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The Supreme Court in the case of Common Cause (A Registered Society) v. UOI (2017) 394 ITR 220/245 Taxman 214 (SC)/(2018) 9 SCC 382, held that under Section 2(12A) – Books of account – Entries in loose papers/sheets are irrelevant and inadmissible as evidence – Offences and prosecution- Settlement Commission – Investigation could not have been directed in case of high public functionaries on basis of legally inadmissible evidence in form of loose papers.

FACTS

During the examination of the Birla and Sahara Groups of Companies, damning documents were found in the form of computer prints, random sheets and loose papers, hard discs, pen drives, and other similar objects. This information served as the basis for the appraisal of the revenue. The individuals being evaluated proceeded before the Settlement Commission.

The Settlement Commission has issued an order stating that the examination of entries on, among other things, loose papers, computer printouts, hard discs, and flash drives has indicated that the transactions listed on documents are not authentic and have no evidential value. The Settlement Commission has also issued an order stating that, among other things, the information included in these loose papers, computer printouts, hard discs, and pen drives does not meet the provisions of the Indian Evidence Act and is thus inadmissible as evidence.

In addition, it was determined that the department lacked proof that the entries in these loose documents and electronic data were not real and that they were created during the normal course of business at the relevant enterprise. In addition, it was determined that the department lacked proof that these submissions were not real. In addition, it was ruled that the PCIT/DR had failed to demonstrate and verify the type and source of receipts and payments, as well as the nature and purpose of payments, as well as the evidential value of loose papers and electronic documents within the legal limitations.

The Commission has also observed that, based on these documents, the department has been unable to establish a clear case for taxing such funds in the hands of the applicant firm. The Commission rests its conclusion on the department’s submission of these documents. The Settlement Commission has determined that the transactions described in the documents were fictitious.

The Settlement Commission thus does not regard the pen drive, hard disc, computer loose papers, or computer printouts to be of any evidentiary value. Common Cause, a registered organization, and other persons have filed a writ petition asking for the issue of an appropriate writ mandating an inquiry into the matter of high public officials based on damning evidence. These materials consist of random sheets of paper, computer printouts, hard discs, flash drives, and other such stuff.

ISSUE

In light of the information shown above, the issue arises as to whether or not a Special Investigation Team (SIT) ought to be established to examine the various functionaries and officials and keep an eye on the activities they engage in.

VIEWS

This Court, in the case of State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, set rules for the dismissal of the F.I.R. In very unusual circumstances, the court may throw out a First Information Report (FIR) even before an investigation has commenced if the circumstances so necessitate.

HELD

In its decision to reject the petition, the court said that entries made on loose papers or sheets are inconsequential and cannot be accepted as evidence. These are not “books of account,” and the entries that they comprise are not adequate to hold a person accountable for their actions. While books of account are always kept up to date in the ordinary course of business, the entries contained within them are not always sufficient proof to hold someone accountable for their actions. The person who is going to depend on these entries is the one who has to prove that they are accurate representations of the facts. the conclusion reached by the Settlement Commission is that such evidence cannot be considered and cannot be trusted. The documents in question did not include sufficient evidence of criminal behavior to support the filing of a first information report and investigation. This was the conclusion reached by the investigating authorities. (Writ Petition No. 505 of 2015 / Information and Advisory Nos. 3 and 4 of 2017 dated January 11, 2017)

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JUDGEMENT REVIEW BY JAY KUMAR GUPTA