Gajendragadkar, J.

1. A criminal conspiracy to which according to the prosecution. M. G. Agarwal, M. K. Kulkarni and N. Laxminarayan hereafter called accused Nos. 1,. 2 and 3 respectively, were parties between December, 1954 and June, 1955 at Bombay has given rise to the criminal proceedings from which the two present appeals arise. At the relevant time, the three accused persons were attached to the office of the Income-tax Officer, Ward No. A-III in Greater Bombay. Accused No. 1 was designated as the First Income-tax Officer, and accused Nos. 2 and 3 worked under him as second and third Assessment Clerks respectively. The main charge against these persons was that during the relevant period, they had entered into a criminal conspiracy by agreeing to do or use to be done illegal acts by corrupt and illegal means and by abusing their position as public servants to obtain for themselves pecuniary advantage in the form of income-tax refund orders and this criminal object was achieved by issuing the said refund orders in the names of persons who either did not exist or were not assessees entitled to such refunds. The prosecution case was that after the said refund orders were thus fraudulently issued, they were fraudently cashed and illegally misappropriated. The ten persons in whose names these refund orders were fraudulently issued were, G. M. Thomas, P. N. Swamy, K. S. Patel, S. R. Bhandarkar S. P. Jain, D. M. Joshi, C. B. Kharkar, Ramnath Gupta, V. M. Deasai and K. V. Rao. It appears that twenty-five bogus vouchers were issued in respect of these ten fictitious cases; eleven accounts were fraudulently opened in different Banks in Bombay and misappropriation to the extent of Rs. 54,000/- has hereby been committed. That, in substance, is the main charge which was levelled against the three accused persons.

2. Nine other subsidiary charges were also framed against them. Charges 2, 3 and 4 were in respect of the income-tax refund order issued on the 7th January, 1955 in favour of Mr. G. M. Thomas. The prosecution alleged that by their several acts in respect of the issuance of this refund order, the three accused persons had committed offences under Ss. 467 and 471 read with S. 34 I.P.C. as well as section 5(2) of the Prevention of Corruption Act read with S. 5 (1) (d) of the said Act and S. 34 of the Indian Penal Code. Similiarly charges 5.6 and 7 were framed under the same sections respectively in regard to the income-tax refund order issued in favour of Mr. G. M. Thomas on the 2nd April, 1955. In regard to the income-tax refund order isued in favour Mr. S. R. Bhandarkar on 2nd April, 1955 charges 8, 9 and 10 were framed under the said respective sections. That is how the case against the three accused persons under ten charges was tried by the Special Judge, Greater Bombay.

3. It would thus be seen that in substance, the prosecution case is that in order to carry out the criminal object of the conspiracy, the three accused persons adopted a very cleaver and ingenious modus operandi in defrauding the public treasury. They decided to take adequate steps to issue income-tax refund orders in the names of non-existing persons and to misappropriate the amounts by encashing the said refund certificates issued in pursuance of the said refund orders. In furtherance of the conspiracy and in furtherance of the common intention of all the conspirators, steps were taken to forge the signatures of the said fictitious persons as claimants wherever necessary, to prepare some of the supporting documents and to deal with the cases as though they were cases of genuine assessees submitting a return and making a claim for refund. It is by adopting this clever device that all the accused persons have succeeded in misappropriating such a large amount as R. 54,000/-

4. It appears that when a return or refund application is received in the Income-tax Office, it first goes to the assessment refund clerk who, in due course, puts it up for orders before the Income-tax Officer. In ordinary course, the Income-tax Officer, sends a notice to the assessee examines him and the accounts produced by him to see if the return is correct. That done, an assessment order is passed by the Income-tax Officer. Thereafter a form known as I.T. 30 form is prepared. This form contains several columns which when filled in give details about the income-tax payable by the assessee, the tax paid by him the refund ordered by the Income-tax Officer or the collection demanded by him. After this form is duly filled, it is sent to another clerk for preparing the refund order. At that stage, the refund order is prepared and the said order together with the demand and collection register and I. T. form 30 are sent back to the Income-tax Officer who examines the record and signs the refund order and the I. T. form 30 and himself makes or causes to be made an entry in the demand and collection register. At this time, he also cancels the refund certificates, such as dividend warrants. The Income-Tax Officer also receive the advice memo prepared by the refund clerk and signs it. The said memo is sent to the Reserve Bank and the refund order is sent to the assessee. After the refund voucher is cashed by the Reserve Bank, the advice memo is received back in the income-tax Office. It is thereafter that an entry is made in the Daily Refund Register. The prosecution case is that the conspirators purported to adopt all steps which they deemed necessary to carry out their criminal object in order formally to comply with the procedure prescribed by the department in making refund orders.

5. At this stage, it is relevant to states briefly how, according to the prosecution, the fraud of the conspirators was discovered. In April, 1955, Mr. Sundararajan who was then the Commissioner of Income-tax, Bombay City received a report that many irregularities were being committed in respect of refund orders issued by A-III Ward. On receiving this report he told Mr. Gharpure who was the Inspecting Assistant Commissioner of Income-tax A-Range, to carry out an inspection of the work of accused No. 1 He, however, cautioned Mr. Gharpure to carry out his assignment as if he was making an inspection in the normal course in order that no suspicion should arise in the mind of accused No. 1. Mr. Gharpure accordingly made inspection and submitted his report on the 6th June, 1955. It is common ground that Mr. Gharpure was not able to discover any fraud.

6. On the 10th June, 1955, Mr. Sundararajan asked Mr. Gharpure to produce before him all the refund books kept in A-III Ward. They were accordingly produced before him. On examining these books, Mr. Sundararajan found certain suspicious features. He came across one counter-foil of the refund order in the name of G. M. Thomas and he noticed that the relevant postal acknowledgment did not bear any postal stamp and presented a clean and fresh appearance. That appeared to Mr. Sundararajan to be suspicions. He also found that a number of refunds were made in round figures which was very unusual. The files showed that on the back of the counter-foils the postal acknowledgments were not stuck up nor were advice notes stuck up. His suspicions having been raised by these unusual features of the files, Mr. Sundararajan conducted a further scrutiny of the six counter-foil books particularly to find out whether the refund orders were in respect of round figures and he found that such refund orders had been passed in the names of Messrs G. M. Thomas, K. S. Patel, P. N. Swamy, D. N. Joshi and S. R. Bhandarkar. After the refund orders were uncashed, they were sent to the Accountant-Generals Office by the Reserve Bank and so Mr. Sundararajan thought that he could get them from the said office. All these happened in the evening of the 10th June 1955.

7. On the 11th June 1955, which was Saturday, Mr. Sundararajan called for the income- tax files of some of the persons named above including G. M. Thomas and K. S. Patel along with the files of twenty other regular assessees. The files of the twenty regular assessees were submitted to him but not of the ten fictitious persons. On enquiry, he was told that those files were not available. The non-production of the said files confirmed his suspicion that something irregular must have happened in respect of them. That is why he sent for accused No. 1 at 2 p.m. but he was no in his office. He came at 3 p.m. Mr. Sundararajan showed him the relevant counter-foils and examined him. The statement made by accused No. 1 was duly recorded by Mr. Sundararajan. As a result of the enquiry made by him, Mr. Sundararajan was satisfied that the three accused persons had fraudulently brought into existence several documents as a result of which a large amount had been misappropriated, and so, he requested the Central Board of Revenue to suspend accused No. 1.

