The division bench of the Delhi High Court in Poonam Jain v. UOI & Ors, held that a person being prosecuted under the has a right to be provided with all the material relied upon by the prosecuting agency.
In the present case, a Show cause Notice under section 276 C(1) and Section 277 was issued to the petitioners imposing income tax liability and liability under Section 181 of the Indian Penal Code and Sections 50 and 51 of the Black Money (Undisclosed Foreign Income and Assets). This was in consequent to a search conducted at their residences. The search resulted in unearthing of certain documents and recording of their statements. On receipt of the notice, the petitioners required the copies of the relevant documents based on which the proceedings were initiated.
The Department refused to issue the same and stated that the documents relied upon in the SCN include statement of bank accounts maintained with foreign banks and further, Article 26(2) of the OECD Model Tax Convention on Income and on Capital (‘OECD Model Convention’) puts a restriction on the authorities in India sharing information that may have been obtained from foreign countries, except with either authorities or the persons concerned with proceedings of the assessment or prosecution etc.
Analyzing the relevant provision, the bench noted that the exception includes both the “persons‟ and “authorities”. “It is inconceivable that the person against whom the prosecution or the proceedings is proposed can be denied the material relied upon to prosecute such person. The basic principle of natural justice requires that the person being proceeded against has to be furnished with copies of the material (whether in the form of documents or statements) gathered against such person and which is being relied upon by the authority which is prosecuting such person. This may, in a given case, and if the prosecution or agency makes out a case in that behalf, be subject to safeguards requiring the person to maintain the confidentiality of such document depending on their nature and contents. But to say that the person being prosecuted or proceeded against can only be ‘shown’ such documents, but not provided copies thereof is untenable even on a plain reading of Article 26 (2) of the OECD Model Convention.”
Directing the authorities to issue the documents required by the petitioners, the division bench comprising of Justice S.Muralidhar and Justice Anil Kumar Chawla said that “as regards the contention that a SCN is not required to be issued, it is obvious that the Department itself recognises the importance of complying with the rules of natural justice and has therefore rightly issued the SCN to the Petitioners, which has to be responded to by them. Indeed, for an effective response, the Petitioners would be required not merely to be ‘shown’ the material relied upon in the SCN but with copies thereof. This would include their own statements, documents seized during the search and documents gathered from other sources including statements of bank accounts, relied upon against them to be provided copies thereof. Such a requirement inheres in the principles of natural justice and would be applicable even if the statute governing the proceedings does not specifically mandate it.”
Read the full text of the Order below.
