The Income – Tax Officer, Corporate Ward – 6(3), Room v. K.inbasagaran

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 03.02.2020CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARANANDTHE HONOURABLE MR.JUSTICE P.VELMURUGAN W.A.No.1183 of 2018 and C.M.P.No.9440 of 2018 1. The Principal Commissioner of Income Tax-6, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034. 2. The Income – Tax Officer, Corporate Ward – 6(3), Room No.706, 7[th] Floor, Wanaparthy Block, 121, Mahatma Gandhi Road, Chennai – 600 034. : Appellants/Respondents 1 & 2 Vs. 1. K.Inbasagaran 2. M/s.Silver Shoes Pvt. Ltd., T-62, Anna Nagar, Chennai – 600 040.: 2[nd] Respondent/3[rd] Respondent Prayer: Writ Appeal filed under Clause 15 of the Letters Patentto set aside the order made in W.P.No.35234 of 2016 dated13.07.2017 and allow the writ appeal. Prayer in W.P.No.35234 of 2016: Petition filed under Article226 of the Constitution of India praying to issue a writ ofCertiorarified Mandamus, calling for the records of the secondrespondent relating to the impugned order dated 30.06.2016passedbythesecondrespondentinproceedingsNo.PAN: /2016-17 and quash the same and consequentlydirect the second respondent to re-issue the refund order as perlaw. For Appellants : Mr.A.P.Srinivas, Senior Standing CounselFor Respondents : Mrs.R.Maheswari for R1 Mr.P.H.Aravind Pandian, Senior Counsel for Ms.Kalaiselvi for R2 JUDGMENT[made by P.VELMURUGAN, J.] This writ appeal has been directed against the order made inW.P.No.35234 of 2016 dated 13.07.2017. 2 The appellant's Department conducted a raid in theresidential premises of the first respondent on 13.09.1993 underSection 132 of the Income Tax Act, and found some incriminatingrecords and cash about Rs.30,18,650/-, US Dollars, GoldBiscuits, Fixed Deposits and the Department seized all theabove. Based on the seizure, the Department has filed a caseagainst the first respondent in Spl.C.C.No.16 of 1997 on thefile of the learned Special Judge I (XI Additional Judge, CityCivil Court), which ended in conviction, but, subsequently on anappeal filed by the first respondent before this Court inCrl.A.No.231 of 2000, he was acquitted by this Court, aggrievedagainst which, the appellant Department has filed an appealbefore the Hon'ble Supreme Court, wherein, the judgment ofacquittal passed by this Court was confirmed. The Income TaxOfficer, vide letter dated 13.01.2016 intimated the firstrespondent about the refund of tax in the individual case. Thefirst respondent sent a communication dated 28.01.2016 statingthat refund has to be given to the second respondent M/s.SilverShoes Pvt. Ltd., The second appellant rejecting the same, hadpassed an order dated 30.06.2016 granting refund in the name ofthe first respondent for a sum of Rs.17,14,640/-. The firstrespondent returned the cheque and filed petition under Section154 of the Income Tax Act against the refund order and the samewas rejected by the second appellant vide order dated 07.09.2016as there is no mistake apparent from the record. Thereafter thefirst respondent filed a writ petition in W.P.No.35234 of 2016and the learned Single Judge, passed a detailed order dated13.07.2017, directing the second appellant to pass orders infavour of the second respondent herein. Aggrieved by the orderdated 13.07.2017, the Department has filed the present writappeal. 3The learned Senior Standing Counsel appearing for theappellants submitted that during a search conducted by theDepartment in the residential premises of the first respondent,some incriminating records and unaccounted money ofRs.30,18,650/-, US Dollors, Gold Biscuits, Fixed Deposits etc.,were seized and criminal proceedings was also initiated, whichended in conviction. But, subsequently, the wife of the firstrespondent had retracted her earlier statement saying that allthe seized articles belong to her and not to her husband andhence on an appeal filed by the first respondent, he wasacquitted by this Court, which was also confirmed by the Hon'bleSupreme Court. Therefore, refund of tax was rightly made in favour of the first respondent as per Section 132-B (3) of theIncome Tax Act, wherein, the Act clearly says that the assetshave to be discharged forthwith from whose custody it was seizedand there is no reference about the original owner of theassets. The Department has rightly refunded the assets in favourof the first respondent and further, there is no mentioningeither in the order of this Court in the criminal appeal or inthe order of the Hon'ble Supreme Court, to whom the assets haveto be refunded. The wife of the first respondent has filed anaffidavit stating that all the seized articles were acquired byher own through sale proceeds of M/s.Silver Shoes PrivateLimited and M/s.Southern Rims (P) Limited, in which, she was theDirector and M/s.A.V.J.Marketing Services, in which she was theProprietor. The Hon'ble Supreme Court has held that the moneyseized at the time of search stated to be owned by wife of thefirst respondent is unaccounted and further it was not statedthat as to whether the seized assets and monies were taxed ornot and how much belonged to her and how much belonged to theCompanies owned by her is also not clearly stated. Under thesecircumstance, the order of the learned Single Judge directingthe appellants to make refund in favour of the second respondentis not justifiable and the same is against law, which warrantsinterference. 