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$-66 & 67 IN THE HIGH COURT OF DELHI AT NEW DELHI versus versus CORAM:HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAORDERHON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAORDERo/o 23.09.2019 C.M. No. 42491/2019 in ITA 850/2019 & C.M. No. 42492/2019 in ITA851/2019 (delav^ 1. By these applications, the applicant seeks condonation of delay of 76 daysin filing both the applications. For the reasons stated in the applications, thedelay is condoned. 2. The applications stand disposed of in the aforesaid terms. ITA 850/2019 & ITA 851/2019 3. The present appeals have been filed by the Revenue assailing the orderdated 14.12.2018 passed by the Income Tax Appellate Tribunal, Delhi 'E'Bench, New Delhi passed by the ITAT in respect of ITA 3208/Del/2013 forthe assessment year 2005-06 and in ITA No. 2576/Del/2010 for theassessment year 2003-04, whereby the Tribunal has allowed the appealspreferred by the Respondent/assessee and set aside the additions made bythe Assessing Officer in the income of the Respondent/assessee trust. 4. A search and seizure operation under section 132 of the Act was carriedout at the premises of the assessee and at the residence of Sh. RK Miglani,Secretary General of the assessee society on 14.02.2006, from where variousincriminating documents relating to the assessee society were seized.Subsequently, assessment was completed u/s 153A vide order dated28.12.2007 at Rs. 45,21,43,413/- (against loss of Rs. (-) 73,354/-in thestatus of AOP) in view of AO's findings that the activities of UPDA werenot charitable in nature and were, in fact in infringement of law and incomplete violation of public policy. The AO made additions ofRs.45,22,04,401 /- on account of unexplained receipts recorded in the documents/books of account found and seized from the premises of theassessee and residence of Shri R. K. Miglani. He relied on the statement ofShri Miglani recorded u/s 132(4) of the Act wherein he had himself admittedthat he was working as Secretary General of UPDA and the entriesappearing in the seized documents were in respect of amounts paid bymembers of UPDA for the purpose of making illegal payments topoliticians/public servants as mentioned in the said documents. Ld. CIT (A)-33, vide order dated 18.02.2013 (in Appeal No. 354/07-08/101) dismissedthe appeal of the assessee confirming the addition of Rs. 45.22 crores asunaccounted revenue receipts in the hands of the assessee which is notapplied to the objects of society. Ld. CIT(A) further held that theunaccounted receipt of Rs. 45.22 crore is not exempt u/s 11 as activities ofUPDA were not charitable in nature and were, in fact, in infringement of lawand in complete violation of public policy. 5. Ld. Tribunal vide its common order for AYs 2001-02 to 2007-08 dated14.12.2018 in ITA 3208/Del/2013 allowed the appeals of the assesseeholding that the assessment framed u/s 153 A of the Act was bad in law, asno search u/s 132 of the Act was earned out at the premises of the assesseeand deleted the addition of Rs. 45.22crores made by the AO on account ofunexplained credit entries recorded in the seized documents and denial ofexemption u/s 11 of the Act. Hence, the present appeal. 6. The admitted position on facts, as emerging from the record, is that nosearch under Section 132 of the Act was conducted in the premises of theRespondent/assessee. Merely a survey under Section 133A was conducted. ITA 850/2019 cfe ITA 851/2019 5. Ld. Tribunal vide its common order for AYs 2001-02 to 2007-08 dated14.12.2018 in ITA 3208/Del/2013 allowed the appeals of the assesseeholding that the assessment framed u/s 153 A of the Act was bad in law, asno search u/s 132 of the Act was earned out at the premises of the assesseeand deleted the addition of Rs. 45.22crores made by the AO on account ofunexplained credit entries recorded in the seized documents and denial ofexemption u/s 11 of the Act. Hence, the present appeal. 6. The admitted position on facts, as emerging from the record, is that nosearch under Section 132 of the Act was conducted in the premises of theRespondent/assessee. Merely a survey under Section 133A was conducted. ITA 850/2019 cfe ITA 851/2019 Consequently, invocation of Section 153A was not warranted, which led tothe assessment order being framed making additions in the income ofRespondent/assessee on the basis of documents recovered which,purportedly, showed cash receipts by the Respondent/assessee form itsmembers. The assessment was made by the Assessing Officer on the basisof the said purported cash receipts found in the documents upon conduct ofsurvey under Section 133A of the Act against the assessee, and uponconduct of search under Section 132 on the premises of the Secretary of theRespondent Trust, Shri R. K Miglani, and on the basis of the statementattributed to him. The relevant findings returned by the Tribunal in theimpugned order read as follows: "199. If the search warrant was never executed at the premises ofthe assessee, it leads to only one conclusion that the assessee wasnever searched. If the assessee was never searched u/s 132 of theAct, assessments framed u/s 153A of the Act are bad in lawbecause provisions of section 153A provides for assessment incase ofsearch or requisition." 