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November 24, 2020

Can mere Entries in loose papers/ sheets be admissible as evidence?

by CA Shivam Jaiswal in Income Tax

Can mere Entries in loose papers/ sheets be admissible as evidence?

According to Indian Evidence Act, evidence may be given of facts in issue and relevant facts. Evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and of such other facts as are hereinafter declared to be relevant, and of no others. However can loose papers be constituted as admissible evidence?  Let us refer to the writ petition 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 on various grounds, pointing out that these persons were not of impeccable integrity.

Brief Details of the Investigation

  • It was claimed that, Central Bureau of Investigation (CBI) conducted raid on the premises of Aditya Birla group industries in four cities, followed by another raid by the Income Tax Department on the very next day.
  • The raid by the CBI reportedly led to recovery of incriminating documents and unaccounted cash amounting to Rs.25 crores.
  • It was submitted that CBI transferred the incriminating documents to the Income Tax Department.
  • The laptop of the Group Executive President was seized during the raid. An E-mail containing a cryptic entry was also recovered from the said laptop referring to political functionaries.
  • When he was questioned about the transactions, he stated that those were purely personal notes. Not meant for SMS or e-mail transmission. And the first note was only to note for his knowledge and consumption – a business development at Gujarat Alkali Chemicals and it did 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.
  • A direction was issued by the SC to the CBI to enquire into these, even though they might be unrelated to the Coal Block Allocation cases.
  • The CBI had not taken any concrete action. It was alleged that the CBI was trying to protect the influential personalities named in the documents seized and was shielding powerful corporate entities.
  • It was alleged that Respondent had also tried to shield the offenders.
  • With respect to Sahara Group, it is averred that the Income Tax Department raided Sahara India Group offices in Delhi and Noida.
  • During the raid, incriminating documents and cash amounting to Rs.135 crores were seized.
  • Certain documents were 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 suggested that cash was transferred to several important public figures. Copies contained the proposal and regarding the actual payments which were made to large number of top political leaders of the country.
  • It was also stated that certain complaints to CBI, CBDT, CVC, SIT, Enforcement Directorate and Settlement Commissioner were made but without avail.
  • In spite of that, the Income Tax Settlement Commission gave immunity to the Sahara Group of Companies.
  • Details were given as to Birla Group that cash of Rs.25 crores was not accounted for in the regular books of accounts 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 lakhs.
  • Mr. Jaluram was the 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 was paid.
  • During the search operation, it was revealed that the proposed payment of Rs.7.5 crores was made with respect to “Project-J – Environment & Forest”, and that 13 projects of the Aditya Birla Group companies were sanctioned by the Ministry of Environment and Forest.
  • It was alleged that evidence of certain highly incriminating money transactions was also found in the laptop of Mr. Shubhendu Amitabh.
  • An E-mail 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.

Observations of SC on evidence admissible with reference to an older case

  • Placing implicit reliance of the decision of the SC in CBI versus V.C. Shukla (supra), it was submitted that it was 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 was made out so as to direct an investigation, and that too against large number of persons named in the documents.
  • Such entries were held to be prima facie not even admissible in V.C. Shukla’s case.
  • He urged that in case investigation was 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 was made out on the basis of material which is not cognizable in law, to direct investigation.
  • With respect to the kind of materials which have been placed on record, SC in V.C. Shukla’s case (supra) dealt with the matter though at the stage of discharge when investigation was completed but same was relevant for the purpose of decision of this case also.
  • SC considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of “Books of Accounts” and has held that such entries in loose papers/sheets were irrelevant and not admissible under Section 34 of the Evidence Act.
  • Only where the entries were in the books of accounts regularly kept, depending on the nature of occupation, those were admissible
  • It was further laid down in 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 were relevant and admissible, and that they were only corroborative evidence.
  • It was held even then independent evidence was necessary as to trustworthiness of those entries which is a requirement to fasten the liability.
  • SC further laid down in V.C. Shukla (Supra) that meaning of account book would be spiral note book/pad but not loose sheets. 
  • It was apparent from the aforesaid discussion that loose sheets of papers were 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 SC

Observations of the SC on whether evidence was admissible in the current case or not

  • SC was 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 was irrelevant to constitute evidence and not admissible in evidence, SC had apprehension whether it would be safe to even initiate investigation.
  • 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 accounts but on random papers at any given point of time.
  • There had to be some relevant and admissible evidence and some cogent reason, which was 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.
  • HC found the materials which were placed on record either in the case of Birla or in the case of Sahara were not maintained in regular course of business and thus lacked in required reliability to be made the foundation of a police investigation.
  • In case of Sahara, the Settlement Commission had observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. revealed that the transactions noted on documents were not genuine and had no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. did not comply with the requirement of the Indian Evidence Act and are not admissible evidence.
  • It was further observed that the department had 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.
  • Since it was 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, SC was of the considered opinion that no case was made out to direct investigation against any of the persons named in the Birla’s documents or in the documents of Sahara.

Conclusion by SC

SC was of the opinion that the materials in question were not good enough to constitute offences to direct the registration of F.I.R. and investigation therein. 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 were 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, SC was of the opinion that it would not be legally justified, safe, just and proper to direct investigation.

Therefore, Mere Entries in loose papers/ sheets are inadmissible as evidence.

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