W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 03.02.2020 CORAM : HONOURABLE MR.JUSTICE N.KIRUBAKARAN AND HONOURABLE MR.JUSTICE P.VELMURUGAN W.A.No.1183 of 2018 and C.M.P.No.9440 of 2018 1. Principal Commissioner of Income Tax-6, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 2. Income Tax Officer, Corporate Ward 6(3), Room No.706, 7th Floor, Wanaparthy Block, 121, Mahatma Gandhi Road, Chennai 600 034. ... Appellants Vs. 1. K.Inbasagaran 2. M/s.Silver Shoes Pvt. Ltd., T-62, Anna Nagar, Chennai 600 040. ... Respondents Prayer: Writ Appeal filed under Clause 15 of Letters Patent to set aside order made in W.P.No.35234 of 2016 dated 13.07.2017 and allow writ appeal. For Appellants : Mr.A.P.Srinivas, Senior Standing Counsel For Respondents : Mrs.R.Maheswari for R1 Mr.P.H.Aravind Pandian, Senior Counsel for Ms.Kalaiselvi for R2 JUDGMENT [made by P.VELMURUGAN, J.] 1/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 This writ appeal has been directed against order made in W.P.No.35234 of 2016 dated 13.07.2017. 2 appellant's Department conducted raid in residential premises of first respondent on 13.09.1993 under Section 132 of Income Tax Act, and found some incriminating records and cash about Rs.30,18,650/-, US Dollars, Gold Biscuits, Fixed Deposits and Department seized all above. Based on seizure, Department has filed case against first respondent in Spl.C.C.No.16 of 1997 on file of learned Special Judge I (XI Additional Judge, City Civil Court), which ended in conviction, but, subsequently on appeal filed by first respondent before this Court in Crl.A.No.231 of 2000, he was acquitted by this Court, aggrieved against which, appellant Department has filed appeal before Hon'ble Supreme Court, wherein, judgment of acquittal passed by this Court was confirmed. Income Tax Officer, vide letter dated 13.01.2016 intimated first respondent about refund of tax in individual case. first respondent sent communication dated 28.01.2016 stating that refund has to be given to second respondent M/s.Silver Shoes Pvt. Ltd., second appellant rejecting same, had passed order dated 30.06.2016 granting refund in name of first respondent for sum of Rs.17,14,640/-. first respondent returned cheque and filed petition under Section 154 of Income Tax Act against refund order and same was rejected by second appellant vide order dated 07.09.2016 as there is no 2/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 mistake apparent from record. Thereafter first respondent filed writ petition in W.P.No.35234 of 2016 and learned Single Judge, passed detailed order dated 13.07.2017, directing second appellant to pass orders in favour of second respondent herein. Aggrieved by order dated 13.07.2017, Department has filed present writ appeal. 3 learned Senior Standing Counsel appearing for appellants submitted that during search conducted by Department in residential premises of first respondent, some incriminating records and unaccounted money of Rs.30,18,650/-, US Dollors, Gold Biscuits, Fixed Deposits etc., were seized and criminal proceedings was also initiated, which ended in conviction. But, subsequently, wife of first respondent had retracted her earlier statement saying that all seized articles belong to her and not to her husband and hence on appeal filed by first respondent, he was acquitted by this Court, which was also confirmed by Hon'ble Supreme Court. Therefore, refund of tax was rightly made in favour of first respondent as per Section 132-B (3) of Income Tax Act, wherein, Act clearly says that assets have to be discharged forthwith from whose custody it was seized and there is no reference about original owner of assets. Department has rightly refunded assets in favour of first respondent and further, there is no mentioning either in order of this Court in criminal appeal or in order of Hon'ble Supreme Court, to whom assets 3/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 have to be refunded. wife of first respondent has filed affidavit stating that all seized articles were acquired by her own through sale proceeds of M/s.Silver Shoes Private Limited and M/s.Southern Rims (P) Limited, in which, she was Director and M/s.A.V.J.Marketing Services, in which she was Proprietor. Hon'ble Supreme Court has held that money seized at time of search stated to be owned by wife of first respondent is unaccounted and further it was not stated that as to whether seized assets and monies were taxed or not and how much belonged to her and how much belonged to Companies owned by her is also not clearly stated. Under these circumstance, order of learned Single Judge directing appellants to make refund in favour of second respondent is not justifiable and same is against law, which warrants interference. 4 Learned Senior Counsel appearing for second respondent vehemently contended that subsequent to search made in house of first respondent, Department has filed criminal case, which ended in conviction, but, on appeal filed by first respondent, this Court acquitted him and case went to Supreme Court, wherein, acquittal of first respondent was confirmed. Hon'ble Supreme Court has accepted that seized assets from house of first respondent belonged to his wife and hence confirmed acquittal of first respondent. Once Supreme Court has held that seized articles did not belong to first respondent, refund order passed by appellant Department in 4/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 favour of first respondent is illegal and against judgment of Hon'ble Supreme Court and hence first respondent filed writ petition. learned Single Judge after elaborate discussion on entire facts of case, has rightly pointed out that refund order has to be done in favour of second respondent and not in favour of first respondent. Further it was rightly held by learned Single Judge that interpretation to be given in facts and circumstances of present case is by interpreting words 'from whose custody assets were seized' as found in Section 132-B (3) of Income Tax Act should be interpreted bearing in mind decision of this Court in Crl.A.No.231 of 2000 and decision of Hon'ble Supreme Court in Crl.A.No.48 of 2002 . above order is being well founded and reasoned, does not warrant any interference of this Court, which would amount to controverting decision of Hon'ble Supreme Court. 