PR. COMMISSIONER OF INCOME TAX-1 vs. M/S EAST DELHI LEASING PVT. LTD.

Present appeal has been filed, inter alia, seeking the following prayers:- “a) To frame the substantial questions of Law mentioned in Para 2 of the appeal;

From the examination of the impugned judgement of the learnd ITAT, it is manifest that the reasoning contained therein to conclude that the notice under section 148 of the Act, issued under the erstwhile regime suffers from the vice of “reason to suspect” rather than “reason to believe” is predicated on the judgement of the Hon’ble Supreme Court in a criminal case. It would be apposite to extract the relevant paragraphs of the impugned order which read thus:

Shorn of details, the facts leading to the present appeal are as under:

We have heard Shri Sameer Shrivastava, learned counsel for the appellant-Raja Naykar and Shri Sumeer Sodhi, learned counsel for the respondent-State of Chhattisgarh.

Shri Sameer Shrivastava submitted that both the Trial Judge as well as the High Court have grossly erred in convicting the appellant. It is submitted that there is no evidence at all which establishes the guilt of the appellant beyond reasonable doubt. It is submitted that the finding of guilt of the appellant as recorded by the Trial Judge is based on conjectures and surmises and, therefore, not sustainable in law. Learned counsel further submitted that, from the evidence of the father and brother of the deceased, it would reveal that the dead body of the deceased has not been identified and the prosecution has failed to prove that the dead body found in the garbage was that of Shiva.

On the contrary, Shri Sumeer Sodhi submitted that both the Trial Judge and the High Court, upon correct appreciation of evidence, have found the accused-appellant guilty of the charges levelled against him. It is submitted that, as per the FSL report, human blood was present on the dagger which was recovered at the instance of the present appellant. It is further submitted that the recoveries made on the basis of the Memorandum under Section 27 of the Indian Evidence Act, 1872 (hereinafter referred to as “the Evidence Act”) would establish the guilt of the accused appellant beyond reasonable doubt. He, therefore, submits that no interference would be warranted with the impugned judgment in the facts and circumstances of the present case.

With the assistance of the learned counsel for the parties, we have Digitally Signed By:VINOD KUMAR Signing Date:17.03.2025 12:26:40 Signature Not Verified

Undoubtedly, the prosecution case rests on circumstantial evidence. The law with regard to conviction on the basis of circumstantial evidence has very well been crystalized in the judgment of this Court in the case of Sharad Birdhichand Sarda vs. State of Maharashtra, wherein this Court held thus: “152. Before discussing the cases relied upon by the High Court we would like to cite a few decisions on the nature, character and essential proof required in a criminal case which rests on circumstantial evidence alone. The most fundamental and basic decision of this Court is Hanumant v. State of Madhya Pradesh [(1952) 2 SCC 71 : AIR 1952 SC 343 : 1952 SCR 1091 : 1953 Cri LJ 129] . This case has been uniformly followed and applied by this Court in a large number of later decisions up-to-date, for instance, the cases of Tufail (Alias) Simmi v. State of Uttar Pradesh [(1969) 3 SCC 198 : 1970 SCC (Cri) 55] and Ramgopal v. State of Maharashtra [(1972) 4 SCC 625 : AIR 1972 SC 656] . It may be useful to extract what Mahajan, J. has laid down in Hanumant case [(1952) 2 SCC 71 : AIR 1952 SC 343 : 1952 SCR 1091 : 1953 Cri LJ 129]: “It is well to remember that in cases where the evidence is of a circumstantial nature, the circumstances from which the conclusion of guilt is to be drawn should in the first instance be fully established, and all the facts so established should be consistent only with the hypothesis of the guilt of the accused. Again, the circumstances should be of a conclusive nature and tendency and they should be such as to exclude every hypothesis but the one proposed to be proved. In other words, there must be a chain of evidence so far complete as not to leave any reasonable ground for a conclusion consistent with the innocence of the accused and it must be such as to show that within all human probability the act must have been done by the accused.”

