[2017] 77 taxmann.

com 245 (SC)/[2017] 245 Taxman 214 (SC)/[2017] 394 ITR 220
(SC)[11-01-2017]

IT : Investigation could not have been directed in case of high public functionaries
on basis of legally inadmissible evidence in form of loose papers

■■■

[2017] 77 taxmann.com 245 (SC)

SUPREME COURT OF INDIA
Common Cause (A Registered Society)
v.
Union of India*
ARUN MISHRA AND AMITAVA ROY, JJ.
INTERLOCUTORY APPLICATION NOS. 3 & 4 OF 2017
WRIT PETITION (CIVIL) NO. 505 OF 2015
JANUARY 11, 2017

Section 69A of the Income-tax Act, 1961, read with section 34 of the Indian Evidence Act,
1872 - Unexplained money (Loose papers) - Raids were conducted on two business groups
and incriminating materials in form of random sheets and loose papers, computer prints,
hard disk, pen drives etc. were found - Evidence of certain highly incriminating money
transactions were also found - However, department had no evidence to prove that entries
in these loose papers and electronic data were kept regularly during course of business of
concerned business house - Whether thus, these detailed documents recovered by
authorities had no evidentiary values and they could not have been relied on to direct
registration of FIR and investigation in case of high public functionaries occupying
important offices - Held, yes - Whether further, materials in question were not only
irrelevant but were also legally inadmissible under section 34 of Evidence Act - Held, yes
[Paras 22, 24 & 27] [In favour of assessee]

FACTS

■ Raids were conducted on the Birla and Sahara Group of Companies and incriminating
materials in form of random sheets and loose papers, computer prints, hard disk, pen drives
etc. were found. Evidence of certain highly incriminating money transactions were also found.

■ 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?

HELD

■ Loose sheets of papers are wholly irrelevant as evidence being not admissible under section
34 so as to constitute evidence with respect to the transactions mentioned therein being of
no evidentiary value. The entire prosecution based upon such entries which led to the
investigation was quashed by this Court. [Para 20]

■ The Court has to be on guard while ordering investigation against any important
constitutional functionary, officers or any person in the absence of some cogent legally
cognizable material. When the material on the basis of which investigation is sought is itself
irrelevant to constitute evidence and not admissible in evidence, whether it would be safe to
even initiate investigation ? In case it is done, the investigation can be ordered as against any
person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely
made, by any unscrupulous person or business house that too not kept in regular books of
account but on random papers at any given point of time. There has to be some relevant and
admissible evidence and some cogent reason, which is prima facie reliable and that too,
supported by some other circumstances pointing out that the particular third person against
whom the allegations have been levelled was in fact involved in the matter or he has done
some act during that period, which may have co-relations with the random entries. In case all
these are not insisted, the process of law can be abused against all and sundry very easily to
achieve ulterior goals and then no democracy can survive in case investigations are lightly set
in motion against important constitutional functionaries on the basis of fictitious entries, in
absence of cogent and admissible material on record, lest liberty of an individual be
compromised unnecessarily. The materials which have been placed on record either in the
case of Birla or in the case of Sahara are not maintained in regular course of business and
thus lack in required reliability to be made the foundation of a police investigation. [Para 21]

■ In case of Sahara, in addition there is adjudication by the Income Tax Settlement

Commission. The order has been placed on record. The Settlement Commission has
observed 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,
non-genuine was proved. 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. [Para 22]
■ It is apparent that the 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. [Para 23]

■ Since it is not disputed that for entries relied on in these loose papers and electronic data
were not regularly kept during course of business, such entries were discussed in the order
passed in Sahara's case by the Settlement Commission and the documents have not been
relied upon by the Commission against assessee, and thus such documents have no
evidentiary value against third parties. On the basis of the materials which have been placed
on record, it is opined that no case is made out to direct investigation against any of the
persons named in the Birla's documents or in the documents of Sahara. [Para 24]

■ 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. This Court has laid down thus:

(1) Where the allegations made in the first information report of the complaint, even if they
are taken at their face value and accepted in their entirety do not prima facie constitute
any offence or make out a case against the accused.