8. At that stage, Mr. Sundararajan naturally wanted to search the office of A-III Ward, but he could not carry out the search since he was told that the key of the A-III Ward Office had been taken away by accused No.3. He then left instructions with the police guard of his office that nobody should be allowed to enter the room of A-III Ward without his permission. Next day, he attended his office, he got the office of A-III Ward sealed and left word with the Inspector on duty that if any person came to work in that officer thereafter it should be reported to him. After Mr. Sundararajan reached home, he received a telephone message that accused No. 3 had come to A-III Ward Office with the keys. Mr. Sundararajan directed the Inspector to take charge of the keys from accused No. 3 and ask him to attend office the next day.

9. Next day was a Monday (13-6-1955). On that day, Mr. Sundararajan accompanied by certain other officers went to the officer of A-III Ward, opened the seal and the lock and after going inside, attached six registers. He also made a search for the assessment records of the ten persons in question but he did not find them. He then transferred accused No. l to an unimportant charge and instructed the Banks that no withdrawals should be allowed from any of the eleven accounts, since the said accounts appeared to him to be suspicious. He then sent for accused No. 3 and examined him. He also sent for accused No. 2 but he was not available since he had gone on leave. He directed one of his inspectors to enquire whether the said ten persons were real persons or were merely fictitious names. All this happened on the 13th June, 1955.

10. On the 14th June, 1955, Mr. Sundararajan went to A-III Ward Office along with accused No. 3. He wanted to search for the missing papers, viz., the assessment record of the ten persons in question. Accused No. 3 waited for some time and then opened accused No. 2s table and took out some papers. A list of these papers was made and they were taken in charge. This list has been signed by Mr. Sundararajan and the officers who accompanied him as well as by accused No. 3. Thereafter, accused Nos. 2 and 3 were suspended and as a result of the investigation which followed, all the three accused persons were put up for their trial before the learned Special Judge for Greater Bombay on the charges already indicated.

11. Before the learned trial Judge, accused No. 3 pleaded guilty to all the charged framed against him, whereas accused Nos. 1 and 2 denied that they had anything to do with the alleged commission of the offences charged.

12. The prosecution sought to prove its case against all the three persons by producing before the learned trial Judge the relevant documents including the files kept in A-III Ward office, and it examined four witnesses from the department for the purpose of showing the procedure that is followed in passing assessment orders and granting refunds and with the object of showing that the conspiracy could not have succeeded without the active assistance and co-operation of accused No. 1. These witnesses are Sundararajan, P. W. 1, Nagwekar, P. W. 2, Subramanian, P. W. 5 and Downak, P. W. 21. It also examined Das Gupta, P. W. 26, to prove the handwriting of the accused person. Eleven other witnesses were examined to prove the identity of accused Nos.. 2 and 3 in respect of the steps taken by them to open accounts in different banks in order to encash the refund vouchers issued in pursuance of the refund orders passed by accused No. 1.

13. The learned trial Judge held that the evidence adduced by the prosecution did not establish beyond a reasonable doubt the, existence of the criminal conspiracy between the three accused. He was not inclined to hold that the ten alleged persons were non-existent. Even so, he proceeded to deal with the case on the basis that the ten persons were non-assessees and yet the refund orders had been passed in their favour. According to the learned trial Judge, accused No. 1 may have innocently signed the relevant documents without looking to them in a hurry to dispose of cases, placing confidence in his staff, and so, it would be difficult to hold that he was a member of the conspiracy. The utmost, said the learned Judge, that can be argued against him is that he was negligent. That is how he acquitted accused No. I of the principal charge of conspiracy under section 120-B and as a result, the other charges as well. In regard to accused No.2, the learned Judge was likewise not satisfied that the evidence, adduced by the prosecution to prove his signatures on the relevant documents established the fact that he had signed those documents and he was not impressed by the other evidence led before him to show that he assisted accused No. 3 in the matter encashing the refund vouchers. On these findings accused No. 2 was acquitted of all the charges framed against him. Since accused No. 3 had pleaded guilty to the charges, the leaned Judge convicted him under sections 467, 471 of the I. P. C and S. 5(2) of the Prevention of Corruption Act and sentenced him to different terms of imprisonment which were ordered to run concurrently. He, however, acquitted accused No. 3 so far as the charge of conspiracy was concerned and he acquitted accused Nos. 1 and 2 of all the offences.

14. Against the order of acquittal passed by the learned Judge in favour of accused Nos. 1 and 2, the State of Maharashtra preferred an appeal in the Bombay High Court and this appeal succeeded. The High Court has found that the learned trial Judge misdirected himself by assuming that accused No. 1 had pleaded that he had negligently signed the relevant documents and passed the relevant orders in a hurry, placing confidence in his staff. The High Court has pointed out that far from pleading negligence, accused No. 1 had definitely stated in his written statement filed in this trial Court that before he directed the issue of refund in the ten cases, he had examined the files containing the supporting documents and had satisfied himself that it was proper to allow the refund in each one of those cases. This position was conceded by the learned Advocate who appeared for accused No.1 in the High Court. The High Court then examined the question as to whether the ten assessees were existing persons or were fictitious names and it came to the conclusion that the ten names given for the eleven accounts in which refund orders were passed were fictitious names. The High Court then examined the circumstantial evidence on which the prosecution relied in support and proof of its main charge of conspiracy between the three accused persons and it came to the conclusion that the said charge had been proved against all the three accused persons beyond a reasonable doubt. That is how the High Court partially allowed the appeal preferred by the State and convicted all the three accused persons under section 120B of the Indian Penal Code. It also convicted accused No. 2 of the offences under Ss. 467, 471, I.P.C., and S. 5(2) of the Prevention of Corruption Act. In regard to the other offences charged, the order of acquittal was confirmed. Having convicted accused Nos. 1 and 2 under Section 120-B, the High Court has sentenced each one of them to suffer rigorous imprisonment for 18 months for the said offence. Accused No. 2 has also been directed to suffer R. I. for 18 months in respect of each of the offences under Ss. 467, 471, I.P.C., and S. 5 (2) of the Prevention of Corruption Act. These sentences are ordered to run concurrently with the sentence ordered under S. 120-B. It is against this order of conviction and sentence passed by the High Court in appeal that accused Nos. 1 and 2 have come to this Court by special leave by their appeals Nos. 176 of 1959 and 40 of 1960.

15. Since the impugned order of conviction and sentence was passed against the appellants by the High Court in exercise of its powers under S. 423 of the Criminal Procedure Code while hearing an appeal against their acquittal, the first question which calls for our decision relates to the extent of the High Courts powers in interfering with orders of acquittal in appeal. This question has been discussed and considered in several judicial decisions both by the Privy Council and this Court. In dealing with the different aspects of the problem raised by the construction of S. 423, emphasis has sometimes shifted from one aspect to the other and that is likely to create a doubt about the true scope and effect of the relevant provisions contained in S. 423. Therefore, we propose to deal with that point and state the position very briefly.

