain sheets of paper available with him.5. On 20.10.66, both the appellants sent their retraction to the Deputy Director of Enforcement Directorate through their Advocate stating that their statements recorded under Exhs. P 39 and P 40 on 19.10.66 were not voluntary statements but obtained under threat and force and the facts stated therein were not correct.6. While it was so, the Income-tax Officer, Karaikudi (PW 1) on coming to know about the raid, issued summons to the first appellant who was then an assessee within his jurisdiction and recorded a statement Exh. P 3 from him on 16.11.66. The first appellant denied of having any connection with the cash of Rs. 4,28,718 said to have been recovered from his premises and reiterated that the statement by the Enforcement Officers was taken from him under force. The second appellant also gave a similar statement under Exh. P 73 on 11.1.74 before PW 8 when examined after eight years. The appellant in Criminal Appeal No. 632/90, namely, Amanullah who was arrayed as accused No. 3 (hereinafter referred as `third appellant) sent a letter under Exh. P 41 dated 4.11.66 to the Enforcement Officers claiming the money seized as belonging to him and explaining that he was negotiating with some film producers for financing film production and the seized amount included a sum of Rs. 2,79,000 being the sale proceeds of his mothers jewels and Rs. 70,000 being his fathers money and therefore the said amount should be returned to him. Thereafter, the third appellant gave a statement before the Enforcement Officers on 22.12.66 reiterating what he has stated in his letter dated 4.11.66.7. In view of the subsequent developments, proceedings were initiated against the third appellant under the provisions of the I.T. 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 in- come at Rs. 4,000 and 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.8. After rejecting the claim of 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 and the first appellant was assessed under the relevant provisions of the I.T. Act. According to the complainant, all the appellants have conspired together to give false evidence at all stages of the proceedings under the I.T. Act and to fabricate false evidence intending that the same might cause the Income-tax Officer to arrive at an erroneous opinion touching the nature and source of the sum of Rs. 4,28,713 which is alleged to have been recovered from the first appellant and that all the appellants thereby have committed the offences punishable under Section 120-B IPC read with Sec. 193 IPC, under Section 120-B read with Section 277 of the I.T. Act and under Section 193 (simplicitor) of Indian Code and in addition the appellants 1 and 3 were indicted under Section 277 (simplicitor) of the Act.9. On the above allegations, the Income-tax Officer, Central Circle, XIV, Madras filed the criminal complaint before the Chief Judicial Magistrate, Egmore in C.C. No. 356 of 1977 on his file which proceedings have culminated to these appeals.10. Be that as it may, we would like to refer certain proceedings before the Income-tax Authorities which are very much relevant for the disposal of these appeals.11. The Income-tax Officer on the basis of the statement of the first appellant given before the Enforcement Authorities found that the amount or Rs. 6 lakhs was the income from other sources of the assessee (the first appellant) and that the explanation given by him was not satisfactory and included that amount in his taxable income. The Appellate Assistant Commissioner agreed with the ITO but the Income- tax Appellate Tribunal held that the department had not brought any material to show that the assessee was the owner of the money in question and that the evidence only indicated that the assessee had been engaged for disbursing the money not belonging to him but belonging to a third party. On the above finding, the Tribunal set aside the assessment order and referred the case back to the ITO to make a fresh assessment. But the ITO again made the same type of assessment. The first appellant took his statutory appeals under the Act and ultimately went before the Tribunal once again which by its order dated 12.5.1980 allowed the appeal of the assessee 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 1977. To substantiate the case, the prosecution examined 12 witnesses and marked Exhs. P 1 to P 87. The appellants did not examine any witness but filed Exhs. 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 Vth Additional Judge, Madras. In the result, the three appellants stood convicted under Section 120-B read with Sec. 193 IPC and Sec. 277 of the I.T. Act besides under Sections 193 IPC and appellants No. 1 and 3 separately under Section 277 of the I.T. Act. But coming to the question of sentence, the trial court taking into consideration of the fact that the appellants were detained under COFEPOSA in respect of the amount seized and they have also undergone the ordeal of enquiries and the trial for a considerable length of time sentenced each of them to undergo imprisonment till the rising of the Court for each of the offences and to pay a total fine of Rs. 2,000, Rs. 600 and Rs. 1,500 respectively with the default clause.12. Being aggrieved by the judgment of the first appellate court confirming the judgment of the trial court, two revisions were filed before the High Court as aforementioned. The High Court for the reasons mentioned in its order confirmed the judgment of the first appellate court and dismissed the revisions. Hence these two appeals.The Officers of the Enforcement Directorate conducted the raid and seized the amount on 19.10.66 on which day itself the statements under Exhs. P 39 and P 40 were recorded from the appellants 1 and 2 by the Officers of the Enforcement Directorate. On the very next day i.e. on 20.10.66 both the appellants sent their retraction to the Director of Enforcement through their