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PETITIONER: K.T.M.S. MOHD. AND ANR.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT28/04/1992

BENCH: PANDIAN, S.R. (J) BENCH: PANDIAN, S.R. (J) FATHIMA BEEVI, M. (J)

CITATION:  1992 AIR 1831            1992 SCR  (2) 879  1992 SCC  (3) 178        JT 1992 (3)   129  1992 SCALE  (1)1006

ACT: Indian Penal Code, 1860 : S.  193-perjury-Prosecution for-Inculpatory statement  given to  officer  of Enforcement department under  s.39  of  FERA subsequently   retracted  stating  it  as  involuntary   and obtained  by  inducement  and  threat-Allegation  of   false statement  given  later to I.T.O.-Prosecuting  authority  to apply  its  mind  as to whether  inculpatory  statement  was voluntary  and,  not obtained by inducement and  threat  and whether  it was given  in a judicial  proceeding-Prosecution to be taken only if expedient in the interest of justice.      S.120-B-Conspiracy-Can  be  inferred  from  direct   or circumstantial  evidence-Agreement between conspirators  need not be directly proved.      Foreign Exchange Regulation Act,1973 :      Ss.39,   40-‘Judicial  Proceeding’-Statement  must   be recorded by a Gazetted Officer to bring it within the  ambit of ‘judicial proceeding’.      Nature of proceedings-Quasi criminal-Statements falling within  the  ambit of ‘judicial proceeding’ to  be  examined only  quo the provisions of the FERA and not with  reference to I.T.Act.      Evidence Act, 1872      S.24-Statement  recorded by Enforcement  Officer  under FERA  in exercise of power as a  Custom  Officer-Evidentiary value  of-Whether  bar  to  admissibility  would  apply   it statement is obtained by inducement and threat.      Income Tax Act, 1961      S.277-False statement in verification-Assessee found in possession of a large sum of money-Inculpatory statement  to officer  of Enforcement Directorate Subsequently  retracted- Statement  to  I.T.O.  in  assessment  proceedings   denying connection with money seized-Prosecution for giving                                                        880 false statement-Decision of Income Tax Appellate Tribunal in assessment proceeding exonerating assessee and holding  that money  did  not belong to him and s.69 had  no  application- Whether can be considered while deciding criminal liability.      Code of Criminal Procedure, 1973      Ss.  195,  340-Criminal proceedings  for  giving  false evidence  in assessment proceeding-Courts to take  care  and caution  before  taking action  against  deponent-Result  of proceedings under I.T.Act to be given due regard.

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    S.223-Misjoinder of charges and misjoinder of  parties- Accused   jointly  charged  of having  conspired  to  commit offence under I.T. Act.-Joint Trial-No specific  allegations or  acceptable  evidence to connect different  accused  with activities   of  each  other-Whether  amounted  to  a   mere irregularity or occasioned failure of justice.

HEADNOTE:      The  Enforcement   Directorate, Madras, on  receipt  of information   that  appellant-1  was  engaged   in   illegal disbursement of money, raided his premises on 19.10.1966 and recovered a sum of Rs. 4,28,713. On the same day appellant-1 and  his  brother-in-law appellant-2  were  interrogated  by Enforcement Officers. Appellant-1 in his  statement Ext.  P. 39  admitted  that he received a sum of Rs. 6  lakh  from  a person of Bombay on the previous day for being disbursed  to various parties; that Rs. 48,000 were paid to accused No.  5 and  Rs. 50,000 to another person; and that the amount  were disbursed  in  compliance  of  instructions  received   from abroad. Appellant-2 in his statement Ext. P.40 admitted  the receipt of the amount by appellant-1 and disbursement of the sum  in compliance of his instructions. Accused No. 5,  when examined,  admitted  the  receipt of Rs.  49,000  for  being disbursed  as  per the details given in  certain  sheets  of paper available with him.      On 20.10.1966 both the appellants sent their retraction to  the deputy Director of Enforcement  Directorate  through their  Advocate stating that their statements Ext. P.39  and P.40 were not voluntary but obtained under threat and  force and were bereft of truth.      The Income-Tax officer, on coming to know of the  raid, issued  summons  to  appellant-1 who  was  an  assessee  and recorded  his statement (Ext.P.3) on  16.11.1966.Appellant-1 denied of having any connection with                                                        881 the  cash  of Rs. 4,28,780 recovered from his  premises  and reiterated that the statement by the Enforcement Officer was taken under force. Appellant-2 also gave a similar statement Ext.  P. 73 on 11.1.1974. Accused No. 5 also denied to  have received any money.      Meanwhile  the appellant in Criminal appeal No. 632  of 1990  (third appellant) who was related to appellants 1  and 2,  sent  a letter (Ext. P.41) to  the  Enforcement  officer claiming the money seized as belonging to him and explaining that  he  was  negotiating  with  some  film  producers  for financing film production and the seized amount included the sale  proceeds of his mother’s jewels as also  his  father’s money   and,  therefore,  the  same  be  returned  to   him. Proceedings under the Income-Tax Act were initiated  against him  also.  he submitted his return of income for  the  year 1967-68 showing the business income as Rs.4,000 and a sum of Rs.2,79,000 representing the cost of jewels belonging to his mother (accused No. 4). His claim was, however, rejected.      The Income-tax Officer treated the sum of Rs. 6 lakh as the  income  of  appellant-1 from  undisclosed  sources  and assessed him accordingly.      A  complaint against the three appellants  and  accused Nos. 4 and 5 was filed alleging that they conspired to  give false statements in the proceedings under the Income-tax Act and  to  fabricate  false evidence  and   thereby  committed offences  punishable  under s. 120-B read with s.  193  IPC, under  s. 120-B IPC read with s. 277 of the Income  Tax  Act and  under  s.193 (simplicitor) of Indian Penal  Code.   The

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appellants  1 and 3 were also indicted under s. 277  of  the Income Tax Act.      Appellant-1  challenged  the assessment order  and  the matter  twice went before the Income-tax Appellate  Tribunal which  in  both  the  rounds of  litigation  held  that  the department  had  failed to show that the  assessee  was  the owner  of  the money, and that the evidence  only  indicated that the assessee had been engaged for disbursing the  money belonging  to  a third party.  It set aside  the  assessment order  and  ultimately  decided  the  matter  in  favour  of appellant-1.      In the meantime the proceedings initiated on the  basis of  the  Criminal Complaint, led to the trial of  the  three appellants  and accused No.5. Accused No. 4 had died  during the  proceedings.  The  Trial  Court  convicted  the   three appellants of the offences levelled against them and                                                        882 sentenced  each  of them to undergo  imprisonment  till  the rising  of the Court for each of the offences and to  pay  a total  fine of Rs. 2,000, Rs.600 and Rs. 1,500  respectively holding  that  they  had been  detained  under  COFEPOSA  in respect of the amount seized and had undergone the ordeal of enquiries and trial for a considerable length of time.   It, however, acquitted accused No. 5.      The first appellate court and the High Court upheld the judgment of the trial Court.      In the appeals to this Court it was contended on behalf of the appellants that (1) the evidence adduced in the  case did  not constitute the requisite ingredients to make out  a case  punishable under the charge levelled against  all  the three  appellants; (2) the statements of appellants 1 and  2 Exts.  P. 39 and P.40 recorded by the  Enforcement  Officers cannot  be  said  to  have  been  recorded  in  a   judicial proceeding as contemplated by s.40, but fell only within the meaning  of  s.39 of FERA and therefore could not  form  the basis  for  initiating a criminal case of perjury;  (3)  the statements  Ext.  P. 39 and P. 40 being recorded  under  the FERA could not be made use of for prosecuting the  deponents of those statements in a separate and independent proceeding under  the  Income-Tax  Act; (4) in  view  of  the  specific findings  of  the  Income-Tax Appellate  Tribunal  that  the appellant- 1/assessee was not the owner of the money  seized and Section 69-A of the Income-Tax Act had no application to the facts of the case, appellants 1 and 2 could not be  held liable  under s.193 IPC and under s. 277 of  the  Income-Tax Act: (6) the evidence available on record was not sufficient to  put  the  third appellant in a joint  trial  along  with appellants  1 and 2 under the conspiracy charges as well  as for recording the conviction under sections 193 IPC and  277 I.T.  Act especially when the third  appellant  consistently took  an uniform stand and when it was not the case  of  the Department that the amount seized was taxable amount in  the hands of the third appellant.      Allowing  the appeals and setting aside the  conviction and sentence of the appellants, this court,      HELD: 1.1. The convictions recorded by the courts below under  Section 120-B read with Section 193 IPC  and  Section 193  IPC (simplicitor) as against the appellants  cannot  be sustained. [p. 902 F-G]                                                        883      1.2.  The complainant has stepped into the shoe of  the Enforcement Directorate, and assumed the authority under the FERA and levelled a charge stating that the appellants 1 and 2  by sending the letter of retraction on  20.10.66  denying their earlier statements dated 19.10.66 have made themselves

