TaxTMI 
TaxTMI 
2018 (1) TMI 120
X X X X Extracts X X X X
X X X X Extracts X X X X
....0/- each and thereafter advanced to the accused not examined. (iii) Advancement of loan in violation of Section 269 SS of the Income Tax Act (for short 'IT Act'), therefore, not recoverable. (iv) Loan not shown in Income Tax Return furnished by the complainant, entitled the accused for acquittal. Ground No. 1 3. The interpretation given under Section 139 of the NI Act by the learned trial Magistrate is based upon the view expressed by two Hon'ble Judges Bench of Hon'ble Supreme Court in Krishna Janardhan Bhat vs. Dattatraya G. Hegde, 2008 (4) SCC 54. However, the learned Magistrate has failed to take note of the fact that the aforesaid view was subsequently to the extent of presumption mandated by Section 139 of the NI Act held not to be the correct view, by three judges Bench of the Hon'ble Supreme Court in Rangappa vs. Sri Mohan (2010) 11 SCC 441, wherein it was observed as under:- 19. It has been contended on behalf of the appellantaccused that the presumption mandated by Section 139 of the Act does not extend to the existence of a legally enforceable debt or liability and that the same stood rebutted in this case, keeping in mind the discrepanci....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... record. An accused has a constitutional right to maintain silence. Standard of proof on the part of the accused and that of the prosecution in a criminal case is different. 34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of the accused is 'preponderance of probabilities'. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies." 21. Specifically in relation to the nature of the presumption contemplated by Section 139 of the Act, it was observed; "45. We are not oblivious of the fact that the said provision has been inserted to regulate the growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters and to safeguard the faith of the creditor in the drawer of the cheque which is essential to the economic life of a developing country like India. This however, shall not mean that the courts shall put a blind eye to the ground re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed fact. 23. In other words, provided the facts required to form the basis of a presumption of law exists, the discretion is left with the Court to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, 'after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.' Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man." 23. The respondent-claimant has also referred to the decision reported as Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm & Ors., 2008 8 SCALE 680, wherein it was observed: "17. Under Section 118(a) of the Negotiable Instruments Act, the court is obliged to presume,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that it did not exist." Interestingly, the very same extract has also been approvingly cited in Krishna Janardhan Bhat (supra). 25. With regard to the facts in the present case, we can also refer to the following observations in M.M.T.C. Ltd. and Anr. v. Medchl Chemicals & Pharma (P) Ltd., 2002 1 SCC 234 (Para. 19): "19.... The authority shows that even when the cheque is dishonoured by reason of stop payment instruction, by virtue of Section 139 the Court has to presume that the cheque was received by the holder for the discharge in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the 'stop payment' instructions were not issued because of insufficiency or paucity of funds. If ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own. Ground No. 2 4. Drawing of adverse inference on the ground of withholding the best evidence is not an absolute proposition and would depend upon the facts and circumstances of the case, therefore, without going into the correctness or otherwise of the findings recorded by the learned trial Court, this question is left open and shall be considered by the learned trial Magistrate at the final hearing of the complaint. Ground No. 3 & 4 5. Relevant portion of Section 269 SS of the IT Act reads thus:- "(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit' or (b) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut be said that Section 269-SS only provides for the mode of acceptance payment or repayment in certain cases so as to counteract evasion of tax. However, Section 269-SS does not declare all transactions of loan by cash in excess of Rs. 20,000/- as invalid, illegal or null and void as the main object of introducing the provision was to curb and unearth black money. 10. It would further be noticed that the learned trial Magistrate has acquitted the accused on the ground that the loan has not been shown in the Income Tax Return furnished by the complainant and while recording such finding has placed reliance upon the judgment of the Hon'ble Delhi High Court in Vipul Kumar Gupta vs. Vipin Gupta 2012 (V) AD (CRI) 189. However, after having perused the said judgment, it would be noticed that the amount in the said case was Rs. 9 lacs and it is in that background that the Court observed as under:- "9. I find myself in agreement with the reasoning given by the learned ACMM that before a person is convicted for having committed an offence under Section 138 of the Act, it must be proved beyond a reasonable doubt that the cheque in question, which has been made as a basis for pro....