(2) Where the allegations in the first information report and other materials, if any,
accompanying the FIR do not disclose a cognizable offence, justifying an investigation
by police officers under section 156(1) of the Code except under an order of a
Magistrate within the purview of section 155(2) of the Code.

(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence
collected in support of the same do not disclose the commission of any offence and
make out a case against the accused.

(4) Where the allegations in the FIR do not constitute a cognizable offence but constitute
only a non-cognizable offence, no investigation is permitted by a police officer without
an order of a Magistrate as contemplated under section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are so absurd and inherently
improbable on the basis of which no prudent person can ever reach a just conclusion
that there is sufficient ground for proceeding against the accused.

(6) Where there is an express legal bar engrafted in any of the provisions of the Code or
the concerned Act (under which a criminal proceeding is instituted) to the institution
and continuance of the proceedings and/or where there is a specific provision in the
Code or the concerned Act, providing efficacious redress for the grievance of the
aggrieved party.

(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the
proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on
the accused and with a view to spite him due to private and personal grudge. [Para 26]
■ Considering the aforesaid principles which have been laid down, it is opined that the
materials in question are not good enough to constitute offences to direct the registration of
F.I.R. and investigation therein. The materials should qualify the test as per the aforesaid
decision. The complaint should not be improbable and must show sufficient ground and
commission of offence on the basis of which registration of a case can be ordered. The
materials in question are not only irrelevant but are also legally inadmissible under section
34 of the Evidence Act, more so with respect to third parties and considering the explanation
which have been made by the Birla Group and Sahara Group, it is opined that it would not be
legally justified, safe, just and proper to direct investigation. [Para 27]

■ In view of the materials which have been placed on record and the peculiar facts and
circumstances projected in the case, no case is made out to direct the investigation as
prayed for. [Para 28]

■ The applications deserved dismissal and were dismissed. [Para 29]

CASE REVIEW

Lalita Kumari v. Government of Uttar Pradesh [2014] 2 SCC 1 (para 25) distinguished.

C.B.I. v. V.C. Shukla [1998] 3 SCC 410 (para 27) and State of Haryana v. Bhajan Lal 1992 Supp (1) SCC
335 (para 27) followed.
CASES REFERRED TO

CBI v. V.C. Shukla [1998] 3 SCC 410 (para 12), Lalita Kumari v. State of U.P. [2014] 2 SCC 1 (para 12)
and State of Haryana v. Bhajan Lal 1992 Supp. (1) SCC 335 (para 26).

Shanti Bhushan, Sr. Adv., Prashant Bhushan, Pramod Dayal, Nikunj Dayal, Ms. Payal Dayal,
Pranav Sachdeva and Ms. Neha Rathi, Advs. for the Petitioner. Mukul Rohatgi, Attorney
General for India, Tushar Mehta, ASG, Ms. V. Mohana, C.A. Sundaram, Sr. Advs., Abhinav
Mukherji, Ms. Binu Tamta, Ms. Meenakshi Grover, Rajiv Rathore, M.K. Maroria, Ms. Sushma
Suri, Braj Kishore Mishra, Amit Bhagat, Shekhar Kumar, G. Ramakrishna Prasad, Suyodhan
Byrapaneni, Mohd. Wasay Khan, Ms. Filza Moonis, Bharat J. Joshi, Jagat Arora, Rajat Arora,
Ms. Ritu Arora, Anuvrat Sharma, Chirag Shroff, Hemant Arya and Ms. Neha Shangaran,
Advs. for the Respondent.
ORDER

1. We have heard learned counsel for the parties at length, as to Interlocutory Application Nos. 3
and 4 of 2017 filed in Writ Petition(Civil) No.505 of 2015.