A close analysis of this decision would show that the following conditions must be fulfilled before a case against an accused can be said to be fully established:

These five golden principles, if we may say so, constitute the panchsheel of the proof of a case based on circumstantial evidence. 8. It can thus clearly be seen that it is necessary for the prosecution that the circumstances from which the conclusion of the guilt is to be drawn should be fully established. The Court holds that it is a primary principle that the accused „must be‟ and not merely „may be‟ proved guilty before a court can convict the accused. It has been held that there is not only a grammatical but a legal distinction between „may be proved‟ and „must be or should be proved‟. It has been held that the facts so established should be consistent only with the guilt of the accused, that is to say, they should not be explainable on any other hypothesis except that the accused is guilty. It has further been held that the circumstances should be such that they exclude every possible hypothesis except the one to be proved. It has been held that there must be a chain of evidence so complete as not to leave any reasonable ground for the conclusion consistent with the innocence of the accused and must show that in all human probabilities the act must have been done by the accused.

It is settled law that the suspicion, however strong it may be, cannot take the place of proof beyond reasonable doubt. An accused cannot be convicted on the ground of suspicion, no matter how Digitally Signed By:VINOD KUMAR Signing Date:17.03.2025 12:26:40 Signature Not Verified

In the light of these guiding principles, we will have to examine the present case.

On a perusal of the judgment of the Trial Judge as well of the High Court, it would reveal that the main circumstance on which the High Court and the Trial Judge found the appellant guilty of the crime is the recovery of various articles at his instance. They have further found that the pieces of blanket recovered from the place of incident and the place where the dead body was subsequently taken for being burnt, were found to be identical/similar. The High Court has observed that specific questions were put to the appellant in his examination under Section 313 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “Cr.P.C.”) regarding recovery of various articles at his instance and also regarding the FSL report, but he has failed to give an explanation with regard thereto.

The motive attributed to the appellant by the prosecution is that the appellant was under an impression that the deceased Shiva had caused the murder of his elder brother Mohan. It is the prosecution case that, on the date of the offence, deceased Shiva was working in a hotel owned by the sister-in-law of the appellant. The appellant gave money to the deceased to buy liquor. They both had consumed liquor. After having dinner, his sister-in-law, her daughter along with the baby went to bed in the middle-room of the house. He slept on the cot. He asked Shiva to sleep on the spread bed on the floor. It is the prosecution case that, at about 10.30 p.m., the appellant gave several blows to Shiva with a dagger. Thereafter, he wrapped the dead body of Shiva in a blanket and a homemade mattress and called his friend Chandan Sao. Thereafter, they broke the lock of the rickshaw parked near Chawni Chowk and took the rickshaw to the house from Chawni Chowk for disposing off the dead body. Thereafter, the appellant along with other accused persons lifted the dead body of the deceased and placed the same on the rickshaw. The rickshaw was then taken to the garbage dumping ground where he threw the dead body. Thereafter, he concealed the dagger in the garbage scattered inside the boundary wall. Following which, he again went to the place where he had thrown the dead body and burnt the clothes wrapped around the dead body and came back to his sister-in law’s house.

The aforesaid story is narrated in the Memorandum of the appellant under Section 27 of the Evidence Act. However, as held by the Privy Council in the locus classicus case of Pulukuri Kotayya and others v. King-Emperor2, only such statement which leads to recovery of incriminating material from a place solely and exclusively within the knowledge of the maker thereof would be admissible in evidence. Digitally Signed By:VINOD KUMAR Signing Date:17.03.2025 12:26:40 Signature Not Verified

Undisputedly, the dead body was found much prior to the recording of the Memorandum of the appellant under Section 27 of the Evidence Act. Therefore, only that part of the statement which leads to recovery of the dagger and the rickshaw would be relevant. 15. The Property Seizure Memo would show that the dagger was seized from a place accessible to one and all. According to the prosecution, the incident took place on 21st October, 2009 and the recovery was made on 25th October, 2009.

