CA though not public servant can be prosecuted under Prevention of Corruption Act – High Court

Chartered Accountant though not public servant can be prosecuted under Prevention of Corruption Act as it covers persons other than the public servants- High Court

CA though not public servant can be prosecuted under PC Act

ABCAUS Case Law Citation:
ABCAUS 2088 (2017) (10) HC

The Challenge/Grievance:
The Petitioner was a chartered accountant who was aggrieved by the order of the Special Court whereby it rejected his application to discharge him of the offences under Prevention of Corruption Act. (the Act).

Brief Facts of the Case:
The complainant had alleged that he was an income tax assessee for several years and has declared all his properties in his returns of income. However he received a two notice for two assessment years from the Assessing Officer (AO, first accused) saying that his income has escaped assessment within the meaning of section 147 of the Income tax Act, 1961. As per the said notices, the complainant was liable to pay tax on the capital gain of Rs. 3,28,65,711/-.

The complainant alleged that he met the AO in his office when he was informed that there were many anomalies in his return that would attract tax to the tune of Rs. 80 lakhs but the case could be closed by imposing tax of only Rs. 30 lakh if the complainant would pa y Rs. 20 lakhs as bribe. When the complainant refused the AO warned him of imposing tax to the tune of Rs. One crores.

Later the complainant received telephone calls from the AO demanding bribe and was directed to hand over it to him. The complainant was also informed that the assessment order has been handed over to the chartered accountant.

The complainant lodged complaint with CBI/ACB and produced compact disc of the recorded conversation between him and the AO substantiating his allegations.

A trap was set up at the chamber of the CA where a cash envelope containing Rs. 5 lakhs was recovered from the table of the CA.

Contention of the Petitioner CA:

The contentions of the Petitioner CA was as under:

1. That the assessment order in respect of which the gratification was alleged to had been demanded by the AO, had already been passed and no work was pending at the date of the complaint. There was no material to show the demand of gratification by the AO.

2. That the complainant himself met the petitioner seeking help to draft the objections to the income tax norices.

3. That the complainant appeared before the AO at his own without the assistance of the petitioner.

4. The complainant was not allowing the AO to discharge his duties peacefully, therefore he was informed by the AO to collect the copy of the assessment order from the petitioner and pass on the acknowledgement.

5. The complainant was willing to pay the taxes in instalment and offered to pay Rs. 5 lakhs cash to petitioner and asked him to pay the 1st instalment.

6. That the complainant placed the trap money on the table towards payment of tax, the petitioner had pushed back the money and refused the same. He was not subjected to sodium carbonate hand test.

7. That the petitioner was a chartered accountant and not a public servant and thus did not fall within the purview of the relevant sections of the Act.

8. That it was nobody’s case that the assessment order was illegal or the re-opening was bad in law.

9. That mere finding of trap money on the table of accused can not be acceptance of bribe.

Contentions of the Public Prosecutor:
The following defence was advanced by the CBI:

1. That sodium carbonate test of the fingers of AO resulted positive evidencing tha he had touched the currency notes.

2. That section 8 of P. C. Act applies to private persons also.

3. That on further verification it was found that the AO had not made the entry about passing the assessment order.

4. That the AO had projected that bu for the bribe he would impose higher penalty.

5. That the contention of the petitioner that he had pushed back the money was not made in the written statement submitted by him during trap mahazar.

6. That it was the petitioner who gestured the complainant to hand over the money, uncovered it, counted the notes and kept it back in the plastic cover.

7. That the assessment order for one year was recovered from the office of the CA along with Rs. 5 lakhs.

8. That as per the colleague of the petitioner CA, she was informed by the CA that complainant would visit to collect the assessment order and she was instructed to collect Rs. 20 lakhs from him to give the order. On this instruction she contacted the complainant over phone and called upon him to come to the CA’s chamber. She also informed that the AO shall also be available at the office of the CA. Thus the statement of the colleague supports the cause of the prosecution.

Observations made by the High Court:

No work was pending for demand of illegal gratification

It was observed that the assessment order which was seized from the chambers of the CA was shown to have been passed on 6.9.2012. But the Investigating Officer had collected material that there was no proof from the official record that such an order was passed on the said date.

The High Court opined that section 7 of the PC Act does not contemplate specifically that the work must be pending on the date of registration of the case. It is sufficient to make out an offence under Section 7 of the Act that he accepts or obtains or agrees to accept or admits to obtain from any person, for himself or for any other person, any gratification whatever, other than legal remuneration, as a motive or reward for doing or forbearing to do any official act. It is also possible that a public person having negotiated for the bribe amount and in anticipation of receiving bribe money despite passing the order waits for the compliance of illegal demand without disclosing that the order is already passed. The materials on record clearly showed that even after passing the Assessment Order, it was not recorded in the proceedings book and not sent to tappal section.

There  was  no recovery from the 1st accused

It was observed that the special court had considered this aspect of the matter and observed that the AO himself had carried the office order to the office of the petitioner on a holiday. His voice sample is collected as per the standard procedure. The Trial Court in the body of its order has discussed this aspect of the matter filament wise. The petitioner CA himself had given his  explanation stating that the complainant had approached him in respect of income tax matter and the order passed by the AO had to be acknowledged by the complainant and the amount of Rs. 5 lakhs was to be given to AO/accused No.1 and his office premises/chamber was used for the purpose. Thus, the seized amount of Rs.5 lakhs was the amount to be given to the AO and he had not offered  any reason as to why his office was used for receiving the bribe amount of Rs. 5  lakhs. As per the  recovery mahazar, very same currency notes mentioned in the entrustment mahazar were seized

The High Court observed that the Special Judge had recorded that at the stage of framing the charge, the contention advanced in his written argument that the petitioner had pushed back the money was not found in  the explanation given by him before the Investigating Officer. The petitioner’s finger test had shown presence of phenolphthalein. The High Court opined that whether this phenolphthalein was due to pushing away of the tainted notes or due to counting the same by using his fingers being a question of fact can be answered only after the Trial.

Chartered Accountant is not a public servant and  is  beyond  the contemplation of the Prevention of Corruption Act.

The High Court observed that The words occurring at Section 8 of the Act “Whoever accepts or obtains, or agrees to accept, or attempts to obtain, from any person, for himself or for any other person, any gratification….” covers the persons other than the public servants contemplated by definition clause (c) of section 2 of the Act and that does not require much elaboration.

The High Court observed that The Special Court below had dealt in detail each and every charge sheet material to come to the conclusion that there were grounds to frame the charge against the AO for the offences under Section 120-B of IPC and sections 7 and 13 (1)(d) r/w Section 13(2) of the P.C. Act and against the accused Chartered Accountant for the offences under Section 120-B of IPC and Section 8 of the P.C. Act r/w Section 120 of IPC. The offence under section 120-B of IPC  i.e.  conspiracy  cannot  be  expected  to  be  proved  by direct evidence. Generally, as a matter of prudence, it can only be construed on the basis of the circumstantial evidence and in connection with the allegation attributed against each of the accused.

Decision/Held:
It was held that the order of the special court was well reasoned, not warranting revisional jurisdiction of the High Court.

CA though not public servant can be prosecuted under PC Act

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