2. The writ petition has been filed by the Common Cause (A registered Society) and others for
issuance of appropriate writ for setting aside the appointment made by the Union of India, of
Respondent No.2 Mr. K.V. Chaudhary as Central Vigilance Commissioner and Mr. T.M. Bhasin as
Vigilance Commissioner on various grounds as enumerated in the petition, pointing out that
these persons are not of impeccable integrity.
3. In I.A. No.3/2016 it is averred that, Central Bureau of Investigation (in short 'the C.B.I.')
conducted raid on the premises of Aditya Birla group industries in four cities on 15.10.2013,
followed by another raid by the Income Tax Department on the very next day. The raid by the
C.B.I. reportedly led to recovery of incriminating documents and unaccounted cash amounting
to Rs.25 crores. It is submitted that C.B.I. transferred the incriminating documents to the Income
Tax Department. The laptop of Mr. Shubhendu Amitabh, Group Executive President was seized
during the raid. An E-mail dated 16.11.2012 containing a cryptic entry was also recovered from
the said laptop referring to political functionaries. When Mr. Amitabh was questioned about the
transactions, he stated that "these were purely personal notes. Not meant for SMS or e-mail
transmission. And the first note is only to note for my knowledge and consumption – a business
development at Gujarat Alkali Chemicals" it does not relate to any political functionary. During
investigation, top officials of the Birla Group admitted that large amounts of cash were routed
by the Group through hawala. The Income Tax Department prepared a detailed appraisal report
on the Hawala transactions. Some extracts of the report dated 27.2.2014 have been filed as
Annexure A-5. A direction has already been issued by this Court to the CBI on 12.10.2015 to
enquire into these, even though they might be unrelated to the Coal Block Allocation cases. The
CBI has not taken any concrete action. The CBI is trying to protect the influential personalities
named in the documents seized and is shielding powerful corporate entities. It has been alleged
that Respondent No.2 has also tried to shield the offenders.

4. With respect to Sahara Group, it is averred that the Income Tax Department raided Sahara
India Group offices in Delhi and Noida on 22.11.2014. During the raid, incriminating documents
and cash amounting to Rs.135 crores had been seized. Certain documents have been filed in the
form of printouts of the Excel sheet showing cash receipt of over Rs.115 crores and cash outflow
of over Rs.113 crores during a short period of 10 months. The random log suggests that cash
was transferred to several important public figures. Copies of the random pages have been filed
as Annexure A-8. The pages Annexure A-9 and A-10 have been filed which contain the proposal
and regarding the actual payments which were made to large number of top political leaders of
the country.

5. It is also averred that certain complaints to CBI, CBDT, CVC, SIT, Enforcement Directorate and
Settlement Commissioner have been made but without avail. In spite of that, the Income Tax
Settlement Commission gave immunity to the Sahara Group of Companies vide its order dated
11.11.2016 which has been filed along with I.A. No.4.

6. I.A. No.4 has been filed by the petitioner pursuant to the direction given by this Court to
substantiate the documents filed along with I.A. No.3. I.A.No.4 contains more or less the same
facts. Details have been given as to Birla Group that cash of Rs.25 crores was not accounted for
in the regular books of account of Aditya-Birla Group or another company and it is also stated
that Mr. Anand Saxena told the Income Tax Department that he was responsible for handling the
cash transactions and he had received cash from Mr. Jaluram in the range of Rs.50,00,000/-
(rupees fifty lacs only). Mr. Jaluram is the Angadia, courier of local Hawala operators. However, it
was stated that he was not aware about the payment made to anyone and he could not say to
whom the unaccounted money had been paid. E-mails dated 2.1.2013, 7.4.2013 and 3.5.2013
have been placed on record.
7. It is further submitted that during the search operation, it was revealed that the proposed
payment of Rs.7.5 crores had been made during the period 9.1.2012 and 2.2.2012 with respect to
"Project-J – Environment & Forest", and that 13 projects of the Aditya Birla Group companies had
been sanctioned by the Ministry of Environment and Forest between 8.11.2011 and 17.6.2013.
The documents – Annexure D is stated to be related to Coal Block of Birla Group of Companies
by the Coal Ministry during the aforesaid period. E-mail dated 13.5.2013, relating to MOEF has
also been placed on record.