5 Heard learned counsel appearing on either side and perused materials available on record. 6 main contention raised by appellant Department is that even though, criminal case filed against first respondent ended in conviction and subsequently, this court acquitted first respondent, which was also confirmed by Hon'ble Supreme Court, there is no specific direction or order either by this Court or by Hon'ble Supreme Court regarding refund of assets and further appellants were not parties to criminal proceedings. learned counsel for respondents contended that it was observed in criminal appeal that first 5/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 respondent and his wife were jointly living in house, where seizure had taken place and wife has given statement before Assistant Director of Income Tax (Investigation) Unit I, Department of Vigilance and Anti-Corruption stating that all properties belonged to her and she earned same through sale proceeds of three Companies owned by her and Hon'ble Supreme Court has also accepted same. 7 On careful reading of judgment of this Court as well as Hon'ble Supreme Court, it is revealed that Court has held that at time of search, wife of first respondent was also residing with him and she has given statement saying that all properties belonged to her and she has also stated source of income for same and Hon'ble Supreme Court has accepted same and found that prosecution has failed to establish that all properties seized belonged to first respondent and therefore confirmed acquittal of first respondent made by this Court. Subsequent to judgment of this Court and Hon'ble Supreme Court, Department has passed refund order in favour of first respondent, against which first respondent filed writ petition, which was allowed in his favour. It is true that in criminal proceedings, Department was not party, but, at same time, Hon'ble Supreme Court has held that seized assets do not belong to first respondent and it only belongs to his wife. Under these circumstances, stand of Department is not correct that they can pass 6/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 refund order only in favour of person, from whose custody, assets were seized. But, at same time, learned Single Judge has not appreciated factual position and also finding of Hon'ble Supreme Court regarding ownership of assets. wife of respondent herself stated in affidavit that she earned some monies, when she was staying in America and she also paid income tax at America, and after repatriating to India, she started business and all seized assets recovered during search were acquired only out of her business through three Companies mentioned above. 8 seized assets were assessed at hands of first respondent for A.Y. 1994-95 vide order dated 29.03.1996. Neither first respondent nor his wife or second respondent has challenged said order so far. Further, neither this Court nor Hon'ble Supreme Court held that all seized properties belong to second respondent herein, where wife of first respondent is Director. Further as rightly pointed out by learned Standing Counsel appearing for appellants that search was not conducted in premises of Company and while giving statement, wife of first respondent has not stated that all properties are belong to Company and in order to escape from clutches of law and to safeguard her husband, she has given that statement stating that all properties belong to her and not to her husband and she has shown some source of income. If at all based on decision of Hon'ble Supreme Court, learned 7/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 Single Judge ought to have directed appellants to pass refund orders in favour of wife of first respondent, but, without any materials or sufficient proof, refund order cannot be passed in name of second respondent. learned Single Judge has failed to consider observations made by Hon'ble Supreme Court in Crl.A.No.480 of 2002 dated 07.12.2005 reported in (2006) 1 SCC 420 and relevant portion of judgment is extracted hereunder: 15. We have heard both learned counsel at length. basic question that emerges in present case is whether accused could be saddled with all unaccounted money at his hand or not. It is admitted position that both husband and wife were living together. wife was running three concerns though those concerns were running in loss. Yet she could manage to earn black money by selling goods without bills and amassed this wealth without disclosing same to Income-tax authority and when raid was conducted she disclosed unaccounted money and accepted herself for being assessed by Income-tax Department. Therefore, in this context, question arises whether joint possession of premises by husband and wife and unaccounted money which has been recovered from house could be said to be in exclusive possession of accused. There are no two opinions in matter that initial burden has to be discharged by prosecution. prosecution in order to discharge that burden has examined Investigating Officer, P.W.53- Shri Viswanathan, D.S.P. (Investigation). P.W.53- Viswanathan has collected all materials from various places and he has given details of his investigation. He has also supported recoveries which have been made by Income-tax Department. He in his 8/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 statement, has also deposed that some money was deposited at various branches of Punjab National Bank at Bangalore and he has examined all Senior Managers of Punjab National Bank to show that various amounts were deposited in their Banks and prosecution has also produced them in witness box to substantiate their allegation as P.Ws.22, 23, 24, 25, 26 and 32. He has also examined persons against whose names those amounts were deposited in witness box. He has also examined Income-tax Officer as