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liable  to be convicted under Section 193 IPC.  [pp.902  GH, 903A]      1.3.  The trial court committed an error in not   only covicting  appellants  1  and 2 for sending  the  letter  of retraction  dated 20.10.66 but also holding appellant-3  and accused  Nos. 4 and 5 as being parties to a  conspiracy  for causing   a  letter  dated  20.10.66  to  be  sent  to   the Enforcement Directorate. [p. 903 AB]      1.4.  Since  the High Court, without adverting  to  the important  intricated questions of law involved in the  case and examining them in the proper perspective has disposed of the  revisions  in a summary manner, its orders  warrant  an interference. [p. 909 DE]      2.1. Necessary care and caution are to be taken  before initiating  a  criminal proceeding for perjury  against  the deponent of contradictory statements in judicial proceeding. [p. 901 B-C]      K.  Karunakaran  v. T.V. Eachara Warrier  and  Another, [1978] 1 SCC 18, referred to.      2.2.   The   mere  fact  that  a  deponent   has   made contradictory  statements  at  two  different  stages  in  a judicial  proceeding is not by itself always  sufficient  to justify a prosecution for perjury under section 193 IPC  but it  must be established that the deponent has  intentionally given  a  false  statement in any  stage  of  the  ‘judicial proceeding’ or fabricated false evidence for the purpose  of being  used  in any stage of the judicial  proceeding.   And such a prosecution for perjury should be taken only if it is expedient in the interest of justice. [p. 901 CD]      3.1.  Every investigation or proceeding under s. 40  of FERA  is  deemed  to be a judicial  proceeding  by  a  legal fiction   embodied  in  its  sub-section  (4)   though   the proceedings  are  neither in nor before any  Court  at  that stage.  But there is no such deeming provision under s.39 of FERA bringing every investigation or proceeding in its ambit as :a judicial proceeding" within the meaning of Ss. 193 and 228 of the Indian Penal Code.                                                 [p. 896 F-H]                                                        884      3.2. The exercise of the power under section 40 of FERA to  summon  persons to give evidence and  produce  documents must  satisfy  the condition that the officer  acting  under that  section  should be a gazetted officer  of  Enforcement because  every person summoned by such an officer to make  a statement under Section 40(1) is under a compulsion to state the truth on the pain of facing prosecution. [p. 896 AB]      Pushpdevi M. Jatia v. M.L. Wadhawan, [1987] 3 SCC  367, referred to.      3.3. The statements Exts. P.39 and P. 40 were  recorded only  in exercise of the powers under s. 39 of the FERA  and the  prosecution has not established that  those  statements were  recorded  by any gazetted officer of  the  Enforcement under  the  provisions of s. 40 of the  FERA  bringing  them within  the meaning of ‘judicial, proceeding’ so as to  make use  of them as the basis for fastening the makers of  those statements with the criminality of the offences under s. 193 and/or s. 228, IPC on the ground that the deponents of those statements have retracted from their earlier statements in a subsequent  proceeding  which is deemed to  be  ‘a  judicial proceeding’. [pp. 901 E-F; 897 A]      3.4.  Even  if statements Exts. P. 39 and  P.  40  fall within  the  mischief of section 40 of the  FERA,  there  is absolutely  nothing  on  record  to  show  that  either  the sanctioning  authority or the prosecuting authority  applied its  mind even subjectively and found that the appellants  1

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and 2 gave their earlier inculpatory statements  voluntarily but  not under any inducement, coercion, threat or  promise; that the deponents have intentionally gave a false statement before  the I.T.O. at the subsequent stage within the  ambit of  s. 193 IPC and that it was expedient in the interest  of justice  to initiate the criminal proceedings  for  perjury. [p. 901 FG]      4. The proceedings under the FERA are quasi-criminal in character.  It  is  pellucid  that  the  ambit,  scope   and intendment  of  these two Acts are  entirely  different  and dissimilar.   Therefore,  the significance  of  a  statement recorded   under   the  provisions  of   FERA   during   the investigation  or  proceeding under the said Act  so  as  to bring them within the meaning of judicial proceeding must be examined  only quo the provisions of the FERA but  not  with reference  to the provisions of any other alien Act or  Acts such as  I.T. Act. [p. 898 BC]      Subba Rao v. I.T. Commr., AIR 1956 SC 604 = [1956]  SCR 577; M/s                                                        885 Pannalal Binjraj v. Union of India, AIR 1957 SC 397 = [1957] SCR   233  and  Shanti  Prasad  Jain  v.  The  Director   of Enforcement, [1963] 2 SCR 297, referred to.      5.1. Even if the officers of the Enforcement intend  to take action against the deponent of a statement on the basis of  his  inculpatory statement which has  been  subsequently repudiated,  the  officer  concerned  must  take  both   the statements together, give a finding about the nature of  the repudiation  and then act upon the earlier  inculpatory  one. But  to  bisect  the  two statements and  make  use  of  the inculpatory  statement alone by passing the other cannot  be legally  permissible because admissibility, reliability  and the evidentiary value of the inculpatory statement depend on the bench mark of the provisions of the Evidence Act and the general criminal law. [898 F-G]      5.2. The voluntary nature of any statement either  made before   the   Customs  Authorities  or  the   officers   of Enforcement under the relevant provisions of the  respective Acts  is a sine quo non to act on it for any purpose and  if the   statement  appears  to  have  been  obtained  by   any inducement, threat, coercion or by any improper means,  that statement  must  be rejected brevi  manu.   However,  merely because  a statement is retracted, it cannot be recorded  as involuntary or unlawfully obtained.  It is for the maker  of the  statement who alleges inducement, threat, promise  etc. to establish that such improper means has been adopted.  But if  the  maker  of  the statement  fails  to  establish  his allegations  of inducement, threat etc. against the  officer who  recorded the statement, the authority while  acting  on the  inculpatory  statement of the maker is  not  completely relieved  of  his  obligations  in  at  least   subjectively applying its mind to the subsequent retraction to hold  that the inculpatory statement was not extorted. [p. 899 D-G]      Vallabhdas Liladhar v. Asstt. Collector of Customs, AIR 1965  SC 481 = [1965] 3 SCR 854 and P. Rustomji v. State  of Maharashtra,  AIR 1971 SC [1087] = [1971] SCR  (Suppl.)  35, referred to.      5.3.  The authority or any Court intending to act  upon the  inculpatory statement as a voluntary one  should  apply its  mind to the retraction and reject the same in  writing. [p. 899 GH]      Roshan  Beevi v. Joint Secretary to the Govt. of  Tamil Nadu, Public                                                        886 Deptt. etc., (1983) Law Weekly (Crl.) 289=(1984) 15 ELT 289,

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referred to.      5.4. The I.T.O. erred in  not taking into consideration the letter of retraction sent by both the appellants through their lawyer on 20.10.1966 alleging that "they were  coerced to  sign  statements by using bodily force  and  threatening with causing injuries to them and they signed the statements fearing danger to their life and body". [p. 902 DE]      6.1.  Though  a criminal court has to  judge  the  case before  it independently on the materials placed before  it, there is no legal bar in giving due regard to the result  of the  proceedings under I.T. Act, and it is one of the  major factors  to be considered and the resultant finding  in  the said  proceeding  will  have some bearing  in  deciding  the criminal prosecution in appropriate cases. [p. 905 C-F]      Uttam Chand v. I.T.O. (1982) 133 ITR 909, P Jayappan v. S.K. Perumal, [1985] 1 SCR 536, referred to.      6.2.  In view of the findings of the Tribunal that  the amount  of Rs. 6 lakh was not owned by the  first  appellant and  that s. 69(a) dealing with the unexplained  money  etc. has no application to the facts of the case, the  appellants cannot  be held to be liable for punishment under  s.  120-B IPC  read with s. 277 I.T. Act and s. 277  (simplicitor)  of the  I.T.  Act  as  the very basis  of  the  prosecution  is completely  nullified  by the order of the  Tribunal,  which fact can be given due regard in deciding the question of the criminal liability of appellants 1 and 2. [pp. 905 F-H;  906 A]      7.1. An agreement between the conspirators need not  be directly  proved,  and  the offence  of  conspiracy  can  be established by either direct or circumstantial evidence  and s.  193  will come to play only when the court is  satisfied that there is reasonable ground to believe that two or  more persons   have  conspired  to  commit  an  offence   or   an actionable wrong.                                                  [p. 907 AB]      Bhagwan  Swarup and Ors. v. State of  Maharashtra,  AIR 1965 SC 682 = [1964] 2 SCR 378, referred to.      7.2.  It  was not stated that the  individual  acts  of appellants 1 and 2 and that of the third appellant were  due to  any conspiracy among all the three.  On the other  hand, the  offence  said  to  have been  committed  by  the  third appellant is specifically attributed only to him. [p. 907 D]                                                        887      7.3.  Appellants 1 and 2 did not state that the  amount seized  belonged to the third appellant nor can it  be  said that  they  knew  that  the  third  appellant  intentionally fabricated  false evidence or wilfully made a  false  return before  the  Income-Tax  Officer.  The  evidence  direct  or circumstantial  is very much lacking to bring all the  three appellants  and  other  two  accused  under  the  charge  of conspiracy. [pp. 907 GH; 908 AB]      8.  The  third appellant could not be put  on  a  joint trial  along  with appellants 1 and 2 and others  under  the charge  of conspiracy, and his conviction under this  charge has to fail. Besides, in his case no question of evading the tax  would  arise.  The Department itself  stated  that  the money recovered did not belong to him.  [pp. 908 C; GH;  909 A]      9.1.  Even  assuming  that  the  third  appellant  made himself liable to be punished under s. 193 IPC and s. 277 of Income-Tax  Act (simplicitor), inasmuch as he was put  in  a joint  trial with appellants 1 and 2 for conspiracy  of  the said offences without any specific allegation or  acceptable evidence to connect him with the activities of appellants  1 and 2, there is a clear misjoinder of charges which includes