8. It is averred that evidence of certain highly incriminating money transactions was also found
in the laptop of Mr. Shubhendu Amitabh. An E-mail dated 16.11.2012 containing a cryptic entry,
has been recovered which in fact does not relate to Gujarat Alkali Chemicals but to a political
functionary and that this fact ought to have been ascertained.

9. It is further averred in the application that documents of Sahara also make out a case of
cognizable offence and the role played by respondent No.2 should be enquired into. The
explanation given to the Income Tax Department on behalf of the Sahara Group by Mr. Sachin
Pawar, that exercise was done to implicate Mr. Dogra and to get him punished from the
Management is unworthy of credence, as was suggested by the Department. However, the stand
of department has been ignored and the Settlement Commission accepted the case set up by
assessee and absolved Sahara from criminal and civil liability on different grounds, even after
receiving a letter from the counsel of the common cause that he was going to file an application
before this Court in the instant matter.

10. We have heard learned counsel for the parties at length. It was submitted by Shri Shanti
Bhushan and Mr. Prashant Bhushan, learned senior counsel appearing on behalf of the
petitioners that it is a fit case for constitution of the SIT for directing investigation into the
incriminating material seized in the raids conducted on the Birla and Sahara Group of
Companies in question.

11. It was submitted that though at this stage, it cannot be said conclusively that payments have
been made, however, a prima facie case has been made out to direct investigation on the basis
of the materials recovered in the raids in question. It has been argued that the order passed by
the Settlement Commission cannot be said to be in accordance with law and is self contradictory
and has been passed in haste. The finding recorded therein cannot be relied upon and it is the
bounden duty of this Court to direct investigation as one whosoever high is not above law and
this Court being the constitutional Court and the highest Court of the country should direct
investigation into the material collected in the raids of two business groups. The investigation by
special investigation Team should not be only ordered, but it should be monitored by this Court.

12. Shri Shanti Bhushan, learned senior counsel has also submitted that in the case of C.B.I. v.
V.C. Shukla 1998 (3) SCC 410, this Court has laid down the law as to admissibility of material
involved therein after the investigation was over and is of no applicability in this case, at this
stage. The allegations which are reflected by the materials collected indicates commission of
cognizable offence. Relying upon the decision of this Court in Lalita Kumari v. State of U.P. 2014 (2)
SCC 1, he urged that it is the bounden duty of the Court to direct investigation and falsity or
correctness of the documents has to be seen in course of the investigation.
13. Shri Mukul Rohatgi, learned Attorney General for India and Mr. Tushar Mehta, learned ASG
have submitted that the material in question with respect to Sahara Group on the basis of which
investigation is sought for, have been found by the Settlement Commission, in proceedings
under Section 245D of the Income Tax Act, to be doubtful. The documents which have been filed
by the Birla as well as Sahara Group are not in the form of account books maintained in regular
course of business. They are random sheets and loose papers and their correctness and
authenticity, even for the purpose of income mentioned therein have been found to be un-
reliable having no evidentiary value, by the concerned authorities of income tax. The documents
of Birla Group are also the same. They are not in the form of regular books of account and are
random and stray materials and thus the case of Birla also stands on the same footing.

14. Placing implicit reliance of the decision of this Court in V.C. Shukla (supra), it was submitted
that it is open to any unscrupulous person to make any entry any time against anybody's name
unilaterally on any sheet of paper or computer excel sheet. There being no further corroborative
material with respect to the payment, no case is made out so as to direct an investigation, and
that too against large number of persons named in the documents. Such entries have been held
to be prima facie not even admissible in V.C. Shukla's case (supra). He urged that in case
investigation is ordered on the basis of such documents, it would be very dangerous and no
constitutional functionary/officer can function independently, as per the constitutional
imperatives. No case is made out on the basis of material which is not cognizable in law, to direct
investigation.

