Supreme Court Ruling: Income Tax Clearance Not Enough to Quash Corruption Charges

In a recent landmark judgment, the Supreme Court has ruled that clearance in Income Tax proceedings does not automatically warrant the discharge of an accused under the Prevention of Corruption Act, 1988 (PCA).

The bench, comprising Justice Vikram Nath and Justice KV Viswanathan, convened to hear an appeal against a Delhi High Court order that denied the discharge of offenses under the PCA. The apex court emphasized that an exoneration order under the Income Tax Act does not definitively establish the legality of the source of income. Drawing from precedent, particularly the State of Karnataka v. Selvi J. Jayalalitha & Ors. case, the court underscored the limited probative value of such orders in criminal prosecutions.

The case in question involves appellant R.C. Sabharwal, an architect with the New Delhi Municipal Corporation, whose assets far exceeded his declared income. Allegations against his son, Puneet Sabharwal, center around the acquisition of INR 79 lakhs through Special Bearer Bonds redemption, which contributed to the purchase of properties under various entities, naming Puneet as the sole beneficiary.

The charges framed against the appellants under the PCA relate to owning disproportionate assets and abetting the offense, respectively. Despite an Income Tax Appellate Tribunal order in 2007 favoring the appellants, the High Court refused their discharge. The tribunal’s decision held that R.C. Sabharwal had no obligation to explain the source of investment in trust properties, among other findings.

The appellants argued that Puneet was a minor for most of the review period, questioning his involvement in the alleged conspiracy. They also cited the exoneration by the Income Tax authorities and misapplication of precedent by the High Court. However, the Additional Solicitor General contended that criminal prosecution is independent of Income Tax proceedings.

Addressing these arguments, the Supreme Court clarified that Income Tax orders do not establish the legality of income sources under the PCA. It distinguished this case from Radheshyam Kejriwal v. State of West Bengal, noting the different nature of civil and criminal proceedings involved. The court emphasized that exoneration in civil adjudication does not preclude criminal prosecution unless the two proceedings are under the same act and arise from the same facts.

Concluding that a prima facie case exists against the appellants, the Court dismissed the appeal, directing an expedited trial after nearly 25 years of litigation. The ruling highlights the need for thorough examination in criminal proceedings, irrespective of exoneration in other legal contexts.

Loader Loading...
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download [494.28 KB]

Print Friendly, PDF & Email
Scroll to Top