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misjoinder of parties also.                                                  [p. 909 AB]      9.2.  In the facts and circumstances of the  case,  the misjoinder   of  charges  cannot  be  said  to  be  a   mere irregularity.   A  failure  of  justice  has  in  fact  been occasioned  since all the courts below have clubbed all  the allegations  levelled against all the three  appellants  and two  other  accused  together as if all  the  offences  were committed in the course of the same transaction pursuant  to a  conspiracy which is neither supported by the  allegations in  the complaint nor by any evidence as required under  the law.   Hence, the conviction under s. 193 IPC and s. 277  of Income-tax Act (simplicitor) have also to be set aside.  [p. 909 BD]

JUDGMENT:      CRIMINAL  APPELLATE JURISDICTION : Criminal appeal  No. 631 of 1990.      From  the  Judgment and Order dated  12.7.1984  of  the Madras High Court in Criminal Revision Case No. 229 of 1981.                     WITH      Criminal Appeal No. 632 of 1990      C.V. Vaidyanathan and A.T.M. Sampath for the Appellant.                                                        888      K.T.S.  Tulsi, Addl. Solicitor General (NP)  and  Ashok Bhan for the Respondent.      The Judgment of the Court was delivered by      S. RATNAVEL PANDIAN, J. The Criminal Appeal No.  631/90 is  Directed by the two appellants namely,  K.T.S.  Mohammed and  M.  Jamal Mohammed and Criminal Appeal  No.  632/90  is directed  by Amanullah Quareshi.  All the  three  appellants are challenging the correctness of the common order made  by the  High  Court of Madras in Criminal  Revision  Case  Nos. 229/81 and 239/81 respectively dismissing the revisions  and confirming  the judgment of the lower Appellante Court  made in  Cr. A. Nos. 221 and 222 of 1980 which in  turn  affirmed the  judgment of the trial Court convicting  and  sentencing the appellants under the provisions of the Indian Penal Code and the Income-tax Act (hereinafter referred to as ‘the I.T. Act’).      The facts leading to the prosecution case are well  set out in the judgments of the Courts below.  Nevertheless,  we think it necessary to recapitulate the basic matrix,  though not  in  details,  in order to enable us  to  give  our  own reasons for the findings which we will be arriving at.      The  first appellant who is the brother-in-law  of  the second appellant received a cash of Rs. 6 lakhs, brought  by a  person  from Bombay for distributing the said  amount  to various  persons  as per the instructions  received  from  a person  at  Singapore.   While he was engaged  in  the  said illegal  transaction,  the Enforcement  Directorate,  Madras raided his  premises at No. 34, Appu Maistry Street, Madras- 1  on  19.10.66  and recovered a sum  of  Rs.  4,28,713  and certain   documents  in  coded  language  relating  to   the disbursement  of  the  cash.  After the  search,  the  first appellant   K.T.M.D.  Mohammed  was  interrogated  by   Shri Amritalingam,  Enforcement Officer of Madras (PW 4) and  the second  appellant, Jamal Mohammed was interrogated  by  Shri Pancheksharan,  Enforcement  Officer on 19.10.66  and  their statements  were  recorded under Exhs. P 39 and P  40.   The first  appellant  under  Exh.  P 39  has  admitted  that  he received a sum of Rs. 6 lakhs from a person of Bombay on the previous  day  for being disbursed to various  parties,  and

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that  Rs.  50,000 and Rs. 48,000 were paid to  one  Baskaran alias Kannan and Angappan of Sarathy & Co. respectively  and the  amounts were disbursed on receipt of instructions  from one  Gopal of Singapore whose full address he did not  know. The second appellant in                                                        889 his  statement  Exh. P 40 has admitted the  receipt  of  the amount  by the first appellant and the disbursement  of  Rs. 50,000 to Bhaskaran and Rs. 40,000 to Angappan as instructed by  the  first appellant in compliance of  the  instructions received from Singapore.      The Enforcement Officers conducted a further search  at the  premises  of  Sarathy and Co., and  discovered  a  cash amount  of Rs. 48,100 and three bank drafts.  Angappan  when examined  admitted  the  receipt of  Rs.  49,000  for  being disbursed  as  per the details given in  certain  sheets  of paper available with him.      On 20.10.66, both the appellants sent their  retraction to  the Deputy Director of Enforcement  Directorate  through their Advocate stating that  their statements recorded under Exhs.  P  39  and  P  40  on  19.10.66  were  not  voluntary statements but obtained under threat and force and the facts stated therein were not correct.      While it was so, the Income-tax Officer, Karaikudi  (PW 1)  on coming to know about the raid, issued summons to  the first  appellant  who  was  then  an  assessee  within   his jurisdiction  and recorded a statement Exh. P 3 from him  on 16.11.66.    The  first  appellant  denied  of  having   any connection  with the cash of Rs. 4,28,718 said to have  been recovered   from  his  premises  and  reiterated  that   the statement  by  the Enforcement Officers was taken  from  him under  force.   The  second appellant also  gave  a  similar statement  under  Exh.  P 73 on 11.1.74  before  PW  8  when examined  after  eight  years.  The  appellant  in  Criminal Appeal  No.  632/90, namely, Amanullah who  was  arrayed  as accused  No. 3 (hereinafter referred as  ‘third  appellant’) sent  a  letter  under  Exh.  P  41  dated  4.11.66  to  the Enforcement Officers claiming the money seized as  belonging to him and explaining that he was negotiating with some film producers  for  financing  film production  and  the  seized amount  included  a  sum  of Rs.  2,79,000  being  the  sale proceeds  of  his mother’s jewels and Rs. 70,000  being  his father’s  money  and  therefore the said  amount  should  be returned  to  him.  Thereafter, the third appellant  gave  a statement  before  the  Enforcement  Officers  on   22.12.66 reiterating what he has stated in his letter dated 4.11.66.      In  view  of the subsequent  developments,  proceedings were  initiated  against  the  third  appellant  under   the provisions  of the I.T. Act. The third  appellant  submitted his return of income for the years 1967-68 to the Income-tax Officer accompanied by statements showing the business in-                                                        890 come  at  Rs.  4,000  and that a sum  of  Rs.  2,79,000  was realised  by him by sale of rubies and jewels  belonging  to his mother, Smt. A.M. Safia who was arrayed as accused No. 4 in  the  complaint.  PW 8 on enquiry found  that  the  third appellant was not in affluent position and as such he  could not  have accumulated such huge sum and that  his  statement about the sale of the family jewels was false.      After  rejecting  the  claim of  third  appellant,  the amount  of  Rs. 6 lakhs said to have been  received  by  the first appellant has been treated as the income of the  first appellant  from  some  undisclosed  sources  and  the  first appellant was assessed under the relevant provisions of  the I.T.  Act. According to the complainant, all the  appellants

