ITRs & IT orders do not constitute “foolproof defence” in Disproportionate Assets (corruption) cases

IT: Section 139, read with sections 56, 68 and 143, of the Income-tax Act, 1961 and section 13 of the Prevention of Corruption Act, 1988 - Return of income (General) - Whether income-tax returns and orders would not ipso facto either conclusively prove or disprove the charge of disproportionate assets (acquisition of assets disproportionate to known sources of income) and can at best be pieces of evidence which have to be evaluated along with the other materials on record - Held, yes

• Income-Tax returns and orders would not ipso facto either conclusively prove or disprove the charge of disproportionate assets (acquisition of assets disproportionate to known sources of income) and can at best be pieces of evidence which have to be evaluated along with the other materials on record.

• Where the income tax returns relied upon by the defence as well as the orders passed in the proceedings pertaining thereto have been filed/passed after the charge-sheet had been submitted, neither the income tax returns nor the orders passed in the proceedings relatable thereto, either definitively attest the lawfulness of the sources of income of the accused persons or are of any avail to them to satisfactorily account the disproportionateness of their pecuniary resources and properties as mandated by section 13(1)(e) of the Prevention of Corruption Act, 1988.

• Submission of income tax returns and the assessments orders passed thereon, would not constitute a full proof defence against a charge of acquisition of assets disproportionate to the known lawful sources of income as contemplated under the Prevention of Corruption Act and that further scrutiny/analysis thereof is imperative to determine as to whether the offence as contemplated by the Prevention of Corruption Act is made out or not.

• The scrutiny in an assessment proceeding is directed only to quantify the taxable income and the orders passed therein do not certify or authenticate that the source(s) thereof to be lawful and are thus of no significance vis-à-vis a charge under section 13(1)(e) of the Prevention of Corruption Act, 1988.

• Even if a receipt claimed as a gift is after the scrutiny of the Income Tax Authorities construed to be income from undisclosed sources and is subjected to income tax, it would not for the purposes of a charge under section 13(1)(e) of the Prevention of Corruption Act, 1988 be sufficient to hold that it was from a lawful source in absence of any independent and satisfactory evidence to that effect.

• Property in the name of the income tax assessee itself cannot be a ground to hold that it actually belongs to such an assessee and that if this proposition was accepted, it would lead to disastrous consequences. In such an eventuality it will give opportunities to the corrupt public servant to amass property in the name of known person, pay income tax on their behalf and then be out from the mischief of law.

• Gift is not lawful source of income for the purpose of satisfactorily explaining disproportionate assets. In R.S. Nayak v. A.R. Antulay [1986] 2 SCC 716, it was enunciated that under section 161 of IPC a present is taken by a public servant as a motive or reward for abuse of office but under section 165 of IPC, the question of motive or reward is wholly immaterial and acceptance of a valuable thing without consideration or with inadequate consideration from a person who has or is likely to have any business to be transacted is forbidden because though not taken as a motive or reward for showing any official favour, it is likely to influence the public servant to show official favour to the person giving such valuable thing. While observing that the ambit of Section 165 is wider than that of sections 161, 162 and 163 of the IPC and is intended to cover cases of corruption which do not come within the sweep of the latter provisions, it was emphatically proclaimed that if public servants are allowed to accept presents when they are prohibited in law, they would easily circumvent the prohibition by accepting the bribe in the shape of a present. It was underscored that the provisions under sections 161 and 165 IPC as well as the section 5 of the Prevention of Corruption Act, 1947 were intended to keep the public servant free from corruption and thus ultimately to ensure purity in public life.

• (Paras 175, 176, 179, 180, 183, 184, 198, 200, 202, 214, 215 of SC Judgment)

Source : taxmann