15. Before dilating upon the issue canvassed in the application we make it clear that we have not
examined the main writ petitions vis a vis challenge to the appointments of respondent Nos.2
and 3. We are examining only the merit of the I.A. No. 3 supported by I.A. No.4, as to whether a
case is made out on the basis of materials which are placed on record, to constitute SIT and
direct investigation against the various functionaries/officers which are projected in Annexure A-
8, A-9 and A-10 and other entries on loose sheets and further monitor the same.

16. With respect to the kind of materials which have been placed on record, this Court in V.C.
Shukla's case (supra) has dealt with the matter though at the stage of discharge when
investigation had been completed but same is relevant for the purpose of decision of this case
also. This Court has considered the entries in Jain Hawala diaries, note books and file containing
loose sheets of papers not in the form of "Books of Account" and has held that such entries in
loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and
that only where the entries are in the books of account regularly kept, depending on the nature
of occupation, that those are admissible.

17. It has further been laid down in V.C. Shukla (supra) as to the value of entries in the books of
account, that such statement shall not alone be sufficient evidence to charge any person with
liability, even if they are relevant and admissible, and that they are only corroborative evidence.
It has been held even then independent evidence is necessary as to trustworthiness of those
entries which is a requirement to fasten the liability.

18. This Court has further laid down in V.C. Shukla (supra) that meaning of account book would be
spiral note book/pad but not loose sheets. The following extract being relevant is quoted
hereinbelow:—
"14. In setting aside the order of the trial court, the High Court accepted the contention of
the respondents that the documents were not admissible in evidence under Section 34 with
the following words:

"An account presupposes the existence of two persons such as a seller and a purchaser,
creditor and debtor. Admittedly, the alleged diaries in the present case are not records of
the entries arising out of a contract. They do not contain the debits and credits. They can at
the most be described as a memorandum kept by a person for his own benefit which will
enable him to look into the same whenever the need arises to do so for his future purpose.
Admittedly the said diaries were not being maintained on day-to-day basis in the course of
business. There is no mention of the dates on which the alleged payments were made. In
fact the entries there in are on monthly basis. Even the names of the persons whom the
alleged payments were made do not find a mention in full. They have been shown in
abbreviated form. Only certain 'letters' have been written against their names which are
within the knowledge of only the scribe of the said diaries as to what they stand for and
whom they refer to."

** ** **

17. From a plain reading of the Section it is manifest that to make an entry relevant
thereunder it must be shown that it has been made in a book, that book is a book of account
and that book of account has been regularly kept in the course of business. From the above
Section it is also manifest that even if the above requirements are fulfilled and the entry
becomes admissible as relevant evidence, still, the statement made therein shall not alone
be sufficient evidence to charge any person with liability. It is thus seen that while the first
part of the section speaks of the relevancy of the entry as evidence, the second part speaks,
in a negative way, of its evidentiary value for charging a person with a liability. It will,
therefore, be necessary for us to first ascertain whether the entries in the documents, with
which we are concerned, fulfill the requirements of the above section so as to be admissible
in evidence and if this question is answered in the affirmative then only its probative value
need be assessed.

18. "Book" ordinarily means a collection of sheets of paper or other material, blank, written,
or printed, fastened or bound together so as to form a material whole. Loose sheets or
scraps of paper cannot be termed as "book" for they can be easily detached and replaced. In
dealing with the word "book" appearing in Section 34 in Mukundram v. Dayaram a decision on
which both sides have placed reliance, the Court observed:—

"In its ordinary sense it signifies a collection of sheets of paper bound together in a manner
which cannot be disturbed or altered except by tearing apart. The binding is of a kind which
is not intended to the moveable in the sense of being undone and put together again. A
collection of papers in a portfolio, or clip, or strung together on a piece of twine which is
intended to be untied at will, would not, in ordinary English, be called a book. ... I think the
term 'book' in Section 34 aforesaid may properly be taken to signify, ordinarily, a collection
of sheets of paper bound together with the intention that such binding shall be permanent
and the papers used collectively in one volume. It is easier however to say what is not a book
 for the purposes of Section 34, and I have no hesitation in holding that unbound sheets of
paper, in whatever quantity, though filled up with one continuous account, are not a book of
account within the purview of Section 34."