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have conspired together to give false evidence at all stages of the proceedings under the I.T. Act and to fabricate false evidence intending that the same might cause the  Income-tax Officer  to  arrive  at an erroneous  opinion  touching  the nature  and  source  of the sum of  Rs.  4,28,713  which  is alleged to have been recovered from the first appellant  and that all the appellants thereby have committed the  offences punishable under Section 120-B IPC  read with Sec. 193  IPC, under  Section 120-B read with Section 277 of the  I.T.  Act and  under Section 193 (simplicitor) of Indian Code  and  in addition the appellants 1 and 3 were indicted under  Section 277 (simplicitor) of the Act.      On  the  above  allegations,  the  Income-tax  Officer, Central  Circle,  XIV, Madras filed the  criminal  complaint before the Chief Judicial Magistrate, Egmore in C.C. No. 356 of  1977  on his file which proceedings have  culminated  to these appeals.      Be  that  as  it may, we would like  to  refer  certain proceedings before the Income-tax Authorities which are very much relevant for the disposal of these appeals.      The Income-tax Officer on the basis of the statement of the first appellant given before the Enforcement Authorities found  that  the amount or Rs. 6 lakhs was the  income  from other sources of the assessee (the first appellant) and that the  explanation  given  by him  was  not  satisfactory  and included  that amount in his taxable income.  The  Appellate Assistant  Commissioner agreed with the ITO but the  Income- tax  Appellate  Tribunal held that the  department  had  not brought any material to show that the assessee was the owner of the money in question and that the evidence only                                                        891 indicated that the assessee had been engaged for  disbursing the  money  not belonging to him but belonging  to  a  third party.   On  the above finding, the Tribunal set  aside  the assessment  order and referred the case back to the  ITO  to make  a fresh assessment.  But the ITO again made  the  same type of assessment.  The first appellant took his  statutory appeals  under  the  Act  and  ultimately  went  before  the Tribunal  once  again  which by its  order  dated  12.5.1980 allowed  the  appeal  of  the  assessee  namely  the   first appellant   and  dismissed  the  cross  objection   of   the department.   In  the  meantime,  the  criminal  proceedings against  these three appellants were initiated  in   January 1977.  To substantiate the case, the prosecution examined 12 witnesses  and marked Exhs. P 1 to P 87. The appellants  did not  examine  any witness but filed Exhs. D 1 to  D  4.  The Trial   Court   accepting  the  evidence  adduced   by   the prosecution,  convicted and sentenced the appellants by  its judgment  which  was confirmed in C.A. Nos. 221 and  222  of 1980  on the file of the Vth Additional Judge,  Madras.   In the  result,  the  three appellants  stood  convicted  under Section  120-B  read with Sec. 193 IPC and Sec. 277  of  the I.T. Act besides under Sections 193 IPC and appellants No. 1 and  3  separately under Section 277 of the I.T.  Act.   But coming  to the question of sentence, the trial court  taking into  consideration  of the fact that  the  appellants  were detained under COFEPOSA in respect of the amount seized  and they  have  also undergone the ordeal of enquiries  and  the trial  for a considerable length of time sentenced  each  of them  to undergo imprisonment till the rising of  the  Court for  each  of the offences and to pay a total  fine  of  Rs. 2,000,  Rs. 600 and Rs. 1,500 respectively with the  default clause.      Being aggrieved by the judgment of the first  appellate court  confirming  the  judgment of  the  trial  court,  two

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revisions   were   filed   before   the   High   Court    as aforementioned.  The High Court for the reasons mentioned in its  order  confirmed the judgment of  the  first  appellate court and dismissed the revisions.  Hence these two appeals.      Mr.  A.T.M. Sampath, the learned counsel  appearing  on behalf of the appellants assailed the impugned order of  the High  Court  raising multiple questions of law the  core  of which is formulated hereunder:          1. The evidence-both oral and  documentary-produced          by   the  complainant  does  not   constitute   the          requisite ingredients to make out a case punishable          under  the  charges  levelled  against  all   three          appellants                                                        892          2. In view of the specific findings of the  Income-          tax  Appellate  Tribunal  in its  order  Exh.  D  4          (enclosed  as  Annexure ‘J’ to the  appeal  papers)          that  the  assessee is not the owner of  the  money          seized, that any other conclusion of ownership will          only  be  perverse and uncalled for" and  that  "so          Section   69-A  of  the  Income-tax  Act   has   no          application to the facts of the case", appellants 1          and 2 on the basis of Exhs. P 36 and P 40 cannot be          held  to  have  intentionally  resiled  from  their          earlier  stand  when subsequently examined  by  the          Income-tax  Authorities thereby  making  themselves          liable  to  be punished under Section 193  IPC  for          perjury  and under Section 277 of the I.T. Act  for          making false statements in verification.          3. The accusation made in the notice issued to  the          first  appellant  dated 8.5.70  by  the  Income-tax          Officer,  Karaikudi stating "On 19.10.66  you  have          admitted  in your statement before the  Enforcement          Directorate that the amount belongs to ............          .............   Subsequently  on 28.2.67  you  have          sent a letter to this office wherein you had denied          ownership   of  the  amount  above"  is   factually          incorrect  because at no point of time,  the  first          appellant   as  pointed  out  by   the   Income-tax          Appellate  Tribunal had admitted the  ownership  of          the  amount.   Therefore,  the very  basis  of  the          notice for launching the prosecution under  Section          193  IPC  and  277 of the I.T.  Act  is  absolutely          unsustainable.          4. The statements recorded from appellants 1 and  2          under  Exhs. P 39 and P 40 by the Officers  of  the          Enforcement   Directorate  fall  only  within   the          meaning of Section 39 of FERA and those statements,          therefore,  cannot be made use of for initiating  a          criminal  case  of perjury in the  absence  of  any          legal   fiction  bringing  the   investigation   or          proceeding  as  a judicial  proceeding  within  the          meaning of Sections 193 and 228 IPC as contemplated          under Section 40 (4) of FERA.          5. The Income-tax Officer in exercise of his  power          under  Section 136 of I.T. Act cannot make  use  of          the   statements   recorded  by   the   Enforcement          Directorate (an independent                                                        893          authority) under the provisions of the special Act-          namely,  FERA,  for prosecuting  the  deponents  of          those  statements  in a  separate  and  independent          proceeding  under  another special Act  namely  the          I.T.  Act  on the ground that the  deponents   have          retracted   their  statements  given   before   the

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        authorities of the Enforcement Directorate.          6.  If any criminal proceeding is  initiated  under          FERA against the appellants 1 and 2 on the strength          of  their statements Exhs. P 39 and P  40  recorded          under  Section  39 of FERA  and  appellants  herein          would  partake the characteristic of an accused  or          become  an  accused of an indictable  offence,  and          therefore,   on  a  mere  denial,   normally,   the          appellants  should  not be subjected  to  face  the          grave  charge  of perjury, unless  such  a  serious          action is warranted.          7.  The  third  appellant cannot be  held  to  have          committed  the offences charged merely  because  he          has  failed  to establish his  consistent  rightful          claim  of the amount of Rs. 4,28,713 as  being  the          sale proceeds of his mother’s jewels.          8. The Courts below ought to have seen that Exh. P.          18,  the  income-tax  returns filed  by  the  third          appellant  was  accepted  on  enquiry  and   though          reopened  belatedly it still stands  incomplete  in          spite of several years.          9.   The  evidence  available  on  record  is   not          sufficient  to put the third appellant in  a  joint          trial  along  with  appellants 1 and  2  under  the          conspiracy  charge  as well as  for  recording  the          conviction under Section 193 IPC and 277 I.T.   Act          especially    when   the   third   appellant    has          consistently taken an uniform stand and when it  is          not  the case of the Department that the amount  of          Rs. 4,28,713 was taxable amount in the hands of the          third appellant.          10.  The congnizance of the offence under  Sections          120-B read with 193 and 193 (simplicitor) was taken          beyond  the period of limitation, prescribed  under          Section 468 of the Code of Criminal Procedure.                                                        894      Before  pondering over the above contentions, we  would like  to make reference to certain salient facts for  proper understanding and appreciation of the issues involved.      The  Officers of the Enforcement Directorate  conducted the  raid  and seized the amount on 19.10.66  on  which  day itself  the  statements  under Exhs.  P 39  and  P  40  were recorded from the appellants 1 and 2 by the Officers of  the Enforcement  Directorate.   On  the very next  day  i.e.  on 20.10.66  both the appellants sent their retraction  to  the Director of Enforcement through their Advocate stating  that the statements were involuntary and bereft of truth.   While it  was so, the ITO of Karaikudi recorded the  statement  of the  first  appellant  on 16.11.66.   Meanwhile,  the  third appellant sent a letter to the Enforcement Officers claiming that he was the owner of the said amount of Rs. 4,28,713 and asked  for  the return of the same.  On 22.12.66  the  third appellant  gave a statement before the Enforcement  Officers explaining  how  the said amount came into  his  possession. But that explanation was not accepted.  In view of the above developments,   proceedings  were taken  against  the  third appellant  under the provisions of the I.T. Act.  The  third appellant  on  1.3.67  submitted his  return  of  income  on 27.2.67  for  the assessment year 1967-68 accompanied  by  a statement  showing  the business income at Rs.  4,000.   The fourth  accused before the trial Court who died  during  the proceedings gave a sworn statement on 2.5.67 before the  ITO stating  that  she gave a cash amount of Rs. 70,000  to  the third  appellant  and  also one necklace  studded  with  red stones  and  two bangles studded with blue  stones   besides