7. In respect of the additions sought to be made under Section 68 of the Act,the Tribunal observed as follows: "209. Adverting to the facts relating to the additions made u/s 68of the Act, we must first understand the precondition for involdngthe provisions of section 68 of the Act and the precondition isthat where any sum is found credited in the books of the assesseemaintained for any previous year. No such entries are found -inthe books of the assessee. What was found was merely notings inloose papers/spiral bound diaries. Whether entries in loosesheets can be construed as entries in the books of account, theHon'ble Supreme Court in the cases of Common Cause, ARegistered Society Vs. UOI 394 ITR 220 wherein the Hon'ble Supreme Court considered the following facts: "Raids were conducted on the Birla and Sahara Group ofCompanies and incriminating materials inform of random sheetsand loose papers, computer prints, hard disk, pen drives etc.were found. Evidence of certain highly incriminating moneytransactions were also found. Question arises as to whether a case was made out on the basisof above materials, to constitute Special Investigation Team (SIT)and direct investigation against the various functionaries/officersand further monitor the same?of above materials, to constitute Special Investigation Team (SIT)and direct investigation against the various functionaries/officersand further monitor the same? Loose sheets of papers are wholly irrelevant as evidence beingnot admissible under section 34 so as to constitute evidence withrespect to the transactions mentioned therein being of noevidentiary value. The entire prosecution based upon suchentries which led to the investigation was quashed by this Court.not admissible under section 34 so as to constitute evidence withrespect to the transactions mentioned therein being of noevidentiary value. The entire prosecution based upon suchentries which led to the investigation was quashed by this Court.[Para 20] Loose sheets of papers are wholly irrelevant as evidence beingnot admissible under section 34 so as to constitute evidence withrespect to the transactions mentioned therein being of noevidentiary value. The entire prosecution based upon suchentries which led to the investigation was quashed by this Court.not admissible under section 34 so as to constitute evidence withrespect to the transactions mentioned therein being of noevidentiary value. The entire prosecution based upon suchentries which led to the investigation was quashed by this Court.[Para 20] The Court has to be on guard while ordering investigationagainst any important constitutional functionary, officers or anyperson in the absence of some cogent legally cognizablematerial. When the material on the basis of which investigation issought is itself irrelevant to constitute evidence and notadmissible evidence, whether it would be safe to even initiateinvestigation? In case it is done, the investigation can be asagainst any person whosoever high in integrity on the basis ofirrelevant or inadmissible entry falsely -made, by anyunscrupulous person or business house that too not kept inregular books of account but on random papers at any givenpoint of time. There has to be some relevant and admissibleevidence and some cogent reason, which is prima facie reliableand that too, supported by some other circumstances pointing outthat the particular third person against whom the allegationshave been levelled was in fact involved in the matter or he hasdone some act during that period, which may have co-relationswith the random entries. In case all these are not insisted, theagainst any important constitutional functionary, officers or anyperson in the absence of some cogent legally cognizablematerial. When the material on the basis of which investigation issought is itself irrelevant to constitute evidence and notadmissible evidence, whether it would be safe to even initiateinvestigation? In case it is done, the investigation can be asagainst any person whosoever high in integrity on the basis ofirrelevant or inadmissible entry falsely -made, by anyunscrupulous person or business house that too not kept inregular books of account but on random papers at any givenpoint of time. There has to be some relevant and admissibleevidence and some cogent reason, which is prima facie reliableand that too, supported by some other circumstances pointing outthat the particular third person against whom the allegationshave been levelled was in fact involved in the matter or he hasdone some act during that period, which may have co-relationswith the random entries. In case all these are not insisted, the process of law can be abused against all and sundry very easilyto achieve ulterior goals and then no democracy can survive incase investigations are lightly set