Bombay High Court
Prakash Madhukarrao Desai vs Dattatrya Sheshrao Desai(Prop. Of ... on 24 January, 2023
Author: Avinash G. Gharote
Bench: Avinash G. Gharote
CRIMINAL APPEAL 795 of 2018.odt
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH AT NAGPUR
CRIMINAL APPEAL NO.795/2018
APPELLANT : Prakash Madhukarrao Desai
Aged about 38 years, Occu : Service
R/o Bhartipura, Karanja (Lad),
Tq. Karanja (Lad), Distt. Washim
...VERSUS...
RESPONDENT : Dattatraya Sheshrao Desai,
Aged about 40 years,
Occu : Business (Proprietor of Tanmay Beer
Shopee) R/o Infront of Shetkari Niwas,
Mangrulpir Road, Tq. Karanja
Distt. Washim.
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Shri Digvijay Khapre, Advocate for appellant
Shri R.S. Kurekar, Advocate for respondent
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CORAM : AVINASH G. GHAROTE, J.
Order reserved on : 22/07/2022 Order pronounced on : 25/01/2023
1. This is an appeal against acquittal under Section 378 (4) of the Code of Criminal Procedure, filed by the original complainant challenging the judgment dated 09/03/2018 in Summary Criminal Case No.933/2016, whereby the learned Magistrate has acquitted the accused/respondent for the offence punishable under Section CRIMINAL APPEAL 795 of 2018.odt 2 138 of the Negotiable Instruments Act, 1881 (for short "the NI Act") on the ground that the cheque in question was in respect of an unaccounted amount which was not shown by the complainant in his Income Tax Returns and therefore cannot be said to be a legally enforceable debt or liability as contemplated under Section 138 of the NI Act.
2. The facts of the case are as under :-
(a) The complainant and the accused are cousins.
(b) The accused runs a beer shopee at Karanja
(c) On 23/03/2016 the accused is claimed to have taken a hand loan of Rs.1,50,000/- for his business purpose from the complainant without any interest, for the repayment of which, it is claimed that the accused had issued a cheque bearing No.159114 dated 19/05/2016 in favour of the complainant in the sum of Rs.1,50,000/- on his account No.1003031000425 with the Akola Urban Cooperative Bank Limited, Branch at Karanja.
(d) The said cheque was presented on 07/07/2016 and was dishonoured for want of sufficient funds in the account of the accused as per the advice dated 11/07/2016 of the complainant's CRIMINAL APPEAL 795 of 2018.odt 3 bank which was accompanied with the memo of the accused/Bank indicating this.
(e) On 13/07/2016 a statutory notice was issued through counsel making a demand, which was not claimed, leading to filing of the complaint on 10/08/2016.
(f) During the trial, the complainant examined himself alone and none else.
(g) The accused did not examine himself or any other witness.
(h) During his statement under Section 313 of the Code of Criminal Procedure (pg.26 of the paper-book), the accused stated that the complainant used to come to his residence and had taken the cheque from his house and has filed a false complaint.
(i) He admitted that he was running a beer shopee at Karanja.
3. Shri Digvijay Khapre, learned counsel for the appellant submits that the sole ground, for dismissal of the complaint, as is apparent from the impugned judgment, was that the amount was not shown in the Income Tax Returns of the complainant. It is contended that this cannot be the ground to dismiss the complaint when the CRIMINAL APPEAL 795 of 2018.odt 4 learned Magistrate categorically found that the cheque in question has been signed by the accused and the plea put forth regarding the relationship between the complainant and the accused as well as the fact that the accused was running a beer shopee under the name of Tanmay Beer Shopee, was found to be correct. It is also submitted that since there was no dispute that the cheque was dishonoured for insufficient funds in the account of the accused, the presumption under Section 139 of the NI Act, clearly became attracted, and that being so, the contention, that the amount was not shown in the Income Tax Returns, would not be of such a consequence so as to dispel the presumption under Section 139 of the NI Act. He therefore submits that once the learned Magistrate having found that the cheque was signed by the accused and the dishonour having been proved, the accused could not have been acquitted and the judgment impugned, is therefore liable to be quashed and set aside. He further submits that the complainant, was never put to notice, regarding this plea of being required to prove the entry in regard to the loan in his Income Tax Returns, on account of the presumption being attracted under Section 139 the NI Act, on account of which also the impugned judgment stands vitiated.