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some  ornaments.   The statement of the fourth  accused  was also not accepted.  The fifth accused (since acquitted) gave a statement on 11.8.70 before the ITO denying the receipt of any  amount  from  the  appellants  1  and  2  on  18.10.66. Thereafter,  appellants 1 and 3 gave separate statements  on 27.2.71 and 4.11.71 respectively.  The second appellant gave his  statement  before the ITO on  11.1.74  repudiating  his earlier statement dated 19.10.66 (Exh. P 40) and stated that the said statement was obtained under duress.  On the  basis of the above statements and subsequent correspondence, it is stated  that appellants Nos. 1 to 3 and accused No.  5  have committed  the offences punishable under Section 120-B  read with 193 IPC and 120-B IPC read with 277 of the I.T. Act.      The trial court after having considered the allegations of  the  complaint, indicted the accused  inclusive  of  the appellants thus:                                                        895      The  first  and second appellants wilfully  caused  the Advocate’s  letter  dated 20.10.66 with a  false  statement; that   they,  thereafter  gave  separate  statements   dated 16.11.66 and 11.1.74 respectively before the ITO repudiating their  earlier  statements  given  before  the   Enforcement Officers  and that they thereby, have committed  an  offence punishable  under  Section 193 IPC.   Similarly,  the  third appellant  not only by fabricating a letter dated  10.10.66, but  also  by  filing a false affidavit  dated  23.3.67  and thereafter  by  making a false statement before the  ITO  on 4.11.71 has made himself liable to be punished under Section 193  IPC.   In  addition, accused No.  1  has  committed  an offence  under Section 277 of the I.T. Act by  delivering  a letter  to the ITO on 27.2.71 containing a  false  statement that his statement under Exh. P 39 was not true and obtained under  duress.   Accused No. 3 has  also  committed  similar offence  under  Section  277 of the  I.T.  Act  by  wilfully delivering  to  the  ITO  a  false  statement  dated  1.3.67 claiming  the  amount of Rs. 4,28,713 as belonging  to  him. Accused  No.  5 has made him liable for  the  offence  under Section  277 by delivering a false statement to the  ITO  on 11.8.70  denying  the  receipt of a sum  of  Rs.  50,000  on 18.10.66.      Be that as it may, a perusal of the entire records show that  a  gist  of the  allegations  levelled  against  these appellants  is  that  the  appellant  No.  1  disowned   his ownership of the amount contrary to the version in Exh. P 39 and  the appellant No. 2 has repudiated the statement  given under  Exh. P 40 and that the appellant No. 3 made  a  false claim  and that, thus, all the three appellants did so  only in pursuance of a conspiracy.      Though a specific ground is taken in the appeal grounds that  Exhs.  P  39 and P 40 are  clearly  relatable  to  the provisions of Section 39 of FERA and that no other statement was  taken  on  oath, the respondent namely  the   Union  of Indian  represented  by  the  Commissioner  of   Income-tax, Central  Circle,  Madras has not filed any  counter  denying that plea. Therefore, we are constrained to hold that  Exhs. P  39  and  P  40  were recorded  by  the  officers  of  the Enforcement in exercise of the power conferred under Section 39 of the Act.      Section 39 of FERA empowers the Director of Enforcement or  any  other  Officer of  Enforcement  authorised  by  the Central Government in this behalf, (i) to require any person to   produce  or  deliver  any  document  relevant  to   the investigation  or proceeding and (ii) to examine any  person acquainted  with  the facts and circumstances of  the  case. Section 40 of

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                                                      896 FERA  qualifies  the officers stating that  the  officer  of Enforcement empowered to summon any person to give  evidence and produce documents must be a gazetted officer.      The  exercise of the power under Section 40 of FERA  to summon  persons to give evidence and produce documents  must satisfy  the  condition that the officer acting  under  that Section should be a gazetted officer of Enforcement which is similar  to  Section  108 of the Customs Act.   That  is  so because  every  person  summoned by a  gazetted  officer  of Enforcement  to  make  a statement under sub  section  1  of Section  40 is under a compulsion to state the truth on  the pain of facing prosecution in view of sub-section 4 thereof. To say in other words, if the officer exercising the  powers under  Section  40  is not clothed with the  insignia  of  a gazetted  post,  there  is  no  sanctity  attached  to   the statements recorded under Section 40 (1) of FERA.      This  Court  in  Pushpdevi M. Jatia  v.  M.L.  Wadhawan [1987] 3 SCC 367 while dealing with the intent of Section 40 of FERA held as follows:          "All that is required by Section 40 (1) of the FERA          is  that such officer recording the statement  must          be  holding  a  gazetted  post  of  an  officer  of          Enforcement  in  contradistinction to  that  of  an          Assistant  Officer of Enforcement which is  a  non-          gazetted post."          ...................................................          ...................................................          In our opinion, the expression ‘gazetted officer of          Enforcement’ appearing in Section 40 (1) must  take          its colour from the context in which it appears and          it  means any person appointed to be an officer  of          Enforcement  under  Section 4  holding  a  gazetted          post."      Every  investigation or proceeding under Section 40  is deemed  to  be  a judicial proceeding  by  a  legal  fiction embodied  in  Sub-section  4  of  that  Section  though  the proceedings  are  neither in nor before any  Court  at  that stage.  But there is no such deeming provision under Section 39 of FERA bringing every investigation or proceeding in its ambit  as  "a  judicial proceeding" within  the  meaning  of Sections  193 and 228 of the Indian Penal Code.  When it  is so,  as  rightly  pointed out by  Mr.  A.T.M.  Sampath,  the statements  recorded  under Exhs. P 39 and P  40  cannot  be brought as                                                        897 having  been  recorded in ‘a judicial proceeding’ so  as  to make  use of them as the basis for fastening the  makers  of those statements with the criminality of the offences  under Sections  193  and/or 228 of the Indian Penal  Code  on  the ground that the deponents of those statements have retracted from  their  earlier statements in a  subsequent  proceeding which is deemed to be ‘a judicial proceeding’.      It is pertinent to note in this connection that in  the manner  of  recording a statement under Section 40  of  FERA there  are  no  safeguards as in the  case  of  recording  a statement  of an accused under Section 164 of  the  Criminal Procedure  Code  by  a  Magistrate.   Nevertheless,   before receiving  that statement in evidence and making use of  the same  against the maker, it must be scrutinised to find  out whether   that   statement  was  made  or   obtained   under inducement,  coercion,  threat,  promise  or  by  any  other improper  means or whether it was voluntarily  made.   There are a catena of decisions of this Court that the  statements obtained  from persons under the provisions of FERA  or  the

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Customs  Act, should not be tainted with any illegality  and they  must be free from any vice.  In the present  case,  we have  to hold as pointed out ibid that the statements  under Exhs. P 39 and P 40 were recorded only under Section 39  but not under Section 40 of the FERA.      Needless  to emphasise that the FERA and the  I.T.  Act are  two separate and independent special Acts operating  in two different fields.      This Court in Subha Rao I.T. Commr., AIR 1956 SC 604  = [1956] SCR 577 has pointed out:          "The Indian Income-tax Act is a self-contained Code          exhaustive  of the matters dealt with therein,  and          its  provisions shown an intention to  depart  from          the common rule, qui facit per alium facit per se."      Further, in M/s Pannalal Binjraj v. Union of India, AIR 1957 SC 397 = [1957] SCR 233 it has been observed thus:          "It  has to be remembered that the purpose  of  the          Act  is to levy Income-tax, assess and collect  the          same.   The preamble of the Act does not say so  in          terms it being an Act to consolidate and amend  the          law  relating to income-tax and super tax but  that          is                                                     898          the purpose of the Act as disclosed in the preamble          of the First Indian Income tax Act of 1886 (Act  II          of  1886).   It follows, therefore,  that  all  the          provisions contained in the Act have been  designed          with the object of achieving that purpose."      Coming  to  the  FERA,  it  is  a  special  law   which prescribes   a  special  procedure  for   investigation   of breaches  of  foreign  exchange  regulations.   Vide  Shanti Prasad  Jain  V. The Director of Enforcement, [1963]  2  SCR 297.  The proceedings under the FERA are  quasi-criminal  in character.   It  is  pellucid  that  the  ambit,  scope  and intendment  of  these two Acts are  entirely  different  and dissimilar.      Therefore,  the  significance of a  statement  recorded under  the  provisions of FERA during the  investigation  or proceeding  under  said Act so as to bring them  within  the meaning of judicial proceeding must be examined only quo the provisions  of  the  FERA  but not  with  reference  to  the provisions of any other alien Act or Acts such as I.T. Act.      If  it is to be approved and held that the  authorities under  the I.T. Act can launch a prosecution for perjury  on the basis of a statement recorded by the Enforcement Officer then on the same analogy the Enforcement authority can  also in a given situation launch a prosecution for perjury on the basis  of any inculpatory statement recorded by  the  Income tax   Authority,  if  repudiated  subsequently  before   the Enforcement authority.  In our opinion, such a course cannot be and  should not be legally permitted.      Leave  apart, even if the officers of  the  Enforcement intend to take action against the deponent of a statement on the  basis  of  his inculpatory  statement  which  has  been subsequently  repudiated,  the officer concerned  must  take both  the  statements  together, give a  finding  about  the nature  of  the repudiation and then act  upon  the  earlier inculpatory  one.   If  on  the  other  hand,  the   officer concerned  bisect  the two statements and make  use  of  the inculpatory statement alone conveniently bypassing the other such  a  stand  cannot  be  a  legally  permissible  because admissibility, reliability and the evidentiary value of  the statement  of the inculpatory statement depend on the  bench mark  of the provisions of the Evidence Act and the  general criminal law.