We must observe that the aforesaid approach is in accord with good reasoning and we are
in full agreement with it. Applying the above tests it must be held that the two spiral note
books (MR 68/91 and MR 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are
"books" within the meaning of Section 34, but not the loose sheets of papers contained in
the two files (MRs 72/91 and 73/91).

** ** **

20. Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and
the small pads are "books" within the meaning of Section 34. He, however, strongly disputed
the admissibility of those books in evidence under the aforesaid section on the ground that
they were neither books of account nor they were regularly kept in the course of business.
he submitted that at best it could be said that those books were memoranda kept by a
person for his own benefit. According to Mr. Sibal, in business parlance "account" means a
formal statement of money transactions between parties arising out of contractual or
fiduciary relationship. Since the books in question did not reflect any such relationship and,
on the contrary, only contained entries of monies received from one set of persons and
payment thereof to another set of persons it could not be said, by any stretch of
imagination that they were books of account, argued Mr Sibal. He next contended that even
if it was assumed for argument's sake that the above books were books of account relating
to a business still they would not be admissible under Section 34 as they were not regularly
kept. It was urged by him that the words "regularly kept" mean that the entries in the books
were contemporaneously made at the time the transactions took place but a cursory glance
of the books would show that the entries were made therein long after the purported
transactions took place. In support of his contentions he also relied upon the dictionary
meanings of the words 'account' and 'regularly kept'." (Emphasis added by us)

19. With respect to evidentiary value of regular account book, this Court has laid down in V.C.
Shukla, thus:
"37. In Beni v. Bisan Dayal it was observed that entries in books of account are not by
themselves sufficient to charge any person with liability, the reason being that a man cannot
be allowed to make evidence for himself by what he chooses to write in his own books
behind the back of the parties. There must be independent evidence of the transaction to
which the entries relate and in absence of such evidence no relief can be given to the party
who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha
the High Court, while negativing a contention that it having been proved that the books of
account were regularly kept in the ordinary course of business and that, therefore, all
entries therein should be considered to be relevant and to have been proved, said that the
rule as laid down in Section 34 of the Act that entries in the books of account regularly kept
in the course of business are relevant whenever they refer to a matter in which the Court
has to enquire was subject to the salient proviso that such entries shall not alone be
 sufficient evidence to charge any person with liability. It is not, therefore, enough merely to
prove that the books have been regularly kept in the course of business and the entries
therein are correct. It is further incumbent upon the person relying upon those entries to
prove that they were in accordance with facts."

20. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant
as evidence being not admissible under Section 34 so as to constitute evidence with respect to
the transactions mentioned therein being of no evidentiary value. The entire prosecution based
upon such entries which led to the investigation was quashed by this Court.

21. We are constrained to observe that the Court has to be on guard while ordering
investigation against any important constitutional functionary, officers or any person in the
absence of some cogent legally cognizable material. When the material on the basis of which
investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence,
we have apprehension whether it would be safe to even initiate investigation. In case we do so,
the investigation can be ordered as against any person whosoever high in integrity on the basis
of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house
that too not kept in regular books of account but on random papers at any given point of time.
There has to be some relevant and admissible evidence and some cogent reason, which is prima
facie reliable and that too, supported by some other circumstances pointing out that the
particular third person against whom the allegations have been levelled was in fact involved in
the matter or he has done some act during that period, which may have co-relations with the
random entries. In case we do not insist for all these, the process of law can be abused against
all and sundry very easily to achieve ulterior goals and then no democracy can survive in case
investigations are lightly set in motion against important constitutional functionaries on the
basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of
an individual be compromised unnecessarily. We find the materials which have been placed on
record either in the case of Birla or in the case of Sahara are not maintained in regular course of
business and thus lack in required reliability to be made the foundation of a police investigation.

