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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be quashed under Section 482 of the Code of Criminal Procedure, 1973 on the ground that the alleged cash loan transaction was said to violate Section 269SS of the Income-tax Act, 1961 and, therefore, the cheque liability was unenforceable.
Analysis: The alleged breach of Section 269SS of the Income-tax Act, 1961 only attracts the statutory penalty provided under Section 271D of that Act and does not, by itself, render the underlying loan transaction void or unenforceable. Nothing in the Income-tax Act, 1961 or the Negotiable Instruments Act, 1881 shows that a cash loan above the prescribed limit cannot be recovered through legal process or that a cheque issued towards such liability ceases to attract the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881. At the stage of summoning or exercise of inherent jurisdiction, the Court does not enter disputed questions of fact or test the defence version on merits, and the complaint disclosed the basic ingredients of the offence.
Conclusion: The plea based on Section 269SS of the Income-tax Act, 1961 was rejected, and the application for quashing of the complaint and summoning order was dismissed.
Ratio Decidendi: Violation of Section 269SS of the Income-tax Act, 1961 does not make a loan transaction void or bar prosecution under Section 138 of the Negotiable Instruments Act, 1881; such violation at most attracts the penalty under Section 271D of the Income-tax Act, 1961, while the statutory presumptions in favour of the cheque holder continue to operate.
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