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    Next we shall pass on to examine the admissibility  and evidentiary                                                        899 value of a statement recorded by an Enforcement authority in exercise of his power as in the case of a customs officer.      This  Court in Vallabhdas Liladhar v. Asstt.  Collector of Customs, AIR 1965 SC 481 = [1965] 3 SCR 854 while dealing with  the question of admissibility of the  statements  made before the Customs Officers held, "Section 24 would  however apply,  for customs authorities must be taken to be  persons in  authority and the statements would be inadmissible in  a criminal  trial  if it is proved that they  were  caused  by inducement, threat or promise."  In a subsequent decision P. Rustomji  v.  State  of Maharashtra, AIR 1971  SC  [1087]  = [1971] SCR (Suppl.) 35 wherein this Court while answering  a question as to whether Section 24 of the Evidence Act is  or is  not  a bar to admissibility in evidence of  a  statement made  by  a person to Custom Officers in  an  enquiry  under Section  108 of the Customs Act held, "In order  to  attract the bar, it has to be such an inducement, threat or  promise which should lead  the accused to suppose that ‘by making it he  would gain any advantage or avoid any evil  of  temporal nature in reference to the proceedings against him."      We  think  it  is not  necessary  to  recapitulate  and recite all the decisions on this legal aspect.  But  suffice to  say that the core of all the decisions of this Court  is to  the  effect that the voluntary nature of  any  statement made either before the Custom Authorities or the officers of Enforcement under the relevant provisions of the  respective Acts  is a sine quo non to act on it for any purpose and  if the  statement  appears  to  have   been  obtained  by   any inducement,  threat, coercion or by any improper means  that statement must be rejected brevi manu.  At the same time, it is to be noted that merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It  is  only  for the maker of  the  statement  who  alleges inducement,  threat,  promise etc. to  establish  that  such improper means has been adopted.  However, even if the maker of  the  statement  fails to establish  his  allegations  of inducement, threat etc. against the officer who recorded the statement,  the  authority while acting on  the  inculpatory statement  of  the maker is not completely relieved  of  his obligations  in at least subjectively  applying its mind  to the  subsequent  retraction to hold  that   the  inculpatory statement  was  not extorted.  It thus boils down  that  the authority or any Court intending to act upon the inculpatory statement  as a voluntary one should apply its mind  to  the retraction  and reject the same in writing.  It is  only  on this principle of law, this Court in                                                        900 several decisions has ruled that even in passing a detention order  on the basis of an inculpatory statement of a  detenu who  has violated the provisions of the FERA or the  Customs Act  etc.  the  detaining  authority  should  consider   the subsequent   retraction  and  record  its   opinion   before accepting  the inculpatory statement lest the order will  be vitiated.  Reference may be made to a decision of  the  full Bench  of  the Madras High Court in Roshan  Beevi  v.  Joint Secretary  to  the Govt. of Tamil Nadu, Public  Deptt.  etc; [1983]  Law weekly (Crl.) 289 = [1984] 15 ELT 289  to  which one of us (S. Ratnavel Pandian, J.) was a party.      In  this context, reference may be made to Section  340 of the Code of Criminal Procedure under Chapter X X VI under the heading "Provisions as to certain offences affecting the administration of justice". This section confers an inherent

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power  on  a  Court to make a complaint  in  respect  of  an offence committed in or in relation to a  proceeding in that Court,  or  as  the case may be, in respect  of  a  document produced or given in evidence in a proceeding in that Court, if  that  Court  is of opinion that it is expedient  in  the interest  of justice that an enquiry should be made into  an offence  referred  to in clause (b) of  sub-section  (1)  of Section  195 and authorises such Court to  hold  preliminary enquiry  as  it thinks necessary and then make  a  complaint thereof in writing after recording a finding to that  effect as  comtemplated under sub-section (1) of Section  340.  The words "in or in relation to a proceeding in that Court" show that  the Court which can take action under this section  is only  the Court operating within the definition  of  Section 195 (3) before which or in relation to whose proceeding  the offence  has  been  committed. There is a  word  of  caution inbuilt in that provision itself that the action to be taken should  be expedient in the interest of justice.  Therefore, it is incumbent that the power given by this Section 340  of the  Code  should  be used with utmost care  and  after  due consideration.   The   scope  of  Section  340   (1)   which corresponds to Section 476(1) of the old Code was   examined by this Court in K. Kanunakaran v. T.V. Eachara Warrier  and Another,  [1978]  1  SCC 18 and in  that  decision,  it  has observed:           "At an enquiry held by the Court under Section 340          (1),  Cr.P.C.,  irrespective of the result  of  the          main  case,  the only question is whether  a  prima          facie  case is made out which, if  unrebutted,  may          have  a  reasonable  likelihood  to  establish  the          specified offence and whether it is also  expedient          in the interest of justice                                                        901           to take such action.           .................................................           ....................The  two  pre-conditions   are          that  the materials produced before the High  Court          make  out  a prima facie case for a  complaint  and          secondly  that it is expedient in the  interest  of          justice to permit the prosecution under Section 193          IPC."      The  above  provisions of Section 340 of  the  Code  of Criminal   procedure  are alluded only for  the  purpose  of showing  that  necessary care and caution are  to  be  taken before initiating a criminal proceeding for perjury  against the  deponent  of  contradictory  statement  in  a  judicial proceeding.      The  mere fact that a deponent has  made  contradictory statements at two different stages in a judicial  proceeding is not by itself always sufficient to justify a  prosecution for   perjury  under  Section  193  IPC  but  it   must   be established  that  the deponent has  intentionally  given  a false statement in any stage of the ‘judicial proceeding’ or fabricated  false evidence for the purpose of being used  in any  stage  of  the judicial  proceeding.  Further,  such  a prosecution  for  perjury  should be taken  only  if  it  is expedient in the interest of justice.      The  facts  of the present case when  examined  in  the light  of  the above proposition of law, it  can  be  safely concluded  that  the  statements Exhs. P 39 and  P  40  were recorded only in exercise of the powers under Section 39  of the  Act and that the prosecution has not  established  that those  statements were recorded by any gazetted  officer  of the  Enforcement under the provisions of Section 40  of  the FERA  for  bringing  them within the  meaning  of  ‘judicial