16. Section 423 (1) prescribes the powers of the appellate Court in disposing of appeals preferred before it and clauses (a) and (b) deal with appeals against acquittals and appeals against convictions respectively. There is no doubt that the power conferred by clause (a) which deals with an appeal against an order of acquittal is as wide as the power conferred by clause (b) which deals with an appeal against an order of conviction, and so, it is obvious that the High Courts powers in dealing with criminal appeals are equally wide whether the appeal in question is one against acquittal or against conviction. That is one aspect of the question. The other aspect of the question centres round the approach which the High Court adopts in dealing with appeals against orders of acquittal. In dealing with such appeals, the High Court naturally bears in mind the presumption of innocence in favour of an accused person and cannot lose sight of the fact that the said presumption is strengthened by the order of acquittal passed in his favour by the trial Court and so, the fact that the accused person is entitled to the benefit of a reasonable doubt will always be present in the mind of the High Court when it deals with the merits of the case. As an appellate Court the High Court is generally slow in disturbing the finding of fact recorded by the trial Court, particularly when the said finding is based on an appreciation of oral evidence because the trial Court has the advantage of watching the demeanour of the witnesses who have given evidence. Thus, though the powers of the High Court in dealing with an appeal against acquittal are as wide as those which it has in dealing with an appeal against conviction, in dealing with the former class of appeals, its approach is governed by the overriding consideration flowing from the presumption of innocence. Sometimes, the width of the power is emphasized, while on other occasions, the necessity to adopt a cautious approach in dealing with appeals against acquittals is emphasised, and the emphasis is expressed in different words or phrases used from time to time. But the true legal position is that however circumspect and cautious the approach of the High Court may be in dealing with appeals against acquittals, it is undoubtedly entitled to reach its own conclusions upon the evidence adduced by the prosecution in respect of the guilt or innocence of the accused. This position has been clarified by the Privy Council in Sheo Swarup v. Emperor, 61 Ind App 398: (AIR 1934 PC 227 [LQ/PC/1934/75] (2)) and Nur Mohammad v. Emperor, AIR 1945 PC 151.

17. In some of the earlier decisions of this Court, however, in emphasising the importance of adopting a cautious approach in dealing with appeals against acquittals, it was observed that the presumption of innocence is reinforced by the order of acquittal and so, "the findings of the trial Court which had the advantage of seeing the witnesses and hearing their evidence can be reversed only for very substantial and compelling reasons" : vide Surajpal Singh v. The State, 1952-3 SCR 193 [LQ/SC/1966/2] at p. 201: (AIR 1952 SC 52 [LQ/SC/1951/77] at p. 54). Similarly in Ajmer Singh v. State of Punjab, 1953 SCR 418 [LQ/SC/1952/92] : (AIR 1953 SC 76 [LQ/SC/1952/92] ), it was observed that the interference of the High Court in an appeal against the order of acquittal would be justified only if there are "very substantial and compelling reasons to do so." In some other decisions, it has been stated that an order of acquittal can be reversed only for "good and sufficiently cogent reasons" or for "strong reasons." In appreciating the effect of these observations, it must be remembered that these observations were not intended to lay down a rigid or inflexible rule which should govern the decision of the High Court in appeals against acquittals. They were not intended and should not be read to have intended to introduce an additional condition in clause (a) of section 423 (I) of the Code.All that the said observations are intended to emphasise is that the approach of the High Court in dealing with an appeal against acquittal ought to be cautious because as Lord Russell observed in the case of Sheo Swarup,61 Ind App 398 :(AIR 1934 PC 227 [LQ/PC/1934/75] (2)) the presumption of innocence in favour of the accused "is not certainly weakened by the fact that he has been acquitted at his trial." Therefore the test suggested by the expression "substantial and compelling reasons" should not be construed as a formula which has to be rigidly applied in every case. That is the effect of the recent decisions of this Court, for instance, in Sanwat Singh v. State of Rajasthan, AIR 1961 SC 715 [LQ/SC/1960/332] , and Harbans Singh v. State of Punjab, AIR 1962 SC 439 [LQ/SC/1961/341] ; and so, it is not necessary that before reversing a judgment of acquittal, the High Court must necessarily characterise the findings recorded therein as perverse. Therefore, the question which we have to ask ourselves in the present appeals is whether on the material produced by the prosecution, the High Court was justified in reaching the conclusion that the prosecution case against the appellants had been proved beyond a reasonable doubt, and that the contrary view taken by the trial Court was erroneous. In answering this question, we would, not doubt, consider the salient and broad features of the evidence in order to appreciate the grievance made by the appellants against the conclusions of the High Court. But under Art. 136 we would ordinarily be reluctant to interfere with the findings of fact recorded by the High Court particularly where the said findings are based on appreciation of oral evidence.

18. There is another point of law which must be considered before dealing with the evidence in this case. The prosecution case against accused No. 1 rests on circumstantial evidence. The main charge of conspiracy under section 120-B is sought to be established by the alleged conduct of the conspirators and so far as accused No. 1 is concerned, that rests on circumstantial evidence alone. It is a well-established rule in criminal jurisprudence that circumstantial evidence can be reasonably made the basis of an accused persons conviction if it is of such a character that it is wholly inconsistent with the innocence of the accused and is consistent only with his guilt. If, the circumstances proved in the case are consistent either with the innocence of the accused or with his guilt, then the accused is entitled to the benefit of doubt. There is no doubt or dispute about this position. But in applying this principle, it is necessary to distinguish between facts which may be called primary or basic on the one hand and inference of facts to be drawn from them on the other. In regard to the proof of basic or primary facts, the Courts has to judge the evidence in the ordinary way, and in the appreciation of evidence in respect of the proof of these basic or primary facts there is no scope for the application of the doctrine of benefit of doubt. The Court considers the evidence and decides whether that evidence proves a particular fact or not. When it is held that a certain fact is proved; the question arises whether that fact leads to the inference of guilt of the accused person or not, and in dealing with this aspect of the problem, the doctrine of benefit of doubt would apply and an inference of guilt can be drawn only if the proved fact is wholly inconsistent with the innocence of the accused and is consistent only with his guilt. It is in the light of this legal position that the evidence in the present case has to be appreciated.

19. Let us first consider that were the duties assigned to accused Nos. 1, 2 and 3 respectively. Once the duties of the respective accused persons are determined, it may facilitate the proper appreciation of the evidence adduced by the prosecution. According to Mr. Sundararajan (P. W. 1), when a file is put up before the Income-tax Officer for assessment, be has to verify the validity of the return especially before he makes an order of assessment. Generally when a return submitted by a person who had not been assessed to tax before is put up before the Income-tax Officer, he has to issue notice to him under S. 23(2). The issue of the notice is not imperative, but that is done in a large majority of cases, almost 99 per cent. The I. T. O. then examines the assessee and the accounts produced by him and makes sure that the income-tax return is correct. If it is not correct, he makes suitable additions and passes the assessment order. It would be noticed that when an assessee makes a return for the first time, it is incumbent on the I. T. O. to enquire whether the assessee has reached a taxable income for the first time in the year in question and that would necessarily involve an enquiry into the financial resources of the assessee during the previous years. That is why though, in theory, discretion is left to the I. T. O. either to issue a notice to the new assessee or not; in practice, a new assessee is almost always given the said notice.

20. After the assessment order is passed by the Income-tax Officer, papers go back to the office and then the I. T. 30 form is prepared. Then the form goes to another clerk for the preparation of the refund order. Then the I. T. 30 form, the refund order and the demand and collection register are together sent to the I. T. O. According to the rules and instructions an Income-tax Officer has, before issuing a refund order, to scrutinise the return and see that it is supported by tax deduction certificates or dividend warrant certificates. Before issuing a refund order under S. 18-A of the Income-tax Act, he has to see that the amount has been actually paid into the treasury and that the original treasury receipt is on the file. When he signs the refund order, he has to cancel and initial the tax deduction certificate, dividend warrant certificate and the treasury receipt. On the form of the refund order, three certificates have been mentioned and they must be complied with and no officer should sign the refund order unless he is satisfied about the compliance regarding the three certificates. That is the procedure deposed to by Mr. Sundararajan in regard to the making of a refund order.

21. Along with the refund order an advice memo is also received by the I. T. O. Like the refund order, this advice memo is also signed by him. This memo is then sent to the Reserve Bank and the refund order is sent normally by registered post to the assessee. Sometimes it can be handed over to him personally. The I. T. 30 form goes through the Head Clerk. After the refund voucher is cashed by the Reserve Bank, the advice memo is received back by the Head Clerk. The statistical clerk and not the Head Clerk would then make an entry in the Daily Refund Register. At the end of the month, the figures of collection and refund are to be tallied with the corresponding figures of the Accountant-General, of collections and refunds. Mr. Sundararajan conceded that such tallying sometimes remains in arrears even for two or three months.

