SC Quashes Disproportionate Assets Case; Calls For Nuanced Approach In Long-Term Financial Reviews

The Supreme Court quashed an FIR against a former Assistant Excise Commissioner of Uttar Pradesh, accused of possessing disproportionate assets (DA) under the Prevention of Corruption Act, 1988. The Court emphasized that income tax returns filed by public servants should be presumed accurate unless specifically contested or proven false.

The Bench of Justice Vikram Nath and Justice Prasanna B. Varale highlighted the need for a "dynamic and nuanced approach" when assessing income and assets spanning decades, considering factors like inflation and natural appreciation of property values.

Case Background

The FIR alleged that the appellant, who served as an Assistant Excise Commissioner, had amassed disproportionate assets worth Rs. 21.74 lakh beyond his known sources of income between 1996 and 2020. According to the prosecution, his total assets amounted to Rs. 1,16,02,669, against an assessed legitimate income of Rs. 94,28,605.

Challenging the FIR, the appellant argued that the combined income declared in his and his wife’s income tax returns during the period exceeded the alleged disproportionate assets. Their declared income of Rs. 1,21,06,268 surpassed the prosecution's valuation of assets, which had excluded his wife’s income from yoga teaching, agriculture, rental earnings, and proceeds from jewelry sales and insurance policies.

After the Allahabad High Court dismissed his plea to quash the FIR, the appellant approached the Supreme Court.

Court's Observations

The Court accepted the appellant's contentions, noting that the income tax returns of the appellant and his wife were not disputed or alleged to be fabricated by the prosecution. It stated, “When a public servant is submitting income tax returns, they should be presumed to be true and correct unless proven otherwise. Considering the declared income of Rs. 1,21,06,268, it is evident that the assets of ₹1,16,02,669 alleged to be disproportionate are, in fact, accounted for.”

The Bench said, "We find it pertinent to note that in cases such as these where disproportionate assets are being dealt with, the amounts under scrutiny cannot be looked at in the same manner as one would do a Bank statement or daily ledger of income and expenditure. The scrutiny process cannot be as mechanical as that when you are examining declared assets and the income of an individual over such a long period of time. There has to be a certain margin that is given while making such an assessment as there are invariably economical fluctuations that would have taken place, especially over the course of nearly twenty-five years. It is crucial to have a nuanced appreciation of how time and economic conditions affect asset value in such cases."

Call for Dynamic Financial Assessment

The Court criticized the rigid and mechanical assessment of income and assets over a 25-year period, emphasizing the need to account for inflation, economic fluctuations, and the natural appreciation of property values.

“The notion that the declared value of an asset, such as property or gold, will remain static is flawed. A dynamic approach must be adopted to reflect the progression of time and changing economic conditions. This nuanced perspective is essential in cases where assets are examined over decades," it said.

Conclusion

Quashing the FIR, the Court concluded that the allegations lacked merit and constituted an abuse of legal process. "We find it appropriate to quash FIR No, 0002 of 2023 dated 17.10.2023 pending against the Appellant. Consequently, the appeal is allowed," the Court ordered.

Cause Title: Nirankar Nath Pandey v. State of UP & Ors. [Criminal Appeal No. 5009 of 2024]

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