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proceeding’.  Even assuming for the sake of  arguments  that those  statements fall within the mischief of Section 40  of the FERA, there is absolutely nothing on record to show that either   the  sanctioning  authority  or   the   prosecuting authority applied its mind even subjectively and found  that the  appellants  1  and 2  gave  their  earlier  inculpatory statements   voluntarily  but  not  under  any   inducement, coercion,  threat  or  promise;  that  the  deponents   have intentionally  gave a false statement before the ITO at  the subsequent  stage  within the ambit of Section 193  IPC  and that it was expedient in the interest of justice to initiate the criminal proceedings for perjury.      The  statements  Exhs. P 39 and P 40 were  recorded  on 19.10.66 from                                                        902 appellants  1  and 2 as repeatedly pointed  out  above  only under  the  provisions  of  FERA.  But  the  subsequent  two statements recorded by the Income-tax Officer from the first and   the   second  appellants on   16.11.66   and   11.1.74 respectively   were  in  exercise of  the  powers under  the provisions  of  the  I.T. Act. It is not  the  case  of  the prosecution  that these two appellants gave any  inculpatory statement before the ITO and thereafter retracted. In  fact, the  appellants  1  and  2  have  retracted  their   earlier statements  even on the very next day which  retraction  was not  taken note of by the ITO. On the other hand,  the  ITO, Central Circle, XIV, Madras in his reply letter sent on  8th March  1972 addressed to the first appellant has  stated  as follows:          "The  statement made by you before  the  Income-tax          Officer  on 16.11.66, that is long after  statement          was  made  before the Officer  of  the  Enforcement          Directorate, immediately after the seizure, and the          statement was made before the Income-tax Officer to          get  over  the  difficult situation  of  having  to          explain the source for the sum of Rs. 6,00,000."      The  above statement unambiguously shows that  the  ITO has  not taken into considerion of the letter of  retraction sent  by  both the appellants through their lawyer  even  on 20.10.66 alleging that "they were coerced to sign statements by using bodily force and threatening with causing  injuries to  them  and they signed the statements fearing  danger  to their  life and body." It may be stated in this  connection, that only the Enforcement Officer, namely, Shri Amritalingam who  recorded the statement from the first  appellant  alone has been examined as PW 4 and the other Enforcement Officer, Shri  Panchaksharam  who  recorded the  statement  from  the second appellant has neither been cited as a witness in  the complaint  nor  appears  to have been  examined  before  the Court.      Hence  for all the reasons stated supra, we  hold  that the convictions recorded by the Courts below under  Sections 120-B read with 193IPC and 193 (simplicitor) as against  the appellants  1  and  2  cannot  be  sustained.  It  is   very surprising  and  shocking to note that the  complainant  has stepped  into the shoe of the Enforcement  Directorate,  and appears  to  have assumed the authority under the  FERA  and levelled  a  charge stating that the appellants 1 and  2  by sending the letter of retraction on 20.10.66  denying  their earlier  statements  dated  19.10.66  have  made  themselves liable to be                                                        903 convicted  under Section 193 IPC (vide paragraph 25  (i)  of the complaint).      Still  more  shocking,  the Trial Court  has  not  only

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convicted  the appellants 1 and 2 for sending the  letter  of retraction dated 20.10.66 but also found the third appellant and  accused  Nos.  4  and 5 as having  been  parties  to  a conspiracy  for causing a letter dated 20.10.66 to  be  sent the Enforcement  Directorate.      The  next  question for consideration  relates  to  the prosecution under Section 277 of the I.T. Act.      In the notice issued by the ITO, Karaikudi dated 8.5.70 asking the first appellant to appear before him, the ITO has stated as follows:          "Thus  in  your statement  before  the  Enforcement          Directorate  you  have  owned  the  amount  whereas          before  the Income-tax authorities you have  denied          ownership of the amount."      It transpires from the notice that the consistent  case of the prosecution is that the entire amount of Rs. 6  lakhs was  owned by the first appellant and that the  said  amount was  assessable in the hands of the first appellant  as  his income from other sources. The matter, as we have  indicated earlier,  came  before  the Tribunal  twice.  In  the  first instance, the Tribunal observed that the evidence  indicated that  the assessee had been engaged only in  disbursing  the money not belonging to him but belonging to some third party and on that basis, the Tribunal set aside the assessment and referred  the  case  back  to  the  ITO  to  make  a   fresh assessment.  But ITO again made the same type of  assessment which once again came before the Tribunal. It was under such circumstances, the Tribunal by its order dated 12.5.80  held as follows:          "But the error they committed was in thinking  that          assessee   is   also   not   the   owner   of   the          money. ............The assessee has said that he  is          only  a  distributor  of some  other’s  money.  The          explanation is quite satisfactory. It is not a cock          and     bull    story    or     of     imagination.          .................The  only conclusion  possible  in          the case is that the assessee is not the owner  but          only  a person in possession of other’s  money  and          that  he is only a distributor of those amounts  on          commission basis. The possession of the assessee is          certainly not as owner but only as                                                        904          a   distributor of the money belonging  to  others.          That conclusion is the only possible conclusion  in          the  case.  Any other conclusion  of  ownership  by          assessee will only be perverse and uncalled for. So          Section  69A  of the Income-tax Act,  1961  has  no          application  to the f acts on the case. The  appeal          of  the  assessee  has  to  be  allowed  and  cross          objections dismissed."      This finding has not been challenged and it reached its finality. A close reading of the order of the Tribunal shows that  the  first  appellant has been  exonerated  completely from  the specific case of the ITO that he is the  owner  of the  entire amount of Rs. 6 lakhs. Therefore, now the  point that  arises  for consideration is  whether  the  conviction recorded  by the subordinate Courts as affirmed by the  High Court  under Sections 120-B read with 277 and 277  I.T.  Act are  or are not liable to be set aside in the light  of  the judgment of the Tribunal.      Mr.  ATM  Sampath very strenuously contended  that  the convictions  recorded by the subordinate Courts as  affirmed by the High Court under Sections 120-B read with 277 and 277 I.T.  Act  are liable to be s et aside in the teeth  of  the judgment   of  the  Tribunal  completely   exonerating   the

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appellants  from the liability of the income-tax.  We  shall examine this contention and dispose of the same in the ratio of  decisions of this Court in P. Jayappan v. S.K.  Perumal, [1985] 1 SCR 536.      In that case, the following dictum has been laid down:          "The criminal court no doubt has to give due regard          to  the  result  of any proceeding  under  the  Act          having a bearing on the question in issue and in an          appropriate  case, it may drop the  proceedings  in          the light of an order passed under the Act, It does          not, however, mean that the result of a  proceeding          under  the  Act would be binding  on  the  criminal          court.  The  criminal court has to judge  the  case          independently on the evidence placed before it."      In the penultimate paragraph of the same judgment,  the following observation was made:          "It may be that in an appropriate case the criminal          Court  may  adjourn or postpone the  hearing  of  a          criminal  case  in exercise  of  its  discretionary          power under Section 309 of the Code of                                                        905          Criminal   procedure   if  the  disposal   of   any          proceeding under the Act which has a bearing on the          proceedings  before it is imminent so that  it  may          take also into consideration the order to be passed          therein.   Even  here  the  discretion  should   be          exercised  judicially and in such a way as  not  to          frustrate  the object of the criminal  proceedings.          There is no rigid rule which makes it necessary for          a criminal court to adjourn or postpone the hearing          of  a case before it indefinitely or for an  unduly          long period only because some proceeding which  may          have some bearing on it is pending else."     The above principle of law laid down by this Court  gives an  indication that the result of the proceedings under  the I.T.  Act is one of the major factors to be  considered  and the resultant finding in the said proceeding will have  some bearing in deciding the criminal prosecution in  appropriate cases.      It  may not be out of place to refer to an  observation of  this Court in Uttam Chand v. I.T.O., [1982] 133 ITR  909 wherein it was observed that the prosecution once  initiated may  be quashed in the light of a finding favourable to  the assessee recorded by an authority under the Act subsequently in  respect of the relevant assessment proceedings.  But  in Jayappan’s case, it has been held that the decision in Uttam Chand’s case is not an authority for the proposition that no proceedings  can be initiated at all under Section  276  (c) and Section 277 as long as some proceeding under the Act  in which  there  is  a chance of success  of  the  assessee  is pending.  Though as held in Jayappan’s case that a  criminal Court  has to judge the case before it independently on  the materials placed before it, there is no legal bar in  giving due regard of the proceedings under I.T. Act.      In the present case, on two occasions, the Tribunal has held  that  the amount of Rs. 6 lakhs was not owned  by  the first appellant. In Exh. D 4, the Tribunal has further  held the  Section 69 (a) dealing with the unexplained money  etc. has  no  application to the facts of the case.  Taking  this finding   of   the  Tribunal  into  constitution,   we   are constrained to hold that the appellants cannot be held to be liable for punishment under Section 120-B read with 277  and 277  (simplicitor) of the I.T. Act as the very basis of  the prosecution  is  completely nullified by the  order  of  the Tribunal which fact can be given due regard in deciding  the