22. Mr. Sundararajan agreed that broadly speaking, it is the duty of the Head Clerk to check all refund cases though, according to him, practice changes from ward to ward. It is the duty of the checking officer to ascertain whether the calculation is correct according to the documents referred to therein. This checking by the Head Clerk should take place within a day or two. If there are major mistakes or anything materially wrong, it is the duty of the Head Clerk to make a report to the Income-tax Officer. It is true that except for his signatures, the Income-tax Officer has to write nothing on the income-tax refund form. On the refund form are printed one certificate and three clauses thereunder. If the file of the assessee is put up before the Income-tax Officer and the file contains the return of income, dividend warrants and also the assessment order, then the first clause of the certificate would be deemed to be verified. The second clause can be deemed to be satisfied if the dividend warrants or other tax deduction certificate are there and the third clause would be deemed to be satisfied if the I. T. O. initials the cage on I. T. 30 form and also cancels the dividend warrant certificate and the tax deduction certificate. The evidence of the witness shows that when a refund order is made, the person who claims the refund, his claim to the refund, his title, his interest and his identity to claim and receive the refund, are also factors to be considered; and they have to be considered not by the clerk but by the I. T. O. That, in brief, is the effect of the evidence given by Mr. Sundararajan.

23. Mr. Subrahmanian. P. W. 5, who was working as an Income-tax Officer in Bombay City until 22nd May, 1958, has given similar evidence. In regard to a claim for refund of Income-tax in the case of dividends and securities the claimant would have to submit a return of income in a prescribed form and make a refund application and enclose with the return tax deduction certificates from interests and securities, dividend warrant certificates in respect of dividends. If an assessee has income only from interest on securities and dividends, the witness stated no question of his paying advance tax arises even if he is an old assessee. If the assessees total income excluding interest on securities and salary and dividends exceeds Rs. 6,000/- in the last completed assessment, the I. T.O. may issue a notice to the assessee for paying advance tax, and it is only where such advance tax is paid in response to the notice issued by the I. T. O. that a question of S. 18-A refund can arise. Mr. Subrahmanian clearly stated that if a return is received from a new assessee showing income from dividends, the I.T.O. would have to satisfy himself about the correctness of the return and for that purpose, he will have to issue a notice under Ss. 22(4) and 22 (2) of the Income-tax Act. It is not difficult to find out whether an assessee is a new assessee or an old assessee because the department keeps a General Index Register up to date, arranged in an alphabetical order. The Register is kept consecutively for five years and each assessee is given a number in it. The number shows the ward in which the assessee is assessed. In that register, an entry is required to be made showing that notice had been given to the assessee to submit a return. The witness stated that a dividend warrant which has to accompany a claim for refund is on a printed form. It normally consists of two parts divided from each other by perforation. The upper part is an intimation to the share-holder that a certain dividend is being paid and that tax has been paid in respect thereof. One part is given to the Banker for recovering the dividend minus the income tax paid, and the other part will be retained by the share-holder and is given to the I. T. O. either for claiming deduction or for a refund.

24. Mr. Nagwekar, P. W. 2, who was working in the A-III Ward office as the first assessment Clerk at the relevant time, has deposed to his known duties and to the duties performed by accused Nos. 2 and 3. It was the duty of the witness to prepare I. T. 30 forms and to issue demand notices and to prepare them. He had to prepare the challans and to make the adjustment memos in respect of the assessees who had made advance payments under S. 18-A of the Income-tax Act. Accused No. 2 had to check the I. T. 30 forms in category 11 cases which means cases in which the income of the assessee from business is between Rs.10,000/- to Rs. 25,000/-. It was his duty to maintain demand and collection registers and to enter cases in that register, also to write refund orders, both regular and under S. 18-A. Accused No. 3 was maintaining all the files. He was also maintaining the General Index Register.

25. The last witness on this subject is Downak, P.W. 21. This witness had been the Head Clerk in the department since 1954 and he had been working all along in A-III Ward. According to him all refund cases had to be checked by the Head Clerk.He had to inspect every refund case but not every refund voucher.That was the duty of the statistical clerk. He complained that the statistical clerk was not discharging his duties properly, though he conceded that once the I.T.O. signs the cases in the I. T. 30 forms, no question of checking really arises. The witness spoke to the fact that the demand and collection registers were written partly by Nagwekar and partly by accused No. 2 This witness as well as Nagwekar proved the writing of Nos. 2 and 3 on the several documents produced by the prosecution.

26. It would thus be seen that the evidence given by the departmental witnesses examined by the prosecution leaves no doubt that the order of assessment and the order of refund are the exclusive functions of the I. T.O., and in discharging his duties in that behalf, he had to apply his mind to the relevant questions before he makes the orders. If a return is submitted by a new assessee, he has obviously to satisfy himself that the return is properly made and that the assessee has not escaped taxation for previous years. If a claim for refund is made, he has similarly to satisfy himself that the claim is justified, whether the refund claimed is an ordinary refund or a refund for advance payment of income-tax made under S. 18-A. It is in the light of this position disclosed by these witnesses that we must now consider what defence accused No. 1 made in the present case.

27. The case made by accused No. 1 in his written statement before the trial Court was that when the cases of the ten assessees were put up before him, the papers were complete in all respects and he directed the issue of the refund after satisfying himself that it was proper to do so. It was presumably because accused No.1 knew the imperative and mandatory character of the obligation imposed on him by the departmental rules in dealing with assessment orders and refund orders that he made a specific case that he had complied with the said rules and had duly satisfied himself before he passed the impugned order of assessment or refund. Indeed, accused No. 1 also made it clear that accused No. 3 must have fabricated all the relevant papers supporting the claim for refund made by the ten assessees and his only fault was that he did not discover that the supporting papers contained in the respective files were fabricated documents. In regard to the 18A refunds, he stated that 18A challans were also in the files submitted to him. Except for two cases, in all other cases there are no assessment orders and accused No. 1 pleaded that in small cases, elaborate orders need not have been passed, and in that connection, he referred to the statement of Mr. Subramanian that no order is necessary where the case is disposed of under S. 23(1). It is thus clear that the High Court was right in holding that the main plea made by accused No. 1 in defence at the trial was not one of negligence but is was a plea that he had fully complied with the rules and had been persuaded to pass the impugned orders because accused No. 3 had put up before him complete files containing supporting documents which, it is now discovered, were fabricated.

28. When the matter reached the High Court accused No. 1 substantially changed his plea. At the appellate stage, his case was that he had not carefully scrutinised the fees to examine, whether the supporting documents had been duly submitted to him before making the orders for refund because he had faith in his clerks and he did not think that they would deceive him. Incidentally, he also referred to the fact that he was not keeping good health and under pressure of work, he passed the impugned orders hurriedly without due examination of the relevant papers. The High Court was not disposed to accept this plea because it held that having regard to the mandatory character of the duties imposed on accused No. 1 in the matter of making orders of refund the plea of negligence would not avail him and so, if the files were not complete when he made the said orders, he must have done so because he was a member of the conspiracy.

