TaxTMI 
TaxTMI 
2023 (11) TMI 1
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..... In lieu of that the accused issued a cheque for the aforesaid amount dated 19.05.2016 drawn in favour of the complainant. The said cheque was dishonoured for want of sufficient funds as per the Bank Advice dated 11.07.2016. On 13.07.2016 a statutory notice was issued under Section 138 of the Act of 1881. The trial Court dismissed the said complaint principally on the ground that the amount stated to be advanced to the accused had not been shown in the Income Tax returns of the complainant. Being aggrieved by the aforesaid adjudication the complainant has preferred the present appeal under Section 378(4) of the Code of Criminal Procedure, 1973. 3. The learned Single Judge while hearing this appeal under Section 378(4) of the Code of Criminal Procedure, 1973 was confronted with the decisions in Krishna P. Morajkar Versus Joe Ferrao & Another [2013 Cr.L.J. (NOC) 572], Bipin Mathurdas Thakkar Versus Samir & Another [2015 SCC OnLine Bom 305] and Pushpa Sanchalal Kothari Versus Aarti Uttam Chavan [2021(5) Mh.L.J. 121]. These decisions are rendered by the learned Single Judges taking the view that even if the amount in question is not reflected in the Income Tax returns of the complain....
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....in Sanjay Mishra (supra) had relied upon the judgment of the Hon'ble Supreme Court in Krishna Janardhan Bhat (supra) to hold that the alleged liability to repay an unaccounted cash amount that was not disclosed in the Income Tax returns could not be said to be a legally recoverable liability. He therefore submitted that in view of the judgment in Rangappa (supra) there being a presumption in favour of the holder of the cheque, it was for the accused to rebut the statutory presumption to enable the Court to hold that there was no legally enforceable liability. Mere absence of the amount advanced/lent to the drawer of the cheque being shown in the Income Tax returns would not be of such importance so as to preclude the holder of the cheque from seeking to recover such liability. The learned counsel referred to the provisions of Chapter XXI and XXII of the Act of 1961. It was urged that by accepting an amount exceeding Rupees Twenty Thousand in cash, the provisions of Section 269-SS of the Act of 1961 would be violated by the drawer of the cheque-accused and not the payee thereof-complainant. The breach of statutory provisions ought not to benefit the drawer by holding such amount to ....
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....lure to record a transaction in the books of account and/or the Income Tax returns of the holder of the cheque and violation of Section 269-SS of the Act of 1961 are independent and distinct acts. Both can arise either together or independently. Hence, the question as framed is modified to read as under:- "Whether in case the transaction is (a) not reflected in the books of account and/or the Income Tax returns of the holder of the cheque in due course and/or (b) is in violation of the provisions of Section 269-SS of the Act of 1961, the same can be held to be a "legally enforceable debt" and can be permitted to be enforced by institution of proceedings under Section 138 of the Act of 1881 ? 7. With a view to answer the aforesaid question, we may note the relevant statutory provisions that having bearing on the question to be answered :- Section 118 of the Act of 1881 reads as under :- "118. Presumptions as to negotiable instruments. - Until the contrary is proved, the following presumptions shall be made:- (a) of consideration. - that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negot....
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.... a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. Explanation. - For the purposes of this Section, "debt or other liability" means a legally enforceable debt or other liability. 139. Presumption in favour of holder. - It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138, for the discharge, in whole or in part, of any debt or other liability. " 8. Section 269-SS of the Act of 1961 reads as under :- "Mode of taking or accepting certain loans, deposits and specified sum. 269-SS. - No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of....
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....y to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; [(ii) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;] (iii) "loan or deposit" means loan or deposit of money; (iv) "specified sum" means any sum of money receivable, whether an advance or otherwise, in relative to transfer of an immovable property, whether or not the transfer takes place.]" 9. The provisions of Sections 118, 138 and 139 of the Act of 1881 have been considered in various decisions of the Hon'ble Supreme Court. In Hiten P. Dalal (supra) it was held that Sections 138 and 139 require that the Court "shall presume" the liability of the drawer of the cheque. In every case where the factual basis for raising of the presumption is established, it is obligatory for the Court to raise this presumption. In Rajaram Sriramulu Naidu (supra) after referring to a recent decision in Basalingappa Versus Mudibasappa [(2019) 5 SCC....