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question of the criminal                                                        906 liability of the appellants 1 and 2.      Now  coming to the case of the third appellant,  it  is his  specific case throughout that the entire amount of  Rs. 4,28,712 belonged to him. It appears from paragraphs 70  and 71   of  the  judgment of the trial  court  that  the  third appellant  filed  a suit on O.S. No. 62/71 on  the  original side  of  the High Court of Madras against  the  Enforcement Directorate  claiming  the  said amount but  that  suit  was dismissed. Exh. P 87 is the certified copy of the  judgment. While  it was so, PW 2 who was then the Income-tax  Officer, City   Circle, Madras during 1967-68 issued a  letter  dated 2.2.67 enclosing a notice under Sections 139 (2) of the I.T. Act and also another notice under Section 177 and 175 of the Act-both  relating  to the  assessment  years  1967-68-which notices  are marked as Exhs. P 14 and P 15. He  was  further directed  to file his return of income within a week of  the receipt  of  Exh.  P  15. The  third  appellant’s  plea  for extension  of  time  was  rejected.  The  third   appellant, thereafter, filed his statement in verification  accompanied by  a signed statement claiming exemption of the sum of  Rs. 4,28,713  as non-taxable on the ground that the said  amount represented the sale proceeds of his mother’s jewels etc.      The allegations in the complaint on the basis of  which the charges were framed against the third appellant are that he along with the first and the second appellants  conspired to fabricate false evidence and to file a false statement on oath  before  the ITO thereby making  himself  liable  under Section 120-B read with 193 IPC and 120-B read with 277 I.T. Act  and  that he also committed offences  punishable  under Section  193 IPC and 277 of I.T. Act (simplicitor).  On  the allegations of the complaint, in our considered opinion, the third appellant could not be jointly indicated for the above conspiracy charges since the first and the second appellants are  sated  to have cospired (i) by sending  the  letter  of retraction  dated  20.10.66  and  (2)  by  giving  a   false statement  before  ITO retracting their  earlier  statements given before the Enforcement Officers which are not the case qua  the third appellant. The allegations against the  third appellant  are  that  he  along  with  appellants  1  and  2 conspired (i) to cause false entries in the account books of M/s  precious Stone Trade Company and (ii) to wilfully  make false statement before the ITO on 4.11.71.      A careful perusal of the complaint leaves an impression that it has been ill-drafted and that necessary  ingredients to make out a case for                                                        907 conspiracy are not brought out in the complaint. It is  true that  in  case  of  conspiracy,  an  agreement  between  the conspirators need not be directly proved but it can also  be inferred form the established facts in the case. As  pointed out  by  this Court in Bhagwan Swaruop and Ors v.  State  of Maharashtra,  AIR  1965 SC 682 = [1964] 2 SCR 378  that  the offence  of conspiracy can be established either  by  direct evidence or by circumstantial evidence and this section will come to play only when the Court is satisfied that there  is reasonable  ground to believe that two or more persons  have conspired to commit an offence or an actionable wrong,  that is  to  say,  there should be prima facie  evidence  that  a person  was a party to the conspiracy. The charges  levelled in  the complaint in paragraphs 25 (i) (ii) and  (iii)  read that  the  first and the second appellants  by  sending  the letter through their lawyer on 20.10.66 committed an offence under   Section   193  IPC  and   that   they,   thereafter,

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individually  committed an offence under Section 193 IPC  by retracting   their  earlier  statements  given  before   the Enforcement Authorities. Under Paragraph 25 (iv), (vi)   and (vii)  of  the complaint, the third appellant is  stated  to have  caused false entries to exist in the account books  of M/s precious Stone Trading Company and then wilfully made  a false  statement  in  verification  before  the   Income-tax Authority  accompanied by a false statement. Nowhere, it  is stated  that the individual acts of appellants 1 and  2  and that of the third appellant were due to any conspiracy among all  the three. On the other hand, the offence said to  have been  committed  by  the  third  appellant  is  specifically attributed  only  to  him. So the question  is  whether  any conspiracy  could be inferred under these circumstances.  In our  opinion,  on the facts of the case, no  such  inference could  by drawn for the simple reason that the appellants  1 and  2 were interrogated by the Enforcement  Authorities  on 19.10.66  and they sent their letter of  retraction  through their  advocate  on the very next day i.e. on  20.10.66  and that the ITO, Karakudi has recorded the retraction statement of  the  first  appellant  even on  16.11.66.  It  was  only thereafter  the  third  appellant  sent his  letter  to  the Enforcement Authorities claiming the controversial amount on 22.12.66.  The charges levelled against appellants 1  and  2 are  only  on the basis of their  retractions  made  through their lawyer on 20.10.66 and by their subsequent statements. In  the letter dated 20.10.66, the appellants 1 and  2  have not stated that the amount belonged to the third  appellant. Similarly,  it is not the case of the prosecution  that  the first  appellant by his statement dated  16.11.66  explained the  amount as belonging to the third appellant. Nor  is  it the  case of the prosecution that the second appellant  came forward by his statement recorded in the year 1974 which  is the  basis for prosecuting him for perjury stating that  the amount                                                        908 belonged to the third appellant. Therefore, no agreement  to commit the offence punishable under Sections 193 IPC or  277 I.T.  Act  can be said to have been hatched  among  all  the three  appellants.  further, it is neither the case  of  the complainant nor could it be said that the appellants 1 and 2 knew that the third appellant intentionally fabricated false evidence  or  wilfully made a false return before  the  ITO. Merely because the third appellant happens to be related  to the  first  appellant  and  claimed  that  amount  as  owner thereof, no irresistible inference can be safely drawn  that there  was a conspiracy among all the three  appellants  and the accused Nos. 4 and 5. Moreover, the evidence, direct  or circumstantial  is very much lacking to bring all the  three and  the other two accused under the charge  of  conspiracy. hence  the third appellant cannot be put on a   joint  trial along with appellants 1 and 2 and others under the charge of conspiracy. Therefore, the conviction of the third appellant under the conspiracy charge has to fail.      It  is pertinent to note, in this connection, that  the trial court in paragraphs 87 and 88 of its judgments,  after finding  appellant  No. 3 guilty of  the  conspiracy  charge along  with  appellants 1 and 2, A 4 (since dead)  and  A  5 punishable under Sections 120-B read with 193 IPC and  120-B read  with  277  I.T. Act has acquitted  the  fifth  accused (Bhaskar alias Kannan) of all the charges in paragraph 89 of its judgment. This contradictory finding of the trial  court has  not been noted either by the appellate court or by  the High Court.      The  next  question that arises  for  consideration  is

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whether the third appellant can be convicted for the offence under   Sections   193  IPC  and  277  of   the   I.T.   Act (simplicitor).  The  third  appellant  has  not  voluntarily submitted any return before the ITO but only on receipt of a notice  from  the ITO. No doubt, this will not  absolve  the criminal liability of the third appellant if the ingredients to  constitute  the offences under these  two  sections  are established and the trial of the case is not vitiated by any illegality.      Section  277  of the I.T. Act in general seeks  to  the penalise  one who makes a false statement in order to  avoid his tax liability. In the present  case, the Revenue has not come  forward  that the money represents the income  of  the third appellant liable to be taxed but on the other hand  it is the case of the ITO that it is not the third  appellant’s money  at  all.  Moreover, a cursory reading  of  the  penal clause proposes to impose                                                        909 punishment  depending upon the quantum of tax sought  to  be evaded. Here no question of evading he tax will arise.  Even assuming,  that the third appellant has made himself  liable to  be punished under Sections 193 and 277 (simplicitor)  of the  I.T. Act, inasmuch as he has been put in a joint  trial with  the appellants 1 and 2 for the conspiracy of the  said offences  without  any  specific  allegation  or  acceptable evidence to connect the third appellant with the  activities of  the appellants 1 and 2, there is a clear  misjoinder  of charges  which includes misjoinder of parties also.  In  the facts and circumstances of the case on hand, the  misjoinder of charges cannot be said to be a mere irregularity. In  our considered  opinion  by the joint trial with  misjoinder  of charges,  as  pointed out by Mr. ATM Sampath, a  failure  of justice  has  in fact been occasioned since all  the  Courts below have clubbed all the allegations levelled against  all the  three  appellants and two other accused (A 4 and  A  5) together and considered the same as if all the offences were committed in the course of the same transaction pursuant  to a  conspiracy which is neither supported by the  allegations in the  complaint nor by any evidence as required under  the law. Hence, the conviction under Sections 193 IPC and 277 of I.T. Act (simplicitor) also have to be set aside.      The   High  Court,  without  adverting  to  the   above important intricated questions of law involved in this  case and examining them in the proper perspective has disposed of the  revisions  in a summary manner and hence  the  impugned orders  warrant  an interference. Since we are  inclined  to allow  all these appeals mainly on the various questions  of law  which  we have discussed in the preceding part of  this judgment,  we  feel it unnecessary to deal  with  the  other questions raised in the appeal.      In the upshot, for the discussion made above, we  allow the  appeals by setting aside the convictions and  sentences as  affirmed by the High Court and acquit the appellants  of all the charges. The fine amount if already paid is directed to be refunded to the appellants.      Both the appeals are allowed accordingly. R.P                                          Appeals allowed                                                        910