Facts

A search was conducted on the Birla and Sahara Groups of Companies and incriminating materials in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. were found. On  the basis of  this material  the income was assessed was made. The assessees approached the Settlement Commission. Settlement Commission passed an order observing that the scrutiny  of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have      no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not  admissible evidence. It  further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, and non-genuine.     It held as well that the PCIT/DR have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. The Settlement Commission has recorded a finding that transactions noted in the documents were not genuine and thus has not attached any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts.

A writ petition was filed by the Common Cause (A registered Society) and others for issuance of appropriate writ for directing to make investigation in the case of high public functionaries on basis of incriminating materials in form of random sheets and loose papers,computer prints, hard disk, pen drives etc.

Issue

Question arises as to whether a case was made out on the basis of above materials, to constitute Special Investigation Team (SIT) and direct investigation against the various functionaries/officers and further monitor the same?

Views

In the case of State of Haryana v. Bhajan Lal 1992 Supp (1) SCC 335, this Court has laid down principles in regard to quashing the F.I.R. The Court can quash FIR also if situation warrant even before investigation takes place in certain circumstances.

Held

Dismissing the petition the Court held that, the entries in  loose papers/sheets  are irrelevant and  inadmissible as  evidence. Such loose papers are  not  “books  of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries   to prove that they are in accordance with facts. Finding of Settlement Commission disregarding such evidence as inadmissible and unreliable. The materials in question were not good enough to constitute offences to direct the registration of     a first information  report  and investigation therein.  (WP No. 505 of 2015  / IA Nos. 3 & 4 of 2017 dt. 11-01-2017)

Editorial : Followed, CB I. v. V. C. Shukla (1998)3 SCC 410. Ratio is very relevant while dealing with matters relating to Search and seizure, Survey where loose sheets or dumb documents are found or impounded.

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– Mahatma Gandhi