4Learned Senior Counsel appearing for the secondrespondent vehemently contended that subsequent to the searchmade in the house of the first respondent, the Department hasfiled criminal case, which ended in conviction, but, on anappeal filed by the first respondent, this Court acquitted himand the case went to Supreme Court, wherein, the acquittal ofthe first respondent was confirmed. The Hon'ble Supreme Courthas accepted that the seized assets from the house of the firstrespondent belonged to his wife and hence confirmed theacquittal of the first respondent. Once the Supreme Court hasheld that the seized articles did not belong to the firstrespondent, the refund order passed by the appellant Departmentin favour of the first respondent is illegal and against thejudgment of the Hon'ble Supreme Court and hence the firstrespondent filed writ petition. The learned Single Judge afteran elaborate discussion on the entire facts of the case, hasrightly pointed out that refund order has to be done in favourof the second respondent and not in favour of the firstrespondent. Further it was rightly held by the learned SingleJudge that “interpretation to be given in the facts andcircumstances of the present case is by interpreting the words'from whose custody the assets were seized' as found in Section132-B (3) of the Income Tax Act should be interpreted bearing inmind the decision of this Court in Crl.A.No.231 of 2000 and thedecision of the Hon'ble Supreme Court in Crl.A.No.48 of 2002”.The above order is being well founded and reasoned, does not warrant any interference of this Court, which would amount tocontroverting the decision of the Hon'ble Supreme Court. 5Heard the learned counsel appearing on either side andperused the materials available on record. warrant any interference of this Court, which would amount tocontroverting the decision of the Hon'ble Supreme Court. 5Heard the learned counsel appearing on either side andperused the materials available on record. 6The main contention raised by the appellant Departmentis that even though, the criminal case filed against the firstrespondent ended in conviction and subsequently, this courtacquitted the first respondent, which was also confirmed by theHon'ble Supreme Court, there is no specific direction or ordereither by this Court or by the Hon'ble Supreme Court regardingrefund of the assets and further the appellants were not partiesto the criminal proceedings. The learned counsel for therespondents contended that it was observed in the criminalappeal that the first respondent and his wife were jointlyliving in the house, where the seizure had taken place and thewife has given statement before the Assistant Director of IncomeTax (Investigation) Unit – I, Department of Vigilance and Anti-Corruption stating that all the properties belonged to her andshe earned the same through sale proceeds of three Companiesowned by her and the Hon'ble Supreme Court has also accepted thesame. 7On a careful reading of the judgment of this Court aswell as the Hon'ble Supreme Court, it is revealed that the Courthas held that at the time of search, the wife of the firstrespondent was also residing with him and she has givenstatement saying that all the properties belonged to her and shehas also stated the source of income for the same and theHon'ble Supreme Court has accepted the same and found thatprosecution has failed to establish that all the propertiesseized belonged to the first respondent and therefore confirmedthe acquittal of the first respondent made by this Court.Subsequent to the judgment of this Court and the Hon'ble SupremeCourt, the Department has passed the refund order in favour ofthe first respondent, against which the first respondent filedwrit petition, which was allowed in his favour. It is true thatin the criminal proceedings, the Department was not a party,but, at the same time, the Hon'ble Supreme Court has held thatthe seized assets do not belong to the first respondent and itonly belongs to his wife. Under these circumstances, the standof the Department is not correct that they can pass refund orderonly in favour of a person, from whose custody, the assets wereseized. But, at the same time, the learned Single Judge has notappreciated the factual position and also the finding of theHon'ble Supreme Court regarding the ownership of the assets. Thewife of the respondent herself stated in the affidavit that sheearned some monies, when she was staying in America and she alsopaid income tax at America, and after repatriating to India, she started business and all the seized assets recovered duringthe search were acquired only out of her business through thethree Companies mentioned above. she started business and all the seized assets recovered duringthe search were acquired only out of her business through thethree Companies mentioned above. 