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4. Shri R.S. Kurekar, learned counsel for the respondent supports the impugned judgment and submits, that for the presumption under Section 139 of the NI Act to be attracted it was necessary for the complainant to demonstrate that the cheque was received in discharge, in whole or in part of any debt or other liability which would only be demonstrated, by an entry, in the books of account or for that matter in the Income Tax Returns, failing which, the presumption would not be attracted, in view of the explanation, to Section 138 of the NI Act, which indicates that "debt or other liability", means a legally enforceable debt or other liability.
5. He further invites my attention to the provisions of Sections 269 SS & 271 D of the Income Tax Act, 1961 (for short, "the IT Act" hereinafter) to submit that since there is a statutory prohibition to receive cash in excess of Rs.20,000/- any amount paid in excess thereof has to be accounted for, and in case such amount is not reflected as an entry in the profit and loss account or the audited statement of account, where it is so required, the amount paid cannot be held to be a legally enforceable debt or liability within the meaning the phrase as occurring in the explanation to Section 138 of CRIMINAL APPEAL 795 of 2018.odt 6 the NI Act and the process of law then cannot be permitted to be resorted to, as the same would amount to putting a premium upon an illegality, which is not permissible in law.
6. There appears to be dichotomy of opinions in regard to the expression "legally enforceable debt or other liability" as occurring in the explanation of Section 138 of the NI Act so as to attract the presumption under Section 139 of the NI Act which again uses the same expression in relation to the provisions of the Income Tax Act. The use of the expression "legally enforceable debt or other liability" would prima facie mean that a debt or liability, which is legal, in all sense of the term. There cannot be any distinction insofar as legality is concerned to hold that what would be not legal under a particular statute may be considered as legal for the purpose of provisions of another statute.
7. In the instant case, the provisions of Section 139 of the IT Act enjoins an assessee to file a return of Income, which would mandate disclosure of all income so that the same is taxable. This taxability of the income is in turn dependent upon a correct profit CRIMINAL APPEAL 795 of 2018.odt 7 and loss account with the proper entries being shown therein, which would then be the measure of the existence of a legal transaction, which is subject to tax. The provisions of the Income Tax Act, are to ensure, the financial stability of the economic condition of the country, by imposing tax, which then can be utilized for the purpose of public welfare. Thus, the liability to pay tax, is not only a statutory liability, but a societal one also, considering that one lives in a society and utilizes all the benefits, arising therefrom. Thus, the liability to pay tax, is cast upon each and every citizen of the country and non- payment of the same, has not only been made an offence, punishable with penalty. Thus, the Income Tax Act is very much part and parcel of the legal framework by which the citizens of the county are governed and are enjoined to obey and comply with. 7.1. The provisions of Sections 138 to 147 of the NI Act, have been enacted, with the purpose of ensuring that there is a speedy remedy, for financial issues such as dishonour of cheque which in turn also affect the economy. Can it be said, that the provisions of Sections 138 to 147 of the NI Act can and/or be permitted to function and operate, de hors the provisions of the CRIMINAL APPEAL 795 of 2018.odt 8 Income Tax Act and the obligations it imposes upon the citizens of the country. There is already a parallel economy flourishing in the country, which is wholly illegal, under which a number of citizens though they are liable to pay tax, either do not file any returns altogether or file returns, by not disclosing the correct position. Can it be said, that such transactions, which have not been indicated in the Income Tax Returns and therefore kept out of the tax purview can be legal in the true sense of the word, so that the recourse to law can then be resorted to, by such a person/s, to recover money, which has not been disclosed to be his income.
7.2. In M.S. Narayana Menon Alias Mani Vs. State of Kerala and another (2006) 6 SCC 39, the Hon'ble Apex Court while considering the presumption under Section 139 of the NI Act in light of the background that the complainant had deliberately not produced his books of accounts and had not been maintaining the statutory books of accounts and other registers in terms of the stock exchanged bye-laws was of the opinion that in absence thereof the Court would be entitled to draw an adverse inference by presuming to the effect that if the same was produced it might have gone CRIMINAL APPEAL 795 of 2018.odt 9 unfavourable to the plaintiff which presumption itself was held to be sufficient to rebut the presumption under Section 118 of the NI Act. 7.3. The issue was considered by the Hon'ble Apex Court in Krishna Janardhan Bhat Vs. Dattatraya G. Hegde, (2008) 4 SCC 54, in which the provisions of Section 271 D of the Income Tax Act were noted (para 19). It was held in light of the provisions of Sections 138 and 139 of the NI Act that the existence of a legally recoverable debt is not a matter of presumption under Section 139 of the NI Act (para 21).