29. In order to meet this finding of the High Court, Mr. Chari has put his clients case somewhat differently before us. He argues that in determining the scope and character of the duties imposed on the Income-tax Officer in the matter of refunds, it would be safer to rely on the rules published in the Income-tax Inspectors Manual rather than on the statements made by interested witnesses and he has drawn our attention to one rule which divides the assessment cases into five categories. The five categories are:

(i) cases with business income of Rs. 25,000/-or above;

(ii) cases with business income between Rs. 10,000/- and Rs. 25,000/-;

(iii) cases with business income between Rs. 5,000/- and Rs. 10,000/-;

(iv)cases other than categories (i), (ii), (iii) and (v);

(v) salary, refund and no assessment cases.

The Manual further provides that by far the largest amount of the total income-tax revenue is derived from the cases failing in categories (i) and (ii) and responsibility for proper assessments in these cases devolves wholly on the Income Tax Officer. It then adds that normally, such cases will not be entrusted to an Inspector for the examination of accounts, except to a limited and specified extent. Therefore, so far as the examination of the account-books is concerned, the Inspectors responsibility mainly rests with respect to the cases falling under categories (iii) and (iv). Cases of category (v) excluding business cases, are not of any importance ordinarily and may be handled by a senior U.D.C. or Head Clerk but in really important cases, which should be very few in each ward, the clerk may have to consult the Inspector.

30. It is on this last part of the provision in the Manual in relation to the cases of category (v) that Mr. Chari strongly relies. He contends that refund cases fall under category (v) and since they are not business cases they have to be handled by a senior U.D.C. or Head Clerk and important amongst them have to be handled by the clerk in consultation with the Inspector. In other words, the argument is that disposal of cases of refund is left to the U.D.C. or Head Clerk ordinarily and in important cases the U.D.C. or the Head Clerk has to consult the Inspector before disposing of them. That being so, the I. T. O. is really not concerned with those cases. When refund cases have been dealt with by the U. D. C or the Head Clerk and papers are submitted to the I.T.O. for his orders, the submission of the papers is purely formal and the I.T.O. would be justified in signing the same without scrutinising the supporting papers or examine whether the refund order proposed for his signature is justified or not. If this argument is well founded, then the plea of negligence made by accused No. 1 would be considerably strengthened and the validity of the inference of guilt drawn by the High Court against him would be considerably impaired.

31. In our opinion, though the plea thus made by Mr. Chari appears prima facie to be attractive, it is really not supported by the provisions in the Circular on which it purports to rest. The latter portion of the provision in the circular refers to the examination of the accounts books and the mechanical part of calculations and it is in the context of the calculation part of the Income-tax Officers duty that there is a delegation to the U.D.C. or the Head Clerk. So far as the examination of the account books is concerned, the Inspector is responsible for cases falling under categories (iii) and (iv), and so far as the examination of the account books in cases falling under category (v) is concerned, it is the U.D.C. or the Head Clerk normally and the U.D.C. or the Head Clerk in consultation with the Inspector in important cases. The fact that the examination of accounts and the comparison of calculations which are a ministerial part of the work are left to the Inspector, the U. D. C. or the Head Clerk, does not mean that these officers are given the authority to decide the main point as to the admissibility of the claim for refund. That point still remains to be considered by the I.T.O. and the I.T.O. alone. Just as making an order of assessment is the exclusive function of the I.T.O., so making an order of refund either ordinary or 18-A is the exclusive function of the same officer, and that is the effect of the oral evidence adduced in the case, and the provisions of the Manual do not affect the validity of that evidence. Therefore, we are satisfied that the prosecution has established the fact that it was the duty of accused No. 1 as income-tax Officer in A-III Ward office to consider the whole matter before making an order of assessment or before granting a claim for refund. It is on that basis that the merits of the prosecution case on the charge of conspiracy have to be considered.

32. Before we deal with the merits, however, there are two other points which must be considered. Mr. Chari has made a grievance of the fact that Mr. Gharpure who held an enquiry at the instance of Mr. Sundararajan has not been examined in this case, and he contends that the failure of the prosecution to examine Mr. Gharpure has prejudiced the defence of accused No. 1. We have already noticed that Mr. Gharpure was asked to make an enquiry cautiously by Mr. Sundararajan and it is common ground between the prosecution and the defence that Mr. Gharpure did not discover any irregularity. It is not surprising that Mr. Gharpure should not have discovered any irregularity, because in trying to make the enquiry informally Mr. Gharpure appears to have trusted accused No. 3 more than he should have. No doubt, Mr. Gharpure wanted to give his inspection an appearance of a normal inspection not based on any reports against the working of A-III Ward Office; but in his anxiety to avoid any suspicious arising in the mind of accused No. 1, he virtually left it to accused No. 3 to send such files for his inspection as he may choose. Mr. Downaks evidence shows that all the files were in the physical custody of accused No. 3 and that when he received a word from Mr. Gharpure that papers should be sent to him for his inspection, he, in turn, used to call for papers from accused No. 3 and such of them as were sent by accused No. 3 were forwarded with a Peon to Mr. Gharpure. It is hardly necessary to observe that accused No. 3 must have taken pretty good care not to send any suspicious files to Mr. Gharpure and so, Mr. Gharpure discovered no irregularity.

33. It is in the light of the position that we have examine whether the grievance made by Mr. Chari against the prosecution for not examining Mr. Gharpure can be justified. The only point on which Mr. Gharpure could have been examined was that the files in question relating to the ten fictitious assessees were kept ostensibly in such a complete and perfect condition that even he could not discover the fraud, and if any of the offending files had, in fact, been sent to Mr. Gharpure, the point that Mr. Gharpure failed to discover the fraud may have been in favour of accused No. 1. The contention raised by Mr. Chari assumes two things. It assumes that the files in relation to the ten cases were complete and contained all supporting documents, and it further assumes that all or some of them had been sent to Mr. Gharpure for his inspection. The validity of the first assumption we will examine later. For the present, it is enough to state that on the evidence of Mr. Downak it is impossible to assume that any of the offending files could have reached Mr. Gharpure. Accused No. 3 obviously could not have taken the risk of sending those fees to Mr. Gharpure and that explains why Mr. Gharpure was unable to discover the fraud. Therefore, we do not think there is any substance in the grievance made by Mr. Chari on the ground that Mr. Gharpure had been deliberately kept back by the prosecution.

34. The next contention to which reference must be made at this stage is that accused No. 1s statement which was recorded by Mr. Sundararajan and Mr. Gharpure has been exhibited by the High Court in appeal, though it was not exhibited in the trial Court. It appears that when Mr. Sundararajan was examined, he deposed to the fact that he sent for accused No. 1 who saw him at 3 P. M. on the 11th June, 1955, and that he recorded his statement. Mr. Sundararajan added that accused No. 1 had made the statement and the witness had recorded it and that accused No. 1, the witness and Mr. Gharpure had signed it. Thus, it is clear that the. document which contains the record of the statement of accused No. 1 was duly proved by Mr. Sundararajan. At that stage, the learned counsel for defence told the learned trial Judge that they wanted to raise an objection as to the admissibility of the said statement and the learned Judge, therefore, ordered that the document should be exhibited later after hearing the defence on the question of its admissibility. It appears that no objection was raised subsequently against the admissibility of the document; even so, the document was not exhibited and the learned Judge has not referred to it in the course of his judgment.