Advocate stating that the statements were involuntary and bereft of truth. While it was so, the ITO of Karaikudi recorded the statement of the first appellant on 16.11.66. Meanwhile, the third appellant sent a letter to the Enforcement Officers claiming that he was the owner of the said amount of Rs. 4,28,713 and asked for the return of the same. On 22.12.66 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 I.T. Act. The third appellant on 1.3.67 submitted his return of income on 27.2.67 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 2.5.67 before the ITO 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 11.8.70 before the ITO denying the receipt of any amount from the appellants 1 and 2 on 18.10.66. Thereafter, appellants 1 and 3 gave separate statements on 27.2.71 and 4.11.71 respectively. The second appellant gave his statement before the ITO on 11.1.74 repudiating his earlier statement dated 19.10.66 (Exh. P 40) and stated that the said statement was obtained under duress. On the basis of the above statements and subsequent correspondence, it is stated that appellants Nos. 1 to 3 and accused No. 5 have committed the offences punishable under Section 120-B read with 193 IPC and 120-B IPC read with 277 of the I.T. Act.16. The trial court after having considered the allegations of the complaint, indicted the accused inclusive of the appellants thus:The first and second appellants wilfully caused the Advocates letter dated 20.10.66 with a false statement; that they, thereafter gave separate statements dated 16.11.66 and 11.1.74 respectively before the ITO repudiating their earlier statements given before the Enforcement Officers and that they thereby, have committed an offence punishable under Section 193 IPC. Similarly, the third appellant not only by fabricating a letter dated 10.10.66, but also by filing a false affidavit dated 23.3.67 and thereafter by making a false statement before the ITO on 4.11.71 has made himself liable to be punished under Section 193 IPC. In addition, accused No. 1 has committed an offence under Section 277 of the I.T. Act by delivering a letter to the ITO on 27.2.71 containing a false statement that his statement under Exh. P 39 was not true and obtained under duress. Accused No. 3 has also committed similar offence under Section 277 of the I.T. Act by wilfully delivering to the ITO a false statement dated 1.3.67 claiming the amount of Rs. 4,28,713 as belonging to him. Accused No. 5 has made him liable for the offence under Section 277 by delivering a false statement to the ITO on 11.8.70 denying the receipt of a sum of Rs. 50,000 on 18.10.66.17. Be that as it may, a perusal of the entire records show that a gist of the allegations levelled against these appellants is that the appellant No. 1 disowned his ownership of the amount contrary to the version in Exh. P 39 and the appellant No. 2 has repudiated the statement given under Exh. P 40 and that the appellant No. 3 made a false claim and that, thus, all the three appellants did so only in pursuance of a conspiracy.18. Though a specific ground is taken in the appeal grounds that Exhs. P 39 and P 40 are clearly relatable to the provisions of Section 39 of FERA and that no other statement was taken on oath, the respondent namely the Union of Indian 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 Exhs. P 39 and P 40 were recorded by the officers of the Enforcement in exercise of the power conferred under Section 39 of the Act.

Court's reasoning:
40. Hence for all the reasons stated supra, we hold that the convictions recorded by the Courts below under Sections 120-B read with 193IPC and 193 (simplicitor) as against the appellants 1 and 2 cannot be sustained. It is very surprising and shocking to note that the complainant has stepped into the shoe of the Enforcement Directorate, and appears to have assumed the authority under the FERA and levelled a charge stating that the appellants 1 and 2 by sending the letter of retraction on 20.10.66 denying their earlier statements dated 19.10.66 have made themselves liable to be convicted under Section 193 IPC (vide paragraph 25 (i) of the complaint).41. Still more shocking, the Trial Court has not only convicted the appellants 1 and 2 for sending the letter of retraction dated 20.10.66 but also found the third appellant and accused Nos. 4 and 5 as having been parties to a conspiracy for causing a letter dated 20.10.66 to be sent the Enforcement Directorate.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 Exh. D 4, the Tribunal has further held the Section 69 (a) dealing with the unexplained money etc. has no application to the facts of the case. Taking this finding of the Tribunal into constitution, we are constrained to hold that the appellants cannot be held to be liable for punishment under Section 120-B read with 277 and 277 (simplicitor) of the I.T. Act 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 the appellants 1 and 2.51. 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 court that the third appellant filed a suit on O.S. No. 62/71 on the original side of the High Court of Madras against the Enforcement Directorate claiming the said amount but that suit was dismissed. Exh. P 87 is the certified copy of the judgment. While it was so, PW 2 who was then the Income-tax Officer, City Circle, Madras during 1967-68 issued a letter dated 2.2.67 enclosing a notice under Sections 139 (2) of the I.T. Act and also another notice under Section 177 and 175 of the Act-both relating to the assessment years 1967-68-which notices are marked as Exhs. P 14 and P 15. He was further directed to file his return of income within a week of the receipt of Exh. P 15. The third appellants plea for extension of time was rejected. The third appellant, thereafter, filed his statement in verification accompanied by a signed statement claiming exemption of the sum of Rs. 4,28,713 as non-taxable on the ground that the said amount