7.4. In Sanjay Mishra Vs. Kanishka Kapoor @ Nikki and another 2009 (4) Mh.L.J. 155, the learned Single Judge of this Court (Shri A.S. Oka, J., as he then was), while considering the fact situation, that the transaction in question in respect of which the cheque was issued, was not disclosed in the Income Tax Returns and therefore was an unaccounted amount, after considering the provisions of the Income Tax Act and relying upon Krishna Janardhan Bhat (supra), had held that when the amount was not disclosed in the Income Tax Returns, by no stretch of imagination it could be stated that the liability to repay unaccounted cash amount CRIMINAL APPEAL 795 of 2018.odt 10 is a legally enforceable liability within the meaning of explanation to Section 138 of the NI Act and if it is held to be so, it will render the explanation to Section 138 of the NI Act nugatory and will defeat the very object of Section 138 of the NI Act of ensuring that the commercial and mercantile activity was conducted in healthy manner and therefore, the provisions of Section 138 of the NI Act cannot be resorted to for recovery of an unaccounted amount. 7.5. In Rangappa Vs. Sri Mohan (2010) 11 SCC 441 after considering the earlier judgment in Krishna Janardhan Bhat (supra) a larger Bench of the Hon'ble Apex Court comprising of three Judges disagreed regarding the non-availability of presumption under Section 139 of the NI Act as expressed therein, by holding that the presumption under Section 139 of the NI Act does indeed include the existence of a legally enforceable debt or liability and held that the observations in Krishna Janardhan Bhat (supra) to that extent may not be correct. It however, hastened to add that this would not in any way cast doubt on the correctness of the decision in Krishna Janardhan Bhat (supra) since it was based on the specific facts and circumstances therein and also further held that the initial CRIMINAL APPEAL 795 of 2018.odt 11 presumption which favours the complainant is always rebuttable by the accused.
7.6. In Krishna P. Morajkar Vs. Joe Ferrao and another, 2013 Cri. L.J. (NOC) 572 (BOM.) (GOA BENCH) a learned Single Judge of this Court (Shri R.C. Chavan, J.) after considering Rangappa and Sanjay Mishra (supra) disagreed with the view taken in Sanjay Mishra (supra) and while disagreeing to refer the matter to a learned Division Bench on the ground that an earlier view by a learned Single Judge in Shri Deelip Apte Vs. Nilesh P. Salgaonkar and others 2006 (2) Goa L.R. 229 and the absence of express provision which would make such loans unrecoverable, held that even if the amount is not shown in the Income Tax Returns that would be of no consequence vis-a-vis proceedings under Section 138 of the NI Act. 7.7. This view has been followed in Bipin Mathurdas Thakkar Vs. Samir and another 2015 SCC OnLine Bombay 305 (para
20) and Pushpa Sanchalal Kothari Vs. Aarti Uttam Chavan 2021 (5) Mh.L.J. 121 (para 17).
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8. The provisions of Section 139 of the IT Act enjoins upon every person to furnish a return of his income during the previous year before the due date, failure to do so entails the imposition of penalty and also imprisonment as provided in Section 276 CC of the IT Act. Thus, a person is under statutory obligation, under the pain of penalty or imprisonment to furnish a return of his income for the previous year before the due date. The term 'legal' would mean what is permissible by a statute and the term 'illegal', would mean what is prohibited by a statute or something done contrary to the manner as postulated by the provisions of a statute. Thus, when Section 139 of the IT Act casts a burden upon a person to file a return, not doing so, or filing a return, not showing an entry of a transaction, would mean that the statutory requirement, in that regard stands violated, thereby making such person liable for penalty and/or imprisonment, thereby making such act as illegal i.e. not legal. In this sense of the view, in case a complainant (under Section 138 of NI Act), has not filed a return, or has filed a return in which the entry in respect of which the complaint is not reflected, the transaction, would be of unaccounted cash and therefore would be illegal i.e. not legal.