22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement
Commission. The order has been placed on record along with I.A.No.4. The Settlement
Commission has observed 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, non-
genuine was proved. 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.
23. It is apparent that the 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.

24. Since it is not disputed that for entries relied on in these loose papers and electronic data
were not regularly kept during course of business, such entries were discussed in the order
dated 11.11.2016 passed in Sahara's case by the Settlement Commission and the documents
have not been relied upon by the Commission against assessee, and thus such documents have
no evidentiary value against third parties. On the basis of the materials which have been placed
on record, we are of the considered opinion that no case is made out to direct investigation
against any of the persons named in the Birla's documents or in the documents A-8, A-9 and A-
10 etc. of Sahara.

25. This Court, in the decision of Lalita Kumari's case (supra), has laid down that when there is
commission of offence apparent from the complaint and a cognizable offence is made out,
investigation should normally be ordered and the falsity of the allegations can be ascertained
during the course of investigation. In our opinion, the decision of Lalita Kumari (supra) is of no
help to the petitioner for seeking direction for an investigation from a Court on the basis of
documents which are irrelevant, and per se not cognizable in law as piece of evidence and
inadmissible in evidence and thus a roving inquiry cannot be ordered on such legally
unsustainable material.

26. 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. This Court has laid down thus:

"102** ** **

(1) Where the allegations made in the first information report of the complaint, even if they
are taken at their face value and accepted in their entirety do not prima facie constitute
any offence or make out a case against the accused.

(2) Where the allegations in the first information report and other materials, if any,
accompanying the FIR do not disclose a cognizable offence, justifying an investigation
by police officers under Section 156(1) of the Code except under an order of a
Magistrate within the purview of Section 155(2) of the Code.

(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence
collected in support of the same do not disclose the commission of any offence and
make out a case against the accused.

(4) Where the allegations in the FIR do not constitute a cognizable offence but constitute
only a non-cognizable offence, no investigation is permitted by a police officer without
an order of a Magistrate as contemplated under Section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are so absurd and inherently
improbable on the basis of which no prudent person can ever reach a just conclusion
 that there is sufficient ground for proceeding against the accused.

(6) Where there is an express legal bar engrafted in any of the provisions of the Code or
the concerned Act (under which a criminal proceeding is instituted) to the institution
and continuance of the proceedings and/or where there is a specific provision in the
Code or the concerned Act, providing efficacious redress for the grievance of the
aggrieved party.

(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the
proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on
the accused and with a view to spite him due to private and personal grudge."
27. Considering the aforesaid principles which have been laid down, we are of the opinion that
the materials in question are not good enough to constitute offences to direct the registration
of F.I.R. and investigation therein. The materials should qualify the test as per the aforesaid
decision. The complaint should not be improbable and must show sufficient ground and
commission of offence on the basis of which registration of a case can be ordered. The materials
in question are not only irrelevant but are also legally inadmissible under Section 34 of the
Evidence Act, more so with respect to third parties and considering the explanation which have
been made by the Birla Group and Sahara Group, we are of the opinion that it would not be
legally justified, safe, just and proper to direct investigation, keeping in view principles laid down
in the cases of Bhajan Lal and V.C. Shukla (supra).

28. In view of the materials which have been placed on record and the peculiar facts and
circumstances projected in the case, we find that no case is made out to direct the investigation
as prayed for.

29. Thus, we find no merit in Interlocutory Application No. 3 supported by I.A. No. 4. The
applications deserve dismissal and are hereby dismissed.
JYOTI

*In favour of assessee.