35. In the High Court, after the appeal was argued for the prosecution by the learned Advocate-General an application was made on behalf of accused No. 1 in which it was stated that accused No. 1 desired to offer an explanation to the High Court in respect of his statement which was recorded by Mr. Sundararajan. In this application, accused No. 1 urged that since the document had not been exhibited, no occasion arose for cross-examining Mr. Sundararajan about it, and a request was made that Mr. Sundararajan and Mr. Gharpure should be called to give evidence and an opportunity should be afforded to accused No. 1 to cross-examine them. No order has been passed on this application but it appears that the High Court gave an opportunity to accused No. 1 to offer an explanation in respect of the said statement. In that statement, on several points the accused had pleaded inability to offer his explanation and the High Court put those points to accused No. 1 with a view to enable him to give an explanation if he so desired and the explanation given by accused No. 1 has been duly recorded by the High Court as his examination under S. 342 of the Criminal Procedure Code. It would thus be seen that in adopting the unusual course of examining accused No. 1 once again at the appellate stage, the High Court acted fairly by accused No. 1 and gave him no opportunity to offer additional explanation. The High Court, however, did not grant his request for calling Messrs. Sundararajan and Gharpure to give evidence. It is against the refusal of the High Court to call the said two witnesses that a grievance is made before us.

36. We are satisfied that there is no substance in the argument that Mr. Gharpure should have been called at the appellate stage and Mr. Sundararajan should have been recalled to give additional evidence in respect of the statement recorded by both of them. It would be noticed that accused No. 1 admits that the record of the statement is faithful and accurate and that all the answers which accused No. 1 is shown to have given to the questions put either by Sundararajan or Gharpure were given by him in fact in the form in which they were recorded. Indeed, after the statements was recorded, accused No. 1 had signed it with the endorsement that the answers recorded above were correct to the best of his knowledge and belief. Therefore, there can be no point at all in examining either Mr. Gharpure or Mr. Sundararajan in respect of this statement. Mr. Sundararajan had duly proved the recording of the statement and but for the objection which the defence wanted to raise about its admissibility after Mr. Sundararajan gave evidence, the document which had been proved would have gone on the record as an exhibit. No objection about the admissibility of the document was raised in the trial Court, in the High Court or even before us. That is why we think, the failure of the trial Court to make an order formally exhibiting the said document has been rightly cured by the High Court. Indeed, the explanation given by accused No. 1 in his examination by the High Court has itself been utilised by Mr. Chari in support of his argument. That is why we are not prepared to hold that the grievance made by Mr. Chari on this account is well founded.

37. That takes us to the question as to whether complete files in respect of the ten cases had been submitted to accused No. 1 before he made the respective orders of refund on them. Mr Charis main argument is that accused No. 3 had fabricated all the relevant documents which would have supported the claims for refund and if accused No. 1 was misled by these fabricated documents, that would amount to negligence no doubt, but it would not make him a co-conspirator with accused No. 3. In our opinion, it is very difficult to accept the theory that all the supporting documents could have been out in the respective files by accused No. 3. The refund ordered in all ten cases consists of refund ordinary and refund under S. 18-A. We have already noticed that in order to make a claim for refund, the claimant has to enclose with the return, tax deduction certificates from interests and securities and dividend warrant certificates in respect of dividends. In most of the cases, the source of income is dividends or securities, and so, the argument that all supporting papers were included in the files assumes that tax deduction certificates from interests and securities and dividends warrant certificates had been filed and that necessarily means that accused No. 3 got the relevant certificates duly printed. Of course, one cannot say that it is impossible to get these certificates printed, but one can safely say that it is extremely improbable. Then it is urged that it is not unlikely that in some of the cases certificates from genuine case papers may have been pushed in and the argument was that the names assigned to the fictitious persons may be common to genuine assessees and that may have enabled accused No. 3 to put in the relevant certificates to deceive accused No. 1. In regard to this assumption again, though one cannot say it is impossible, one is bound to say that it is extremely improbable and in dealing with these arguments, we must not forget that it was the duty of accused No. 1 to examine the papers carefully in order to satisfy himself that a refund should be ordered. In some cases where on the I. T. 30 forms advance payment of tax was not shown, it became all the more necessary to examine the supporting papers very carefully and it is not easy to imagine that a genuine paper borrowed from a genuine case could have deceived accused No. 1 if only he had looked at it a little carefully. Besides, after the supporting receipts are examined and the refund order is made, they have to be cancelled and that makes it impossible for the same receipts to be used twice over. That is another serious infirmity in the argument

38. In this connection, it would be relevant to consider whether accused No. 3 could have taken steps to destroy the relevant papers as suggested by Mr. Chari. It would be noticed that the argument that the full files were placed before accused No. 1 necessarily postulates that the relevant, receipts and other documents in the files have subsequently been destroyed, and so, it is permissible to find out why those documents should have been destroyed by accused No. 3 at all. If the relevant documents had been fabricated so well that accused No. 1 was misled by them, accused No. 3 would be interested in keeping the files on the record so that whoever examined the files would be likewise deceived and the fraud may not be discovered. The theory that the relevant documents were destroyed by accused No. 3 appears to be inconsistent with the ordinary course of conduct which accused No. 3 might not have adopted if he had really fabricated the said documents.

39. There is still another difficulty in accepting this theory of the destruction of the documents. We have already referred to the evidence given by Mr. Sundararajan in regard to the events that took place on the 11th June, 1955, and thereafter. That evidence clearly shows that Mr. Sundararajan moved so quickly and so unexpectedly that there was hardly any opportunity for accused No. 3 to destroy or remove any of the documents in the said files. Until the 11th June, nobody in the office of accused No. 1 had any suspicion that any investigation was being conducted by Mr. Sundararajan and from the 11th June, Mr. Sundararajan kept a tight hold over the office of accused No. 1. In fact on the 12th of June, 1955, which was a Sunday, accused No. 3 attempted to go into the office, but he was prevented and the key of the office which he carried was taken away from him. Thereafter, a close search was made by Mr. Sundararajan along with other officers of the department and the papers discovered in the search were duly listed and have been produced. Therefore, in our opinion, accused No. 3 could not have removed or destroyed any of the papers from the files even if he desired to do so, and that is another ground for rejecting the theory that the relevant papers had been put in the files when accused No. 1 made the orders of refund and they have been since then either removed or destroyed.

40. An examination of the contents of the papers whose list was prepared by Mr. Sundararajan after they were recovered, also leads to the same inference. Wherever relevant papers were put in files, the files have been recovered; wherever the papers were put in bunches, they have been recovered in bunches, and it is significant that they contained several supporting papers but did not contain the necessary receipts without which an order of refund could not have been made, and that shows that the receipts which would be printed documents had not been fabricated by accused No. 3 and were not included in the files when accused No. 1 passed the orders of refund. In that connection, it is of some importance to note that paying-in-slip dated June, 10, 1955, for Rs.4,256/9/- in regard to the account opened in the name of D. M. Joshi was also found in the papers recovered by the search. If accused No. 3 had got an opportunity to remove some of these papers, papers of this kind would have been the first to be removed by him, but, apparently, he was not able to touch this paper and it has been attached. Therefore, there can be no doubt that the files and bunches of papers in regard to 10 cases which are produced before the Court are in the same condition in which they were when they were put before accused No. 1 for making his orders of refund.