CRIMINAL APPEAL 795 of 2018.odt 13 8.1. Then the provision of Sections 269 SS of the Income Tax Act prohibits the acceptance or taking of loans/deposits exceeding an amount of Rs.20,000/- by cash. The provisions of Section 271 D of the IT Act makes an action in contravention to the provisions of Section 269 SS liable for penalty equivalent to the amount of loan or deposit taken or accepted by cash. Though the provisions of Section 273 B of the IT Act mandates, that in case the assessee or the recipient proves that there was a reasonable cause for acceptance of the amount in cash in excess of the sum prohibited by Section 269 SS of the IT Act the penalty may not be imposed, the fact remains that the acceptance of an amount in cash in excess of Rs.20,000/- would carry penalty as contemplated by Section 271 D of the IT Act and therefore would be an act, which is not permissible in law. Though Section 269 SS of the IT Act imposes a prohibition upon the recipient, the prohibition in fact touches the transaction itself. In Assistant Director of Inspection Investigation Vs. A.B. Shanthi (2002) 6 SCC 259, the Hon'ble Apex Court while considering the legality of Section 269 SS of the IT Act has held that the object of introducing Section 269 SS was to ensure that the taxpayer should not be allowed to give false explanation for his unaccounted money or if he CRIMINAL APPEAL 795 of 2018.odt 14 has given some false entries in his accounts, he should not escape by giving false explanation for the same and the main object of the provision was to curb this menace. The constitutional validity of the said provision was thus upheld. Thus, the very purpose, of introducing Section 269 SS of the IT Act was to curb the parallel economy which was rampant on account of cash transactions which were unaccounted for. Thus, what has been prohibited by Section 269 SS of the IT Act and violation of the same and has been made liable for a penalty, could it be said that an action done contrary thereto, would be legal, within the expression "legally enforceable debt or other liability", as occurring in the explanation to Section 138 of the NI Act. Holding that infraction of provisions of the Income Tax Act would be a matter between revenue and the defaulter and the advantage cannot be taken by the borrower [as held in Bipin Madhurdas Thakkar and Krishna Morajkar (supra)], in my considered opinion, would tend to defeat the very purpose of the Income Tax Act and would bolster the parallel economy of transactions in cash.
CRIMINAL APPEAL 795 of 2018.odt 15 8.2. The expression "legally enforceable" as occurring in the explanation to Section 138 of the NI Act, necessarily has to be given a narrow meaning for the reason that legality, has to traverse across everything and it cannot be said that if one action is illegal under a particular statute, the same ought to be discarded, for the purpose of considering the applicability of another statute. 8.3. Though in Rangappa (supra) it has been held that the presumption mandated by Section 139 of the NI Act indeed includes the existence of a legally enforceable debt or liability, the question whether transaction, which is prohibited by a statute, would attract such presumption, did not fall for consideration as is apparent from the defence raised as noted in para 8 therein.
8.4. I am therefore with due regard and respect unable to agree, with what has been held in Bipin Madhurdas Thakkar, Krishna Morajkar and Pushpa (supra) and I am in agreement with what has been held in Sanjay Mishra (supra).
9. The issue whether the benefit of law by invoking Sections 138 to 147 of the NI Act should be permitted, for recovery CRIMINAL APPEAL 795 of 2018.odt 16 of unaccounted cash, which transaction is prohibited by Section 269 SS of the IT Act, is of seminal importance and has wide ramifications, considering which, I deem it appropriate to frame the following question:-
Whether in case the transaction, is not reflected in the Books of account and/or the Income Tax Returns of the holder of the cheque in due course and thus is in violation to the provisions of Section 269 SS of the Income Tax Act, 1961 whether such a transaction, 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 Negotiable Instruments Act ?
10. I, therefore, deem it appropriate to direct the Registry to place the matter before the Hon'ble the Chief Justice, if deemed appropriate to constitute an appropriate Bench for answering the above question.
11. The Registry is directed to do the needful.
Digitally signed bySHAILENDRA
(AVINASH G. GHAROTE, J.) SUKHADEORAO WADKAR Signing Date:25.01.2023 16:33 Wadkar