in motion against importantconstitutional functionaries on the basis of fictitious entries, inabsence of cogent and admissible material on record, lest libertyof an individual be compromised unnecessarily. The materialswhich have been placed on record either in the case of Birla orin the case of Sahara are not maintained in regular course ofbusiness and thus lack in required reliability to be made thefoundation- of a police investigation. [Para-21] process of law can be abused against all and sundry very easilyto achieve ulterior goals and then no democracy can survive incase investigations are lightly set in motion against importantconstitutional functionaries on the basis of fictitious entries, inabsence of cogent and admissible material on record, lest libertyof an individual be compromised unnecessarily. The materialswhich have been placed on record either in the case of Birla orin the case of Sahara are not maintained in regular course ofbusiness and thus lack in required reliability to be made thefoundation- of a police investigation. [Para-21] In case of Sahara, in addition there is adjudication by the IncomeTax Settlement Commission. The order has been placed onrecord. The Settlement Commission has observed that thescrutiny of entries on loose papers, computer prints, hard disk,pen drives etc. have revealed that the transactions noted ondocuments were not genuine and have no evidentiary value andthat details in these loose papers, computer print outs, hard diskand pen drive etc. do not comply with the requirement of theIndian Evidence Act and are not admissible evidence. It furtherobserved that the department has no evidence to prove thatentries in these loose papers and electronic data were keptregularly during the course of business of the concerned businesshouse and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have notbeen able to show and substantiate the nature and source ofreceipts as well as nature and reason of payments and haveTax Settlement Commission. The order has been placed onrecord. The Settlement Commission has observed that thescrutiny of entries on loose papers, computer prints, hard disk,pen drives etc. have revealed that the transactions noted ondocuments were not genuine and have no evidentiary value andthat details in these loose papers, computer print outs, hard diskand pen drive etc. do not comply with the requirement of theIndian Evidence Act and are not admissible evidence. It furtherobserved that the department has no evidence to prove thatentries in these loose papers and electronic data were keptregularly during the course of business of the concerned businesshouse and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have notbeen able to show and substantiate the nature and source ofreceipts as well as nature and reason of payments and havefailed to prove evidentiary value of loose papers and electronicdocuments within the legal parameters. The Commission has alsoobserved that department has not been able to make out a clearcase of taxing such income in the hands of the applicant firm onthe basis of these documents. [Para 22]documents within the legal parameters. The Commission has alsoobserved that department has not been able to make out a clearcase of taxing such income in the hands of the applicant firm onthe basis of these documents. [Para 22] It is apparent that the Commission has recorded a finding thattransactions noted in the documents were not genuine and thushas not attached any evidentiary value to the pen drive, harddisk, computer loose papers, computer printouts. [Para 23]transactions noted in the documents were not genuine and thushas not attached any evidentiary value to the pen drive, harddisk, computer loose papers, computer printouts. [Para 23] It is apparent that the Commission has recorded a finding thattransactions noted in the documents were not genuine and thushas not attached any evidentiary value to the pen drive, harddisk, computer loose papers, computer printouts. [Para 23]transactions noted in the documents were not genuine and thushas not attached any evidentiary value to the pen drive, harddisk, computer loose papers, computer printouts. [Para 23] Since it is not disputed that for entries relied on in these loosepapers and electronic data were not regularly kept during courseof business, such entries were discussed in the order passed inSahara's case by the Settlement Commission and the documentshave not been relied upon the Commission against assessee andthus such documents have no evidentiary value against thirdparties. On the sis of the materials which have been placed onrecord, it is opined that no case is made out to directinvestigation against any of the persons named in the Birla'sdocuments or in the documents of Sahara. [Para 24]papers and electronic data were not regularly kept during courseof business, such entries were discussed in the order passed inSahara's case by the Settlement Commission and the documentshave not been relied upon the Commission against assessee andthus such documents