Cash Transaction Exceeding Rs. 20K Does Not Nullify The Transaction In S.138 NI Act Case: Karnataka High Court

Accused Gajanan had approached the court seeking to set aside the judgment of Addl. District and Sessions Judge, Belgaum, confirming the judgment of conviction and order of sentence passed by Magistrate Court, convicting the petitioner for offence punishable under Section 138 of Negotiable Instruments Act and sentenced to pay a fine of Rs.1,28,000.

It was contended by the petitioner that as per Section 269SS of the Income Tax Act, if the transaction amount is more than Rs.20,000, such transaction shall be made by cheque or demand draft. Since the complainant has not paid the alleged loan amount through the cheque or the demand draft, the alleged transaction cannot be called as legally recoverable debt.

A single judge bench of Justice G Basavaraja rejecting the argument said,

"Contravention of Section 269SS of the Income Tax Act, does not make the alleged transaction void. The concerned authorities can take necessary action against the complainant for non compliance of Section 269 of the Income Tax Act. Only on that ground, this Court cannot interfere with the impugned judgment passed by the Courts below."

Further the court noted "In the original Section 276DD, in case of imposition of punishment, the term of imprisonment was also prescribed which could extend to two years. But, subsequently, by the introduction of Section 271D, the punishment of imprisonment was taken away and the failure to comply with the provisions of Section 269SS could only be visited with a penalty of fine equal to the amount of loan or deposit to be taken or accepted."

The bench also noted that Section 269SS was inserted in the Income Tax Act by Finance Act 1984 with effect from 01.04.1984, but the same came into effect from 01.07.1984. It was inserted in order to plug the loopholes and to put an end to the practice of giving false and spurious explanations by taxpayers, debarring persons from taking or accepting from any other person any loan or deposit otherwise than by account-payee cheque or account-payee bank draft, if the amount of such loan or deposit, or the aggregate amount of such loan or deposit, is Rs.10,000/- or more. The amount of Rs.10,000/- was later revised as Rs.20,000/- with effect from 01.04.1989.

Further the bench turned down the contention of the accused that the complainant has failed to prove the payment of amount of Rs.15 lakhs. It said,

"The presumption under Section 139 of the NI Act is a statutory presumption and once the signature and cheque are not in dispute, it will be presumed that the cheque was issued for discharge of any debt or other liability in favour of the complainant/holder of the cheque. The complainant is not required to spell out in the complaint the nature of the transaction or source of the fund, since the onus is on the accused to prove that the cheque was not issued towards discharge of any debt or other liability."

Then it said,

"When the complainant has discharged his burden that the cheques have been issued in discharge of legally enforceable debt, the burden lies on the accused to rebut the presumption under Section 139 of the NI Act. However, the accused has failed to rebut the said presumption by placing the probable defence."

Finally, the court termed as 'absurd' and rejected the contention of petitioner that the complainant, being the Commercial Tax Officer had insisted the accused to issue 15 signed blank cheques of Rs.1 lakh each for the purpose of paying tax in respect of the business of M/s.Gajanan Glass and Plywoods.

It observed ,

"If really the accused has issued 15 signed blank cheques to the complainant, the accused ought to have explained as to why the complainant has insisted him to issue 15 signed blank cheques. The accused has not explained on what date and time the complainant has insisted and on what date the accused has issued those cheques to the complainant. The accused chose not to reply to the legal notice demanding payment of the loan by the complainant. Even the accused has not taken any legal steps against the complainant for misuse of the alleged signed blank cheques."

Further it opined, "The accused need not issue signed blank cheques to the complainant in any circumstances. Such an improbable defence set up by the accused cannot be accepted."

Following which it held that, "The Courts below have properly appreciated the evidence on record in a proper perspective with the provisions of law regarding presumption in detail. On re-evaluation of the entire evidence placed on record, I do not find any illegality in the impugned judgments. In my opinion, the judgments and orders impugned in these revision petitions are not suffering from any legal infirmity occasioning grave injustice to the petitioner, calling for interference."

Case Title: GAJANAN v. APPASAHEB SIDDAMALLAPPA KAVERI.

Case No: CRIMINAL REVISION PETITION NO. 2011 OF 2013

Citation: 2022 LiveLaw (Kar) 483

Date of Order: 18TH DAY OF NOVEMBER, 2022

Appearance: DEEPAK S KULKARNI, ADVOCATE for petitioner.

B V SOMAPUR, ADVOCATE for respondent.