ITR Not Relevant to Determine Debt in Cheque Dishonour Cases: Gujarat HC Quashes Trial Court Order [Read Order]

The Gujarat High Court quashed an order passed by a Trial Court directing the complainant in a cheque dishonour case to produce his Income Tax Returns (ITR), holding that ITR is not relevant to determine debt.

The petitioner, K.S. & Co., filed the original complaint, challenging the order dated October 27, 2016, passed in Criminal Case No. 3098 of 2013. The complainant had advanced a loan of Rs. 2,50,000/- to the accused in 2010, which was partly repaid. A cheque issued for the residual amount of Rs. 2,05,000/- was subsequently dishonoured, leading to the filing of a complaint under Section 138 of the Negotiable Instruments Act.

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During the trial, the accused filed an application under Section 91 of the Cr.P.C. seeking directions for the complainant to produce his ITRs for the years 2010-11, 2011-12, and 2012-13. The Trial Court allowed the application, reasoning that producing the documents would allow both parties to place their stands on record. The complainant's review application was subsequently rejected.

The counsel for the petitioner argued that all necessary documents, such as the loan agreement and cheque details, had already been produced. It was contended that ITRs are filed for multiple transactions and cannot specifically disclose the amount due from the accused, making them irrelevant for adjudicating the complaint under the Negotiable Instruments Act. Reliance was placed on the decision of the Gujarat High Court in Hiten Parekh Proprietor-Parekh Enterprises vs. State of Gujarat.

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The Single Bench of Justice J.L. Odedra observed that the reasoning of the Trial Court was bereft of logic, as it merely stated that producing ITRs would allow the parties without explaining how the documents were relevant to the dispute. The Court noted that the ITRs could neither disclose the complainant's right to charge interest nor the aggregate outstanding due from the accused, especially since the returns would contain data pertaining to other persons as well.

Drawing from the ratio in Hiten Parekh, the High Court held that the direction to produce ITRs was "de hors" (outside the scope of) any reasoning. While the Court clarified that directions to produce other documents, such as those proving the authority to charge interest or maintain accounts, were germane to the dispute, the specific direction regarding ITRs was set aside.

The High Court allowed the petition and quashed the orders dated October 27, 2016, and May 29, 2017, to the extent that they directed the production of certified copies of Income Tax Returns.

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