8The seized assets were assessed at the hands of thefirst respondent for the A.Y. 1994-95 vide order dated29.03.1996. Neither the first respondent nor his wife or thesecond respondent has challenged the said order so far. Further,neither this Court nor the Hon'ble Supreme Court held that allthe seized properties belong to the second respondent herein,where the wife of the first respondent is the Director. Furtheras rightly pointed out by the learned Standing Counsel appearingfor the appellants that the search was not conducted in thepremises of the Company and while giving the statement, the wifeof the first respondent has not stated that all the propertiesare belong to the Company and in order to escape from theclutches of law and to safeguard her husband, she has given thatstatement stating that all the properties belong to her and notto her husband and she has shown some source of income. If atall based on the decision of the Hon'ble Supreme Court, thelearned Single Judge ought to have directed the appellants topass refund orders in favour of the wife of the firstrespondent, but, without any materials or sufficient proof,refund order cannot be passed in the name of the secondrespondent. The learned Single Judge has failed to consider theobservations made by the Hon'ble Supreme Court in Crl.A.No.480of 2002 dated 07.12.2005 reported in (2006) 1 SCC 420 and therelevant portion of the judgment is extracted hereunder: “ 15. We have heard both the learned counsel atlength. The basic question that emerges in the presentcase is whether the accused could be saddled with allthe unaccounted money at his hand or not. It is theadmitted position that both the husband and wife wereliving together. The wife was running three concernsthough those concerns were running in loss. Yet shecould manage to earn black money by selling goodswithout bills and amassed this wealth withoutdisclosing the same to the Income-tax authority andwhen the raid was conducted she disclosed theunaccounted money and accepted herself for beingassessed by the Income-tax Department. Therefore, inthis context, the question arises whether the jointpossession of the premises by the husband and wife andthe unaccounted money which has been recovered fromthe house could be said to be in exclusive possessionof the accused. There are no two opinions in thematter that the initial burden has to be discharged bythe prosecution. The prosecution in order to dischargethat burden has examined the Investigating Officer,P.W.53- Shri Viswanathan, D.S.P. (Investigation). P.W.53- Viswanathan has collected all the materialsfrom various places and he has given the details ofhis investigation. He has also supported therecoveries which have been made by the Income-taxDepartment. He in his statement, has also deposed thatsome money was deposited at various branches of PunjabNational Bank at Bangalore and he has examined all theSenior Managers of Punjab National Bank to show thatvarious amounts were deposited in their Banks and theprosecution has also produced them in the witness boxto substantiate their allegation as P.Ws.22, 23, 24,25, 26 and 32. He has also examined the personsagainst whose names those amounts were deposited inthe witness box. He has also examined the Income-taxOfficer as P.W.14, P.W.44 Assistant Director ofIncome-tax (Investigation) and P.W.51- S. GanapathyIyer. By this evidence the prosecution has establishedthat the money was recovered at the house of theaccused as well as various purchases of immovableproperties made by the wife of the accused. Theprosecution has tried to establish that all the moneyswhich had been recovered from the house of theaccused, various deposits in the Punjab National Bankat various places through the influence of theRegional Manager of Punjab National Bank and therecovery of the gold ornaments as well as the recoveryof foreign exchange i.e. dollars belong to accused.Thus, the prosecution has tried to establish that allthe moneys belonged to the accused and after takingsanction, prosecution was launched against theaccused. There are no two opinions in the matter thatthe initial burden lies on the prosecution. In thecase of C.S.D.Swami v. The State reported in AIR 1960SC 7, this Court has taken the view that in Section 5(3) of the Prevention of Corruption Act, 1947 acomplete departure has made from the criminaljurisprudence still initial burden lies on theprosecution and in that context it has been observedas follows : “Section 5(3) does not create a new offence but onlylays down a rule of evidence, enabling the court toraise a presumption of guilt in certain circumstances-a rule which is a complete departure from theestablished principle of criminal jurisprudence thatthe burden always lies on the prosecution to prove allthe ingredients of the offence charged, and that theburden never shifts on to the accused to disprove thecharge framed against him.” “Section 5(3) does not create a new offence but onlylays down a rule of evidence, enabling the court toraise a presumption of guilt in certain circumstances-a rule which is a complete departure from theestablished principle of criminal jurisprudence thatthe burden always lies on the prosecution to prove allthe ingredients of the offence charged, and that theburden never shifts on to the accused to disprove thecharge framed against him.” 16. Therefore, the