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....scharge of any debt or other liability. The acquittal of the accused was because the defence raised by him satisfied the standard of preponderance of probabilities that the complainant had no capacity to lend the amount of Rupees Three Lakhs to the accused. 10. In Asstt. Director of Inspection Investigation Versus A.B. Shanthi [(2002) 6 SCC 259] the constitutional validity of Sections 269-SS and 271-D of the Act of 1961 was challenged. While considering the said challenge it was observed that the object of introducing Section 269-SS was to ensure that a tax payer is not allowed to give false explanation for his unaccounted money and if he has given false entries in his account he cannot escape by giving false explanation for the same. The object sought to be achieved was to eradicate the evil practice of making of false entries in the account books and later giving explanation for the same. Upholding the validity of Section 269-SS of the Act of 1961 it was held that the same was neither violative of Article 14 of the Constitution of India nor that it was enacted without legal competence. While considering the challenge to Section 271-D of the Act of 1961 reference was made to Sect....
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....rge of a debt or other liability. It was further observed that the existence of a legally recoverable debt was not a matter of presumption under Section 139 of the Act of 1881 as held in Krishna Janardhan Bhat (supra). On that premise it was held that to attract Section 138 of the Act of 1881 the debt had to be a legally enforceable debt as per the 'explanation' to Section 138 of the Act of 1881. Since there was no presumption under Section 139 of the Act of 1881 that the debt was a legally recoverable debt, the liability to repay unaccounted cash amount could not be said to be a legally enforceable liability within the meaning of 'explanation' to Section 138 of the Act of 1881. By holding that if such liability was held to be a legally enforceable debt the same would render the explanation to Section 138 of the Act of 1881 nugatory. On that premise, it was held that the complainant had failed to establish that the cheque was issued towards discharge of a legally recoverable debt. 13. The judgment in Krishna Janardhan Bhat (supra) was considered by the Larger Bench of three learned Judges of the Hon'ble Supreme Court in Rangappa (supra) and after referring to its earlier decision ....
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.... be contested. It is thus clear that once the execution of the cheque/instrument is admitted, the initial presumption under Section 139 of the Act of 1881 favours the complainant that there exists a legally enforceable debt or liability. While rebutting such presumption it would always be open for the accused to raise all permissible defences including the defence that the complainant had failed to disclose the amount that has been stated to have been advanced/lent to the accused in his Income Tax returns. The complaint which is otherwise maintainable under Section 138 of the Act of 1881 is not liable to be dismissed at the threshold only on the ground that the complainant had failed to disclose the amount mentioned in the cheque in his Income Tax returns. The presumption under Section 139 of the Act of 1881 being in the nature of an initial statutory presumption in favour of the complainant, it will have to be rebutted by the accused as any other legal presumption. It hardly needs any reiteration that the standard of proof for rebutting such presumption is on the basis of preponderance of probabilities. 15. The decisions in Krishna Janardhan Bhat and Rangappa (supra) were conside....
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.... giving such amount in cash. It was held that the bar under Section 23 of the Act of 1872 was not attracted in such case. A learned Single Judge of the Delhi High Court in Sheela Sharma vs. Mahendra Pal [2016 ACD 1022] while considering similar contentions raised in defence in proceedings under Section 138 of the Act of 1881 has referred to the decision of this Court in Jayantilal M. Jain (supra) and after referring to various other decisions held that the transaction in question would not be hit if the bar under Section 269-SS of the Act of 1961 was attracted. A learned Single Judge of the Madras High Court in K.T.S.Sharma Versus Subramanian [2001(4)CTC 486] has considered similar contentions based on Section 269-SS of the Act of 1961, Section 23 of the Act of 1872 as well as the doctrine of 'pari delicto'. It was held therein that violation of Section 269-SS attracts penalty under Section 271D, the object is to protect the Revenue and the contract cannot be regarded as prohibited by implication. The doctrine of 'pari delicto' would not be attracted so as to make the contract void if it was not the object of the parties at the time when the transaction was entered into to circum....