The Supreme Court of India has ruled that departmental circulars prescribing limits for gold possession cannot be used to justify disproportionate assets in prosecutions under the Prevention of Corruption Act, 1988. In a recent order, the bench of Justice K.V. Viswanathan and Justice Arun Palli set aside a High Court of Judicature at Patna decision that had previously quashed corruption charges against a respondent, citing permissible gold holding limits set by tax authorities.

The controversy originated from a First Information Report registered on May 11, 2015, at the Vigilance Police Station in Patna. The respondent, Phulpari Kumari, was accused of holding assets significantly higher than her known sources of income, leading to charges under Sections 13(2) and 13(1)(e) of the Prevention of Corruption Act. Following an investigation and the receipt of necessary sanctions, a chargesheet was filed against her. On January 28, 2021, the Court of Special Judge, Vigilance, Patna, took formal cognizance of the offences.

The respondent subsequently moved the Patna High Court, challenging the cognizance order. The core of her defense rested on specific administrative guidelines, including Instruction No. 1916 issued on May 11, 1994, and a 2016 press release from the Central Board of Direct Taxes under the Ministry of Finance. These documents provide thresholds for gold possession—500 grams for a married woman, 250 grams for an unmarried woman, and 100 grams for a male—for the purpose of income tax assessments. The High Court accepted this argument, reasoning that because the respondent’s gold jewelry did not exceed the cumulative limit prescribed by these circulars, there was no case to be made for disproportionate assets. Consequently, the High Court quashed the prosecution, prompting the State of Bihar to appeal the decision to the Supreme Court.

During the proceedings before the Supreme Court, the appellant-State argued that the entitlement to possess gold is fundamentally different from the statutory requirement to explain the source of assets during a corruption investigation. The Supreme Court agreed with the State’s position, finding the High Court’s reliance on tax circulars to be legally untenable. The bench emphasized that the burden of proof in a corruption case requires a clear explanation of how assets were acquired, rather than a mere comparison of physical holdings against tax department guidelines.

As the Supreme Court observed, “In a prosecution under Section 13(1)(e) read with Section 13(2) of the Act, the accused is called upon to explain allegations with regard to owning assets disproportionate to known sources of income.” The Court further clarified the distinction between tax compliance and criminal accountability for public servants, noting, “Merely showing certain press release and circulars permitting the holding of gold to a certain extent will not amount to accounting for the possession of the said assets.”

Legal Implications for Anti-Corruption Litigation

The ruling reinforces the principle that circulars issued for the convenience of tax administration do not offer immunity from the stringent provisions of the Prevention of Corruption Act. By setting aside the High Court's order, the Supreme Court has underscored that the “known source of income” test is a rigorous financial and legal scrutiny that cannot be bypassed by citing extraneous administrative norms meant for different regulatory contexts.

The decision serves as a significant precedent for how investigative agencies handle evidence of physical assets, such as precious metals and jewelry, when evaluating wealth accumulation by public servants. It ensures that the evidentiary requirements mandated by the Prevention of Corruption Act remain focused on the legitimacy of the income source rather than arbitrary thresholds established for tax purposes.

Restoration of Judicial Proceedings

Following the Supreme Court’s decision, the order of cognizance dated January 28, 2021, passed by the Court of Special Judge, Vigilance, Patna, has been restored. The case is now set to proceed from that stage before the trial court. During the hearing, counsel for the respondent sought to introduce other arguments regarding the nature of the assets, which the Supreme Court noted.

Addressing this, the bench granted the respondent the liberty to raise these arguments before the trial court. The Supreme Court specifically instructed that any such proceedings would be decided on their own merits and remain uninfluenced by the observations made during the High Court’s earlier decision or the Supreme Court’s own order. With the quashing order overturned, the Vigilance Department’s case in Special Case No. 20 of 2015 is now back on track for adjudication. The trial court is expected to resume its inquiry into the alleged assets, ensuring that the respondent receives a full opportunity to justify her income in accordance with the law while the prosecution maintains the mandate to prove its case regarding the disproportionate nature of the assets. This effectively brings the litigation back to the trial phase, where the factual claims will be tested through the standard judicial process of evidence submission and cross-examination.