initial burden was on theprosecution to establish whether the accused hasacquired the property disproportionate to his knownsource of income or not. But at the same time, it hasbeen held in State of M.P. Vs. Awadh Kishore Guptathat accused has to account satisfactorily for themoney received in his hand and satisfy the court thathis explanation was worthy of acceptance. In order tosubstantiate the plea taken by the accused that allthe monies which had been received belonged to hiswife and in support thereof he has examined as many as13 witnesses including himself, his wife and his son-in-law. D.W. 12 is the wife of the accused. She hasdeposed that the entire money belonged to her. She hasadmitted the raid on her house and she has alsoadmitted that she has amassed the wealth by sellingcycle rims and leather products without any bill andout of the money amassed by her she had persuaded herhusband to deposit the same at various banks. She hascome forward and admitted the recovery of the foreignexchange at her house and she has accounted for thesame. She has also admitted the recovery of the goldornaments at her house and she has explained that shehas purchased those gold ornaments. She has alsosubmitted that some real estate was purchased out ofself-earning as well as the loan from the mother ofthe son-in-law and some contribution was made by theson-in-law which the son-in-law has also admitted.Likewise, D.W.8 her son-in-law, Thiru S.Rajasankaralso appeared in the witness box and admitted that hehad also saved certain foreign exchange when he hadgone on various visits abroad. He has also admitted tohave carried some money to be deposited in the bank.The accused has also come forward in the witness boxas D.W.13 and has deposed that all the monies belongedto his wife and when he came to know about theunaccounted money at his house, he gave a piece of hismind to her. He has admitted that on one or twooccasions the money was carried by himself to bedeposited in the account in Punjab National Bank andsome money was also deposited on account of some ofthe members of the family by D.W.8, S. Rajasankar, theson-in-law. Therefore, under these circumstances, therespondent has explained the possession of unaccountedmoney.” 9On a careful reading of the above paragraphs, it isrevealed that even though, the Hon'ble Supreme Court confirmedthe acquittal of the first respondent, it has observed that the wife of the first respondent has admitted that she has amassedthe wealth by selling cycle rims and leather products withoutany bill and out of money amassed by her, she had persuaded herhusband to deposit the same in various banks. She has alsoadmitted that the recovered seized assets belong to her.Therefore, whether she has been prosecuted for the above non-disclosure or not is not brought before this Court. 9On a careful reading of the above paragraphs, it isrevealed that even though, the Hon'ble Supreme Court confirmedthe acquittal of the first respondent, it has observed that the wife of the first respondent has admitted that she has amassedthe wealth by selling cycle rims and leather products withoutany bill and out of money amassed by her, she had persuaded herhusband to deposit the same in various banks. She has alsoadmitted that the recovered seized assets belong to her.Therefore, whether she has been prosecuted for the above non-disclosure or not is not brought before this Court. 10In fine, however, the learned Single Judge failed toconsider the above and directed the appellants to pass refundorder in favour of the second respondent, which warrantsinterference of this Bench. It is not proved that all the seizedproperties were assessed in the name of the second respondent.Therefore, the order passed by the Single Judge is set aside tothat extent alone. Hence the second appellant is directed toverify as to whether the seized assets have been shown in thereturns filed by the wife of the first respondent at any pointof time. If it is so, the second appellant is directed to passorders in accordance with law, after verifying the returns filedby the wife of the first respondent, if not, the appellants aredirected to take action against the wife of the first respondentin accordance with law for not showing assets in her returns andnot paying the income tax. Further the Department of CommercialTax and the Department of Wealth Tax, are directed to takeaction against the wife of the first respondent for selling theproducts without any bill and amassing wealth. 11With the above directions, the writ appeal is partlyallowed to the extent stated above. Consequently connectedmiscellaneous petition is closed. Sd/-Assistant Registrar// True Copy// cgi Sub Assistant Registrar To 1. The Principal Commissioner of Income Tax-6, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034.2. The Income – Tax Officer, Corporate Ward – 6(3), Room No.706, 7[th] Floor, Wanaparthy Block, 121, Mahatma Gandhi Road, Chennai – 600 034. Copy to: 1.The Department of Commercial Tax, Chennai. Chennai. 2.The Department of Wealth Tax, Chennai. Chennai. +1cc to Mr.A.P.Srinivas, Advocate, SR.No.8726. +1cc to Ms.R.Maheswari, Advocate, SR.No.8060. W.A.No.1183 of 2018VG II(CO)CSR: 28.02.2020