MUMBAI, APR 30, 2014: THE issues before the Bench are - Whether Search as per the provisions of Sec 132 is always person-specific and not premise-specific; Whether, for the purpose of block assessment, it is necessary that the name of the assessee must figure in the warrant of authorisation u/s 132 and Whether mere presence of the assessee's name in the panchnama enables the Revenue to initiate block assessment. And the verdict goes against the assessee.

Facts of the case

The assessee is a lady. Her husband's premises were searched pursuant to a search warrant. During the course of search of the husband's residential premises certain documents were seized. A panchanama was drawn on 24th February, 2006, which revealed the locker keys pertaining to three lockers which were in joint names of S.K. Mohile and Ashish S. Mohile and the assessee. The lockers were at Bank of Baroda. On 23rd February, 1996 a warrant of authorization was issued in the name of the Branch manager, Bank of Baroda to search the lockers. The argument advanced was that, in the facts and circumstances of the case and in law, AO had no jurisdiction to pass an assessment order in the present case u/s 143(3) read with Section 158BC as no search warrant was served on the assessee.

While dealing with this additional ground raised in the appeal, the Tribunal found that search u/s 132 was a condition precedent for passing an order u/s 158BC and there being no search in the case of said Pamela, the orders u/s 158BC were nonest in law. The Bench of the Tribunal, with a view to verify the existence of authorization in the name of the assessee, directed the DR to appear before it to produce the warrant of authorization in the name of the assessee and for that purpose as many as eight adjournments were given. Despite this time being granted to the DR, he was unable to produce the warrant of authorization in the name of the assessee. It was argued that there was a massive restructuring of the department on 1st August, 2001. The Tribunal had clarified that, in the event the most relevant document pertaining to the appeal before the Tribunal was not produced, adverse inference will be drawn against the department. The request was that no such adverse inference be drawn because of the restructuring of the department.

On appeal before HC, a similar order was passed by the Division Bench that in order to enable the counsel for the appellant revenue to produce search warrant Nos.12406 and 12420 as mentioned in paragraph 9 of the impugned judgment dated 8th October, 2009 of the Income Tax Appellate Tribunal, stand over to 24th April, 2013. To be heard along with ITA No.2795 of 2009. In pursuance of that order, DR had produced a copy of the letter dated 28th November, 1996 from the office of the Additional Director of Income Tax (Investigation). The said letter indicated that the warrant of authorization was issued and search warrant No.12406 was issued in the name of the Branch Manager. In the case of search warrant No.12420 as well it was issued in the name of the Branch Manager of the Bank of Baroda.

Held that,

++ it is in these circumstances and the factual back ground that the Income Tax Appellate Tribunal arrived at a conclusion that the assessee before it, namely, Pamela Ashish Mohile was not searched. No warrant evidencing said search was produced. Therefore, mere presence of her name in the panchnama would not enable the Revenue to undertake further exercise and as disclosed in the record. It is in these circumstances the Tribunal concluded that the search under Section 132 is a person specific and not a premises specific. It follows that if the name of the assessee against whom the block assessment has been made, does not figure in the warrant of the authorization issued u/s 132, the block assessment would be unauthorized;

++ such a finding in the given facts and circumstances and in the backdrop of several opportunities given to the Revenue to produce the relevant record is a possible and plausible view. That does not raise any substantial question of law. Any larger issue or wider controversy need not be gone into in the facts peculiar to this case. The appeal is, therefore, devoid of any merits and is dismissed.

Selection of wrong code in I-T return won't turn a Public Co. into Private Co. to recover unpaid taxes from director

April 30, 2014[2014] 44 taxmann.com 211 (Gujarat)

IT: Where assessee-company was registered as a public limited company and also it came out with public issue, then merely because wrong code number applicable to private company was selected in return, section 179 could not be applied making its director liable for arrear of tax

No reassessment as profit was treated as capital gain after detailed inquiry during original assessment

April 30, 2014[2014] 44 taxmann.com 212 (Gujarat)

IT : Where transactions were treated in nature of capital gain after making detailed inquiry in scrutiny, no reassessment would be sustainable

JM Financial Limited vs. ACIT (ITAT Mumbai)

No s. 14A/ Rule 8D disallowance for investment in shares of subsidiaries & Joint Ventures

In AY 2009-10, the assessee has specifically raised a point before the AO that 97.82% of the investment is in subsidiary companies and joint venture companies and, therefore, no expenditure was incurred for maintaining the portfolio on these investments or for holding the same. The assessee has also pointed out that these investments are long term investment and no decision is required in making the investment or disinvestment on regular basis because these investments are strategic in nature in the subsidiary companies on long term basis and, therefore, no direct or indirect expenditure is incurred. The department has not disputed this fact that out of the total investment about 98% of the investments are in subsidiary companies of the assessee and, therefore, the purpose of investment is not for earning the dividend income but having control and business purpose and consideration. Therefore, prima facie the assessee has made out a case to show that no expenditure has been incurred for maintaining these long term investment in subsidiary companies. The AO has not brought out any contrary fact or material to show that the assessee has incurred any expenditure for maintaining these investments or portfolio of these investments. In Godrej & Boyce Mfg. Co it was held that s. 14A(2) does not ifso facto empower the AO to apply the method prescribed by Rule 8D straightaway without considering whether the claim made by the assessee is correct. Also, in Garware Wall Ropes it was held that a disallowance u/s 14A cannot be made if the primary object of investment is holding controlling stake in the group concern and not earning any income out of investment. Similarly, in Oriental Structural Engineers (approved by the Delhi High Court) it has been held that s. 14A disallowance cannot be made for investment in subsidiaries and SPVs out of commercial expediency