P.W.14, P.W.44 Assistant Director of Income-tax (Investigation) and P.W.51- S. Ganapathy Iyer. By this evidence prosecution has established that money was recovered at house of accused as well as various purchases of immovable properties made by wife of accused. prosecution has tried to establish that all moneys which had been recovered from house of accused, various deposits in Punjab National Bank at various places through influence of Regional Manager of Punjab National Bank and recovery of gold ornaments as well as recovery of foreign exchange i.e. dollars belong to accused. Thus, prosecution has tried to establish that all moneys belonged to accused and after taking sanction, prosecution was launched against accused. There are no two opinions in matter that initial burden lies on prosecution. In case of C.S.D.Swami v. State reported in AIR 1960 SC 7, this Court has taken view that in Section 5(3) of Prevention of Corruption Act, 1947 complete departure has made from criminal jurisprudence still initial burden lies on prosecution and in that context it has been observed as follows : Section 5(3) does not create new offence but only lays down rule of evidence, enabling court to raise presumption of guilt in 9/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 certain circumstances- rule which is complete departure from established principle of criminal jurisprudence that burden always lies on prosecution to prove all ingredients of offence charged, and that burden never shifts on to accused to disprove charge framed against him. 16. Therefore, initial burden was on prosecution to establish whether accused has acquired property disproportionate to his known source of income or not. But at same time, it has been held in State of M.P. Vs. Awadh Kishore Gupta that accused has to account satisfactorily for money received in his hand and satisfy court that his explanation was worthy of acceptance. In order to substantiate plea taken by accused that all monies which had been received belonged to his wife and in support thereof he has examined as many as 13 witnesses including himself, his wife and his son-in-law. D.W. 12 is wife of accused. She has deposed that entire money belonged to her. She has admitted raid on her house and she has also admitted that she has amassed wealth by selling cycle rims and leather products without any bill and out of money amassed by her she had persuaded her husband to deposit same at various banks. She has come forward and admitted recovery of foreign exchange at her house and she has accounted for same. She has also admitted recovery of gold ornaments at her house and she has explained that she has purchased those gold ornaments. She has also submitted that some real estate was purchased out of self-earning as well as loan from mother of son-in-law and some contribution was made by son-in-law which son-in-law has also admitted. 10/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 Likewise, D.W.8 her son-in-law, Thiru S.Rajasankar also appeared in witness box and admitted that he had also saved certain foreign exchange when he had gone on various visits abroad. He has also admitted to have carried some money to be deposited in bank. accused has also come forward in witness box as D.W.13 and has deposed that all monies belonged to his wife and when he came to know about unaccounted money at his house, he gave piece of his mind to her. He has admitted that on one or two occasions money was carried by himself to be deposited in account in Punjab National Bank and some money was also deposited on account of some of members of family by D.W.8, S. Rajasankar, son-in-law. Therefore, under these circumstances, respondent has explained possession of unaccounted money. 9 On careful reading of above paragraphs, it is revealed that even though, Hon'ble Supreme Court confirmed acquittal of first respondent, it has observed that wife of first respondent has admitted that she has amassed wealth by selling cycle rims and leather products without any bill and out of money amassed by her, she had persuaded her husband to deposit same in various banks. She has also admitted that recovered seized assets belong to her. Therefore, whether she has been prosecuted for above non-disclosure or not is not brought before this Court. 10 In fine, however, learned Single Judge failed to consider above 11/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 and directed appellants to pass refund order in favour of second respondent, which warrants interference of this Bench. It is not proved that all seized properties were assessed in name of second respondent. Therefore, order passed by Single Judge is set aside to that extent alone. Hence second appellant is directed to verify as to whether seized assets have been shown in returns filed by wife of first respondent at any point of time. If it is so, second appellant is directed to pass orders in accordance with law, after verifying returns filed by wife of first respondent, if not, appellants are directed to take action against wife of first respondent in accordance with law for not showing assets in her returns and not paying income tax. Further Department of Commercial Tax and Department of Wealth Tax, are directed to take action against wife of first respondent for selling products without any bill and amassing wealth. 11 With above directions, writ appeal is partly allowed to extent stated above. Consequently connected miscellaneous petition is closed. [N.KIRUBAKARAN, J.] [P.VELMURUGAN, J.] 03.02.2020 Index : Yes/No Speaking / Non Speaking order cgi 12/13 http://www.judis.nic.in W.A.No. 1183 of 2018 and C.M.P.No.9440 of 2018 N.KIRUBAKARAN, J. and P.VELMURUGAN, J. cgi To 1. Principal Commissioner of Income Tax-6, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 2. Income Tax Officer, Corporate Ward 6(3), Room No.706, 7th Floor, Wanaparthy Block, 121, Mahatma Gandhi Road, Chennai 600 034. W.A.No.1183 of 2018 and 03.02.2020 13/13 http://www.judis.nic.in PCIT-6, Chennai / ITO, Corporate Ward-6(3), Chennai v. K. Inbasagaran / Silver Shoes Pvt. Ltd