41. There is yet one more circumstance which is wholly destructive of the theory suggested by Mr. Chari that the relevant papers had been removed or destroyed. It appears that when Mr. Sundararajan sent for the files from A-III Ward office, he had asked that some of the offending files should be submitted to him and he was told that the files were not in the office but had been transferred to the BRCP office. On the 11th June when the statement of accused No. 1 was recorded by Mr. Sundararajan, he drew his attention to the fact that the relevant register contained an endorsement dated 30th April, 1955, that the three files relating to Mr. Thomas, Mr. Patel and Mr. Jani had been transferred to BRC. When accused No. 1 was questioned on this point, he said that the case of Mr. Thomas had been transferred and that the entry showed that the transfer had been made on the 30th April, 1955. He gave the same answer in regard to the files of Mr. Patel Mr. Sundararajan then told accused No. 1 that the enquiry made with B.S.D. office showed that the files in question had not been received by it and he was asked whether the case papers would, therefore, be in his office. His answer was, they must be in his office. It is remarkable that in the statement before Mr. Sundararajan accused No. 1 did not deny that an endorsement had been made showing that the three files had been transferred and accepted the responsibility for the said transfer. It was only when he realised that Mr. Sundararajan had enquired from the B.S.D. Officer and had found that the said files had not gone to that office that he felt that the admissions made by him would damage his case. That is why when he was examined by the High Court, he came out with the explanation that he trusted his clerk and assumed that the endorsement was genuine and true and so, he admitted that the files had been transferred. It is impossible to accept this explanation. Having regard to the statement made by accused No. 1 before Mr. Sundararajan, there can be no doubt whatever that accused No. 1 was a party to be endorsement made showing that the three files had been transferred and the obvious object of making the said endorsement was not to send the said files to Mr. Gharpure. If the files had been in perfect condition, accused No. 1 would not have thought of adopting this device. That is one conclusion which follows from his conduct and the other conclusion which inevitably follows is that accused No. 1 knowingly allowed an endorsement to be made with a view to keep back the files from Mr. Gharpure and that means he was as much interested in keeping the files back as accused No. 3 was. This endorsement therefore, plays a very important part in proving the prosecution case of conspiracy against accused No. 1. In the result, we must reject the contention raised by Mr. Chari that the files containing all the relevant papers including the printed receipts were placed before accused No. 1 before he passed the orders of refund and if that is so, it follows that without examining the supporting papers, accused No.1 chose to make the said orders of refund. If the duties imposed on accused No. 1 in respect of assessment orders and refund order mandatory, then his failure to examine the files would naturally support the prosecution case that he was deliberately ignoring the infirmities in the files and that was because he was a member of the conspiracy. Indeed, Mr. Chari did not seriously dispute the position that if his argument on the circular contained in the Manual did not succeed and if his contention that the files were complete when they were placed before accused No. 1 for making refund orders was rejected, then the conclusion of the High Court against accused No. 1 could not be successfully challenged by him.

42. In order to get a clear idea as to the modus operandi adopted by the conspirators, we would, as an illustration, trace the steps taken in pursuance of the conspiracy in regard to the case of Mr. Thomas. A return is alleged to have been submitted by Mr. Thomas for his income for the years 1953-54 and 1954-55 and along with the return, his address is also given as 87,Woodhouse Road, Bombay. The return shows that the only source of the assessees income was dividend and that source brought him Rs.4,912-for both the years. This return was submitted on the 22nd December, 1954. I.T. 30 form was then prepared showing the claim for refund, and in the cage made on his form calculations are made leading up to the conclusion that Rs.1102-3-0 were refundable as ordinary refund and Rs.4,500/ were refundable as 18-A refund. The I.T. 30 form is signed by accused No. 1 and the amount shown as refundable to the assesses is also initialled by him. This was done on the same day. Prior to the entry made in the cage on the I.T. 30 form, an assessment order is purported to have been passed which shows that accused No. 1 was satisfied that the assessee had no other income except from dividends, and so, the order was passed under section 23(1) of the Income-tax Act. Thereafter on the same day, a refund order was passed and signed by accused No. 1. In that connection, accused No. 1 certified that the tax concerning which refund was given had been credited in the treasury, that no refund order regarding the sum then in question had been previously granted and that the order of refund had been entered in the original file of assessment under his signature. These two certificates were preceded by the general certificate that Mr. Thomas was entitled to the refund for the year in question. On this refund order having been issued, the amount was duly paid to Mr. Thomas. The same procedure was followed in respect of the assessment and refund order for the year 1954-55. It would thus be obvious that accused No. 1 purported to pass an assessment order on the papers of Mr. Thomas, though Mr. Thomas was being assessed for the first time, without making any enquiry; he initialed the orders of refund both ordinary and 18-A and issued the three required certificates in support of the order of refund and it was only after he took these steps that the refund voucher was prepared and the amount was duly paid to a person who claimed to be Mr. Thomas. We have already seen that the oral evidence proves that accused No. 1 had to be vigilant in making an order of assessment and in directing a refund to be paid; and we have noticed that the certificates which he had to issue in support of the order of refund required that he ought to consult the necessary registers and satisfy himself that the refund was due. In regard to the refund under S. 18A, he had to enquire whether the advance tax had been paid and intimation had been received in that behalf from the Reserve Bank. It is in the light of these requirements that the conduct of accused No. 1. has to be judged.

43. Having considered the steps that were taken in the case of Mr. Thomas, it would be unnecessary to refer to similar steps taken in respect of nine other fictitious assessees. We might, however, broadly indicate how the refund orders came to be passed by accused No. 1 in respect of the remaining assessees. In regard to Patel, the ordinary and 18-A refund was allowed on January 14, 1955, and ordinary refund to Swamy was allowed on the 22nd January and to Bhandarkar on the same day. 18-A refund was allowed to Swamy on the 2nd April and on the same day ordinary refund was allowed to Bhandarkar and 18-A to Patel, Bhandarkar and Thomas, so that it would be noticed that the papers in regard to Thomas, Patel, Bhandarkar and Swamy came before accused No. 1 on more occasions than one and every time he has done what the object of the conspiracy required him to do.

44. Accused No. 1 had been called to work on special jury in the Sessions Court from the 19th April until 3rd May, 1955. After he came back, the process of issuing refund orders on fictitious assessments was resumed. On the 5th May, 1955, ordinary refund was allowed in respect of Rao, Kharkar, Gupta and Desai. All these were new assessees. Indeed, it is hardly necessary to point out that these fictitious persons could not have been assessed at any time and so, on paper, their cases must be dealt with as cases of new assessees. On the next day, i.e., 6th May, 18-A refund was allowed to Kharkar, Gupta, Desai and Rao. On the 3rd June, ordinary and 18-A refund was also allowed to Jani and ordinary and 18-A refund was also allowed to Joshi, so, that between the 23rd December, 1954, to the 3rd June, 1955, more than Rs.54,000/- have been ordered to be refunded to the ten fictitious assessees. That, broadly stated, is the nature of the modus operandi adopted by the conspirators.

45. This modus operandi necessarily involved the opening of bank accounts in the same fictitious names in order to encash the challans issued for refund; and accordingly, eleven accounts were opened, two in the name of Thomas and one each in the names of the remaining nine. These accounts were, in the majority of cases, opened after the refund order was passed. But it is significant that in two cases, they were opened even before the refund order was passed and that is one circumstance which strongly suggests that accused Nos. 2 and 3 who opened the accounts were absolutely certain that refund orders would be passed as soon as accused No. 1 was requested to do so; otherwise it is impossible to understand how they would have taken the steps of opening the account even before the refund order was passed. Two accounts were opened in the name of Thomas by accused No. 3 claiming to be Thomas and he was introduced as such to the two respective banks by Mr. Iyer, P.W. 11 and accused No. 2. Patels account was opened by accused No. 2 who was introduced as Patel by himself, signing in that name. Swamys account was opened by accused No. 3 who was introduced by accused No. 2 Bhandarkars account was opened by accused No. 2 who was introduced by Narasimhachary, P. W. 12, father of accused No. 3, Raos account was opened by accused no. 3 who was introduced by accused No. 2. Kharkars account was opened by accused No. 2 who was introduced by accused No. 3. Guptas account was opened by Vasantlal P. W. 24 who was introduced by accused No. 3. Desais account was opened by accused No. 3 who was introduced by accused No. 2. It is not proved who opened Janis account, though the person who opened it was introduced by accused No. 3; and Joshis account was opened by Vasantlal P.W. 24 who was introduced by accused No. 3. Thus, by opening these eleven accounts, the amounts ordered to be refunded to the fictitious assessees were deposited in these accounts and were withdrawn thereafter. That completes the story of this conspiracy.