have no evidentiary value against thirdparties. On the sis of the materials which have been placed onrecord, it is opined that no case is made out to directinvestigation against any of the persons named in the Birla'sdocuments or in the documents of Sahara. [Para 24] In the case o/State of Haryana v. Bhajan Lai 1992 Supp (I) SCC335, this Court has laid down principles in regard to quashingthe F.l.R. The Court can quash FIR also if situation warrant evenbefore investigation takes place in certain circumstances. ThisCourt has laid down thus:335, this Court has laid down principles in regard to quashingthe F.l.R. The Court can quash FIR also if situation warrant evenbefore investigation takes place in certain circumstances. ThisCourt has laid down thus: (8) Where the allegations made in the first information report of the complaint, even if they are taken at their face value andaccepted in their entirety do not prima facie constitute anyoffence or make out a case against the accused. (9) Where the allegations in the first information report and other materials, if any. accompanying the FIR do not disclose acognizable offence, justifying an investigation by police officersunder section I56( I) of the Code except under an order of aMagistrate within the purview of section 155(2) of the Code. (10) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same donot disclose the commission of any offence and make out a caseagainst the accused. (11) Where the allegations in the FIR do not constitute acognizable offence but constitute only a non- cognizable offence,no investigation is permitted by a police officer without an orderof a Magistrate as contemplated u/s 155(2) of the Code. (12) Where the allegations made in the FIR or complaint are soabsurd and inherently improbable on the basis of which noprudent person can ever reach a just conclusion that there issufficient ground for proceeding against the accused. (13) Where there is an express legal bar engrafted in any of theprovisions of the Code or the concerned Act (under which acriminal proceeding is instituted) to the institution andcontinuance of the proceedings and/or where there is a specificprovision in the Code or the concerned Act, providing efficaciousredress for the grievance of the aggrieved party. (14) Where a criminal proceeding is manifestly attended withmala fide and/or where the proceeding is maliciously institutedwith an ulterior motive for wreaking vengeance on the accusedand with a view to spite him due to private and personal grudge.[Para 26] (13) Where there is an express legal bar engrafted in any of theprovisions of the Code or the concerned Act (under which acriminal proceeding is instituted) to the institution andcontinuance of the proceedings and/or where there is a specificprovision in the Code or the concerned Act, providing efficaciousredress for the grievance of the aggrieved party. (14) Where a criminal proceeding is manifestly attended withmala fide and/or where the proceeding is maliciously institutedwith an ulterior motive for wreaking vengeance on the accusedand with a view to spite him due to private and personal grudge.[Para 26] n Considering the aforesaid principles which have been laid down,it is opined that the materials in question are not good enough toconstitute offences to direct the registration of FIR andinvestigation therein. The materials should qualify the test as perthe aforesaid decision. The complaint should not be improbableand must shoM> sufficient ground and commission of offence onthe basis of which registration of a case can be ordered Thematerials in question are not only irrelevant but are also legallyinadmissibly under section 34 of the Evidence Act, more so withrespect to third parties and considering the explanation whichhave been made by the Birla Group and Sahara Group, it isopined that it would not be legally justified, safe, just and properto direct investigation. [Para 27] "it is opined that the materials in question are not good enough toconstitute offences to direct the registration of FIR andinvestigation therein. The materials should qualify the test as perthe aforesaid decision. The complaint should not be improbableand must shoM> sufficient ground and commission of offence onthe basis of which registration of a case can be ordered Thematerials in question are not only irrelevant but are also legallyinadmissibly under section 34 of the Evidence Act, more so withrespect to third parties and considering the explanation whichhave been made by the Birla Group and Sahara Group, it isopined that it would not be legally justified, safe, just and properto direct investigation. [Para 27] " 8. Therefore, the Tribunal has rejected reliance placed by the Revenue onsome loose papers/spiral bound diaries, by placing reliance on CommonCause (supra). In these circumstances, we are of the view that no question oflaw arises for consideration in the present appeals, and the same are, accordingly, dismissed. SEPTEMBER 23, 2019nk ITA 850/2019 & ITA 851/2019 VIPIN SANGHI SANJEEV NARUEA, J