represented the sale proceeds of his mothers jewels etc.A careful perusal of the complaint leaves an impression that it has been ill-drafted and that 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 form the established facts in the case. As pointed out by this Court in Bhagwan Swaruop and ors v. State of Maharashtra, AIR 1965 SC 682 : 1964(2) SCR 378 that 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 20.10.66 committed an offence under Section 193 IPC and that they, thereafter, individually committed an offence under Section 193 IPC by retracting their earlier statements given before the Enforcement Authorities. Under Paragraph 25 (iv), (vi) and (vii) of the complaint, the third appellant is stated to have caused false entries to exist in the account books of M/s precious Stone Trading Company and then wilfully made a false statement in verification before the Income-tax Authority accompanied by a false statement. Nowhere, it is stated that the individual acts of appellants 1 and 2 and that of the third appellant were due to any conspiracy among all the three. On the other hand, the offence said to have been committed by the third appellant is specifically attributed only to him. So the question is whether any conspiracy could be inferred under these circumstances. In our opinion, on the facts of the case, no such inference could by drawn for the simple reason that the appellants 1 and 2 were interrogated by the Enforcement Authorities on 19.10.66 and they sent their letter of retraction through their advocate on the very next day i.e. on 20.10.66 and that the ITO, Karakudi has recorded the retraction statement of the first appellant even on 16.11.66. It was only thereafter the third appellant sent his letter to the Enforcement Authorities claiming the controversial amount on 22.12.66. The charges levelled against appellants 1 and 2 are only on the basis of their retractions made through their lawyer on 20.10.66 and by their subsequent statements. In the letter dated 20.10.66, the appellants 1 and 2 have not stated that the amount belonged to the third appellant. Similarly, it is not the case of the prosecution that the first appellant by his statement dated 16.11.66 explained the amount as belonging to the third appellant. Nor is it the case of the prosecution that the second appellant came forward by his statement recorded in the year 1974 which is the basis for prosecuting him for perjury stating that the amount belonged to the third appellant. Therefore, no agreement to commit the offence punishable under Sections 193 IPC or 277 I.T. Act can be said to have been hatched among all the three appellants. further, it is neither the case of the complainant nor could it be said that the appellants 1 and 2 knew that the third appellant intentionally fabricated false evidence or wilfully made a false return before the ITO. 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 a conspiracy among all the three appellants and the 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 1 and 2 and others under the charge of conspiracy. Therefore, the conviction of the third appellant under the conspiracy charge has to fail.54. It is pertinent to note, in this connection, that the trial court in paragraphs 87 and 88 of its judgments, after finding appellant No. 3 guilty of the conspiracy charge along with appellants 1 and 2, A 4 (since dead) and A 5 punishable under Sections 120-B read with 193 IPC and 120-B read with 277 I.T. Act has acquitted the fifth accused (Bhaskar alias Kannan) of all the charges in paragraph 89 of its judgment. This contradictory finding of the trial court has not been noted either by the appellate court or by the High Court.Section 277 of the I.T. Act in general seeks to the penalise one who makes a false statement in order to avoid his tax liability. In the present case, the Revenue has not come forward that the money represents the income of the third appellant liable to be taxed but on the other hand it is the case of the ITO that it is not the third appellants money at all. Moreover, a cursory reading of the penal clause proposes to impose punishment depending upon the quantum of tax sought to be evaded. Here no question of evading he tax will arise. Even assuming, that the third appellant has made himself liable to be punished under Sections 193 and 277 (simplicitor) of the I.T. Act, inasmuch as he has been put in a joint trial with the appellants 1 and 2 for the conspiracy of the said offences without any specific allegation or acceptable evidence to connect the third appellant with the activities of the appellants 1 and 2, there is a clear misjoinder of charges which includes misjoinder of parties also. In the facts and circumstances of the case on hand, the misjoinder of charges cannot be said to be a mere irregularity. In our considered opinion by the joint trial with misjoinder of charges, as pointed out by Mr. ATM Sampath, a failure of justice has in fact been occasioned since all the Courts below have clubbed all the allegations levelled against all the three appellants and two other accused (A 4 and A 5) together and considered the same as if all the offences were committed in the course of the same transaction pursuant to a conspiracy which is neither supported by the allegations in the complaint nor by any evidence as required under the law. Hence, the conviction under Sections 193 IPC and 277 of I.T. Act (simplicitor) also have to be set aside.57. The High Court, without adverting to the above important intricated questions of law involved in this case and examining them in the proper perspective has disposed of the revisions in a summary manner and hence the impugned orders warrant an interference. Since we are inclined to allow all these appeals mainly on the various questions of law which we have discussed in the preceding part of this judgment, we feel it unnecessary to deal with the other questions raised in the appeal.