46. Let us now briefly recapitulate the circumstances on which the prosecution relies. The first circumstance is that all the assessees were new assessees and in nine out of ten cases in question no enquiry was made by accused No. 1 before making the order of assessment. The evidence shows and that is indeed well known that when a voluntary return is made by an assessed showing a fairly large amount of income, an Income-tax Officer would naturally be put on an enquiry as to whether the assessee began to obtain the said income in the relevant year or was receiving the same income even before which had not been taxed. That is way Mr. Sundararajan stated that in 99% of the cases of new assessees, notice is invariably issued and an enquiry is held. In some of these cases, the income from dividends showed that the value of the property would be Rs.75,000/- or even more than a lakh of rupees, and that made the enquiry absolutely necessary. Accused No. 1 has admitted that he did not know any of these assessees, so that it could not be urged that he knew that the assessees had come into the said income during the relevant year.

47. The next circumstance is in relation to the S.18-A refunds allowed. It appears that out of 25 refunds allowed, 12 are 18-A and 13 are ordinary. In most of the cases, the income is either by way of dividends or by way of interest on Government securities. It is plain that section 18-A would be inapplicable to the cases of assessees whose sole source of income is dividends or interests on Government securities. It is only where a demand notice is served by the Income-tax Officer on the assessee as required by S. 18-A that advance payment is made by the assessee and in respect of it 18-A refund can be claimed. The accused was asked to explain how he came to make 18- A refund orders in these circumstances and he was unable to give any explanation. Mr. Chari has, no doubt, referred us to the statement made by Mr. Subrahmanian that it is quite possible that advance tax is paid for obtaining a tax clearance certificate for obtaining import / export licence or obtaining a passport for going abroad. The witness added that sometimes the parties make voluntary deposits towards the advance tax. Theoretically, it is possible that advance tax may be paid by a person who has not receive a notice under S. 18-A, and we may assume that if a refund is allowed to such an assesses, it may be called 18-A refund. But this theoretical possibility does not explain the very suspicious character of the conduct of accused No. 1 in allowing 18-A refunds in case after case in quick succession when he should have known that all the persons to whom refund was allowed were first assessees and their income was of such a character as not to attract the provisions of S. 18-A.

48. Then there is this circumstance to be considered that in regard to eight out of 10 cases no assessment orders have been passed. The assessment order passed on the papers of Thomas is signed but that on the papers of Patel is not even signed. Accused No. 1 explained that in small cases, assessment orders need not be passed. It is remarkable that in eight out of ten cases, he should have chosen to adopt that course. In the case of new assessees, it would, indeed, be strange if the Income-tax Officer makes no enquiry and passes no order of assessment at all and yet, he proceeds to deal with the claim for refund and to grant it straight-away. It is in that connection that the requirement of the certificates imposes on the Income-tax Officer a solemn duty to make 8 searching enquiry before a refund order is passed.

49. In five out of the ten cases, no entry is made in the cage showing advance payment of tax. These cases are in respect of Patel, Rao, Kharkar, Gupta and Desai. Clearly before 18-A refund was ordered by accused No. 1, he ought to have looked at the relevant registers and documents to satisfy himself that a claim for refund under S. 18A was justified. The case of Jani is still more surprising. The documents in regard to this case show that the order of assessment was passed under S. 23(3) and if the endorsements made therein are to be believed, an enquiry was held on 3rd June, 1955, followed by the usual refund order. Now, it is very difficult to imagine who could have appeared before accused No. 1 as Jani and what questions accused No. 1 could have asked him to satisfy himself about the correctness of the return submitted by him. When Mr. Sundararajan asked accused No. 1 about this enquiry, he was driven to say that the only information he could give on the point would be from the file. The case of Jani leaves no room for doubt that the entry about the enquiry under S. 23(3) is wholly untrue and that in order to avoid suspicions, accused No. 1 adopted the expedient of saying that in one of these cases an enquiry had been made.

50. In passing orders of refund under S. 18-A, the Income-lax Officer has to consult the demand and collection register. Evidence shows that after a refund order is passed and signed by the I. T. O. he has to make an entry in the demand and collection register, and he has to cancel the relevant certificates such as dividend warrants. It is by looking at the said registers that he can issue the three certificates to which we have already referred. In respect of 18-A refunds, after an advance payment of tax is made by the assesses, the Reserve Bank sends an intimation to the income-tax office and that is entered. This entry can be treated as a plus entry in favour of the assessee. After a refund order is issued and the voucher given to the assesses in that behalf is uncashed, intimation is again received that the refund has been paid to the assessee and that leads to a corresponding entry in the register which can be said to be a minus entry. The plus entry is thus cancelled and the account is closed. Now, it is impossible to understand now all this could have been done by accused No. 1 in respect of these fictitious assesses. Therefore, we are satisfied that the High Court was right in coming to the conclusions that accused No. 1 was a member of the conspiracy and that without his active assistance the other conspirators could not have earned out the object of the conspiracy and could not have successfully deprived the public treasury of such a large amount of Rs.54,000/-. In the result, the order of conviction and sentence imposed by the High Court on accused No. 1 is confirmed.

51. That takes us to the case of accused No. 2. The oral evidence given by Mr. Iyer, P.W. 3, by Mr. Narsimmachari, P.W. 12 and by Mr. Gadagkar, P.W.17, if believed, cleanly shows that he assisted accused No. 3 in opening several accounts. Miss Parikh no doubt attempted to argue the evidence of these witnesses should not be believed. But we are not impressed by this argument. Mr. Iyer and Mr. Gadagkar are obviously disinterested witnesses. Mr. Iyer spoke about the part played by accused No. 2 when account was opened in the name of Bhandarkar, and Mr. Gadagkar spoke about the part played by accused No. 2 when account was opened in the name of Thomas. The only comment made against Mr. Iyer is that it is unlikely that he would remember the face of accused No. 2 so as to be able to identify him without making a mistake. Mr. Iyer was the Agent of the Matunga Branch in 1955 and he has taken the oath that accused No. 2 is the person who pretended to be Bhandarkar. Mr. Gadagkar knew accused No. 2 four or five years before as a relative of Principal Deshpande of the Ruia College, and his evidence clearly shows that accused No. 2 played the part of a conspirator in assisting accused No. 3 to open the account in the Bank of Maharashtra Ltd., of which Mr. Gadagkar was the Manager. This evidence has been believed by the High Court and we see no reason to interfere with the conclusion of the High Court on that point. Then the signatures made by accused No. 2 on some of the in criminating documents in regard to the opening of the accounts in, fictitious names were proved by the handwriting expert, Mr. Das Gupta to have been made by accused No. 2. The learned Judges of the High Court were satisfied on looking at the said signatures that the evidence given by the expert can be safely accepted. Besides, several documents consisting of fees and bunches of papers were found in the drawer of the table which was in charge of accused No. 2. It cannot be suggested that accused No. 3, deliberately put those papers in the drawer of accused No. 2 because as we have already seen, none of the conspirators apprehended that Mr P. Sundararajan was on the track. All the relevant orders and advice memos were filled in by accused No. 2 and thereby he played his part in the conspiracy.

52. Therefore, we feel no hesitation on accepting the conclusion of the High Court, that accused No. 2 was also in the conspiracy along with accused Nos. 1 and 3. Therefore, the order of conviction and sentence passed by the High Court against accused No. 2 is also confirmed.

53. The result is, both the appeals fail and are dismissed. Accused No. 1 Agarwal to surrender to the bail.

54. Appeals dismissed.