A Two-Judge Bench of the Supreme Court held that the proceedings under the Income Tax Act and its evidentiary value remains a matter of trial and they cannot be considered as conclusive proof for discharge of an accused person, dismissing the appeal filed by the accused in a Disproportionate Assets case. The appellant Puneet Sabharwal contended that the High Court erred in holding that merely because for a large part of the period of investigation, the appellant was a minor, it would not be by itself a reason to disregard the fact that for at least seven years of the investigation period he was a major.

It was further added that the courts below erred in, without more, endorsing the allegations against the appellant(s) solely on account of being named as a beneficiary in  the trust deed of M/s Morni Devi Brij Lal Trust.  It was also submitted that since out of the twenty years of the check period except 7 years of the said period the appellant Puneet Sabharwal was a minor, it belied logic as to how the said appellant could have conspired with his father. That the High Court erred in not taking into account the exoneration of the appellant’s father by the Income Tax Appellate Tribunal; that the Income Tax Appellate Tribunal, by its order of 31.08.2007, rendered a categorical finding that the father did not hold the properties of the said trust as benami and even the limited issue on which the Income Tax Appellate Tribunal remanded the matter, by the order of 30.12.2009, the assessment officer found the deposits to be income of the son.

The 2nd appellant also argued substantially on the basis of the Income Tax Appellate Tribunal order that the order of Income Tax Appellate Tribunal categorically held that income arising from properties of various entities were wrongly added to the income of the appellant. The appellant was not the owner of those entities and consequently the properties and money held by those entities could not be held to be under the ownership of the appellant R.C. Sabharwal. It was added that, the reassessment for thirteen years was carried out on the complaint of CBI itself. The courts below misapplied the judgment of this Court in Selvi J. Jayalalitha and failed to notice the distinguishing feature, namely that, in the present case, it was not a case of reliance on income tax return but the returns which were subjected to an inquisition.

The High Court exercising power under Article 226, 227 of the Constitution of India and Section 482 of Cr.P.C. has power to look into material placed by the accused in arriving at its conclusion for discharge, the appellant contended. The probative value of the Orders of the Income Tax Authorities, including the Order of the Income Tax Appellate Tribunal and the subsequent Assessment Orders, are not conclusive proof which can be relied upon for discharge of the accused persons, the Apex Court Bench noted. It was thus observed that, “these orders, their findings, and their probative value, are a matter for a full-fledged trial. In view of the same, the High Court, in the present case, has rightly not discharged the appellants based on the Orders of the Income Tax Authorities.” Distinguishing the matter from other cited precedents, the Supreme Court Bench of Justices Vikram Nath and K V Viswanathan held that, “In the present case, the proceedings under the Income Tax Act which are sought to be relied upon relate to the assessment of income of the assessee and not to the source of income and the allegation of disproportionate assets under the Prevention of Corruption Act. The said Orders cannot be the basis to abort the criminal proceeding in the present case.”

It was also noted that, “Insofar as the submission that where there is exoneration in a civil adjudication, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue is concerned, the same is also without merit as far as the present case is concerned.” However it was also observed that, “The trial has been pending for nearly 25 years. We direct that the trial be expeditiously concluded and, in any case, on or before 31.12.2024.”