A Single Bench of the Karnataka High Court has recently held that, transactions of more than Rs.20000/- in cash, does not vitiate the proceedings under Section 138 Of the Negotiable Instruments Act, 1881 but only results in an additional penalty under Section 269SS of the Income Tax Act, 1961.
The Delhi High Court had made a similar observation in HARCHARAN SINGH Vs SURENDER SINGH [2022 TAXSCAN (HC) 838].
It was observed by the Delhi High Court in a similar case that, “in the present case, the object of the parties when the transaction was entered into cannot be said to be to circumvent or defeat the purpose of the Income Tax Act. The defendant would not have issued the cheque in question had the object of the loan transaction been to defeat the provisions of the Income Tax Act.”
In response to the conviction in the NI Act case against him, the accused filed the present Criminal Revision Petition.
The petitioner submitted that, as per the Section 269 of the Income Tax Act, transactions above Rs. 20,000/- were to be made by cheque or demand draft. It was further submitted that since the respondent paid the loan amount through cash, such transaction cannot be legally recovered as debt. On this ground, the petitioner sought the acquittal of the accused, Ganjan.
The petitioner-accused also contended that the complainant has failed to prove the lack of repayment of the debt.
It was observed that, the 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.
On the aforesaid observation, the single bench of Justice G Basavaraja held that the court cannot interfere with the conviction on the ground of noncompliance with the Income Tax Act provisions and dismissed the Criminal Revision Petition.
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