As per the FSL report, the blood stains found on the dagger were of human blood. However, the FSL report does not show that the blood found on the dagger was of the blood group of the deceased. Apart from that, even the serological report is not available.

Insofar as the recovery of rickshaw is concerned, it is again from an open place accessible to one and all. It is difficult to believe that the owner of the rickshaw would remain silent when his rickshaw was missing for 3-4 days. As such, the said recovery would also not be relevant.

Another circumstance relied on by the Trial Judge is with regard to recovery of blood-stained clothes on a Memorandum of the appellant. The said clothes were recovered from the house of the appellant‟s sister-in-law. The alleged incident is of 21st October 2009, whereas the recovery was made on 25th October, 2009. It is difficult to believe that a person committing the crime would keep the clothes in the house of his sister-in-law for four days.

It can thus be seen that, the only circumstance that may be of some assistance to the prosecution case is the recovery of dagger at the instance of the present appellant. However, as already stated hereinabove, the said recovery is also from an open place accessible to one and all. In any case, the blood found on the dagger does not match with the blood group of the deceased. In the case of Mustkeem alias Sirajudeen v. State of Rajasthan, this Court held that sole circumstance of recovery of blood-stained weapon cannot form the basis of conviction unless the same was connected with the murder of the deceased by the accused. Thus, we find that only on the basis of sole circumstance of recovery of blood-stained weapon, it cannot be said that the prosecution has discharged its burden of proving the case beyond reasonable doubt.

As already discussed hereinabove, merely on the basis of suspicion, conviction would not be tenable. It is the duty of the prosecution to prove beyond all reasonable doubt that it is only the accused and the accused alone who has committed the crime. We find that the prosecution has utterly failed to do so.

Insofar as the finding of the High Court that the appellant has failed to give any explanation in his statement under Section 313 Cr. P.C. is concerned, we find that the High Court has failed to appreciate the basic principle that it is only after the prosecution discharges its duty of proving the case beyond all reasonable doubt that the false explanation or non-explanation of the accused could be taken into consideration. In any case, as held by this Court in the case of Sharad Birdhichand Sarda (supra), in a case based on circumstantial evidence, the nonexplanation or false explanation of the accused under Section 313 Cr.P.C. cannot be used as an additional link to complete the chain of circumstances. It can only be used to fortify the conclusion of guilt already arrived at on the basis of other proven circumstances.

In the result, the appeal is allowed. The impugned judgment and order dated 22nd July, 2015, passed by the Division Bench of the High Court of Chhattisgarh, Bilaspur in CRA No. 223 of 2012 is quashed and set aside. The appellant is directed to be released forthwith, if not required in any other case. (Emphasis supplied by us hereinabove) 7. In our considered opinion, the principles enunciated in the aforesaid decision by Hon’ble Supreme Court would be squarely applicable to the facts of the instant case before us. The ld. AO while recording the reasons had merely suspected that the movement of funds (both inflow and outflow) in assessee’s bank account constitutes income of the assessee. This suspicion was however triggered based on the STR received by the ld. AO. At the cost of repetition, we would like to mention the fact that the assessee is engaged in the business of financing and leasing where obviously there would be huge movement of funds (both inflow and outflow) in the bank account of the assessee. Moreover, all these funds were received from the related entities and invested with the related entities in the regular business of financing and leasing. There is absolutely no income element involved therein. There is no presumption u/s 68 of the Act for the movement of funds between entities to be automatically construed as yielding income. Further the investigation wing had only suggested enquiry to be made with regard to the rotation of funds. This may lead the ld. AO to entertain ‘reason to suspect’ and not ‘reason to believe’ that income of the assesee had escaped assessment. Reliance in this regard is placed on the decision of Hon’ble Jharkhand High Court in the case of PCIT vs Maheswari Devi reported in 455 ITR 755 (Jharkhand). This information also cannot be construed as a tangible material available with the ld. AO which would enable him to form a reasonable belief that income of the assessee had escaped assessment warranting reopening u/s 147 of the Act, moreso , when the investigation wing never even complained of the escapement of income of the assessee.”