CIT vs. Shambhubhai Mahadev Ahir (Gujarat High Court – Full Bench)

CBDT's low tax effect circulars have prospective effect

Clause 11 of Instruction No. 3/2011 dated 9.2.2011 specifically states that "this instruction will apply to appeals filed on or after 9.02.2011. However, the cases where appeals have been filed before 9.02.2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed." Similarly, clause 11 of instruction No. 5/2008 dated 15.5.2008 specifically provides that "this instruction will apply to appeals filed on or after 15.05.2008. However, the cases where appeals have been filed before 15.05.2008 will be governed by the instructions on this subject, operative at the time when such appeal was filed". There is, thus, no ambiguity in the instructions of either 2011 or 2008 as regards the applicability of those instructions in respect of the appeals, and, at the same time, it has also been made clear that if those appeals are not filed after the given dates mentioned in those instructions, the fate of the appeals will be governed in accordance with the instructions prevailing on the date of presentation of such appeals. In view of such clear legislative intention, we are unable to hold that even if an appeal is filed prior to 9.02.2011, the same would be barred notwithstanding the fact that at the time of filing such appeal, the same was not barred by the then instructions of the CBDT (Sureshchandra Durgaprasad Khatod reversed, Vijaya V. Kavekar (Bom), Madhukar K. Inamdar (Bom) & other judgements dissented from)

Case remanded for de novo assessment as rental value of property wasn't determined as per direction given by CIT

May 1, 2014[2014] 44 taxmann.com 207 (Mumbai - Trib.)

IT: Where while making de novo assessment, Assessing Officer relied upon decision of co-ordinate bench of Tribunal but failed to take into consideration directions given by Commissioner for making necessary enquiries for determining fair rental value of property, matter was to be restored to file of Assessing Officer for de novo assessment in accordance with law

Sales commission paid to NR agent for services rendered outside India wasn't taxable in India; no withholding of tax

May 1, 2014[2014] 44 taxmann.com 173 (Hyderabad - Trib.)

IT/ILT : Where assessee-company made payment of sales commission to a foreign party by direct remittance for services rendered outside India, amount in question not being chargeable to tax in India, assessee was not required to deduct tax at source while making said payments

IT/ILT : Where in support of claim of deduction for sales commission paid to foreign party, assessee brought on record commission bills which clearly substantiated services rendered by foreign party, claim in question could not be rejected taking a view that transaction in question was sham

CHANDIGARH, MAY 01, 2014: THE issues before the Bench are - Whether quashing of proceedings by the Tribunal for faulty service of notice under Ss 148, 143(2) & 142(1) amounts to allowing assessee to go scot-free even if he is liable to pay capital gains tax on compensation received for statutory acquisition of his land; Whether merely because there is an error in service of notice on the assessee, the statutory liability to pay tax on capital gains gets extinguished and Whether assessee is to be assessed at the place of its agent or the place where his land was acquired. And the Bench allows the Revenue's appeal.

The assessee Jasbir Singh received compensation amounting to Rs.1,04,54,474/- against compulsory acquisition of his land situated at village Mansoorwal Dona, District Kapurthala. The assessee had not furnished his return of income. Finding it to be a case of income having escaped assessment for the assessment year 1999-2000 by reason of failure on the part of the assessee to make a return under Section 139 of the Act, after recording reasons and obtaining necessary approval, notice under Section 148 of the Act was served on the assessee on 21.3.2006. He did not furnish his return even then. Thereafter, notice under Section 142(1) was issued along with a questionnaire. The assessee neither attended the office of the named Income Tax authority in the notice nor filed return nor made compliance of the said notice. Even on information made available, the Assessing Officer could not get current residential address of the assessee. The concerned Inspector of the revenue found that it was not possible to effect service in ordinary manner and consequently, service of the notice was effected under Section 142(1) of the Act through affixation on the last known address of the assessee. Since after acquisition of the whole land of village Mansoorwal Dona by PUDA, it had been converted into a residential colony and as such, notice was affixed on the Dharamshala of the village. None appeared on behalf of the assessee. Accordingly, the AO proceeded to frame assessment in terms of Section 144 of the Act i.e. calculating the quantum of long term capital gain for the assessment year 1999-2000 at Rs.1,00,09,746/-. As the assessee had concealed this entire income, penalty notice under Section 271-C of the Act was also issued separately for the concealment of this income on account of long term capital gains arising from compulsory acquisition of land by PUDA.

Assessee filed a petition u/s 264. The plea of the assessee was that statutory notice had not been served upon him and affixture of notice somewhere in village, where the assessee neither was residing nor was working for gain and had only agriculture land which had been acquired, was of no legal value. It was pleaded that his address was available with PUDA, Jalandhar and had the AO made some genuine efforts, his address could have been obtained from his bank account or from the office of Land Acquisition Collector, PUDA, Jalandhar and from the Income Tax Department itself where the assessee was allegedly assessed for the assessment year 1999-2000. It was elaborated that the assessment proceedings for the year 1999-2000 had already been finalised by the revenue through his power of attorney Jarnail Singh. Consequently, the CIT accepting version of the assessee had set aside order of the AO, wherein directions were issued for framing assessment afresh after allowing adequate opportunity to the assessee of being heard. Directions were also issued to the AO to ensure that contentions of the assessee were judiciously dealt with. Pursuant to this order, proceedings of assessment were started afresh. During that proceedings, it was noticed that the assessee had filed the return of income for the assessment year 1999-2000 with the Income Tax Officer, Ward-VI, Jalandhar mentioning the address as c/o Shri Jarnail Singh, resident of village Dheena, District Jalandhar Cantt. The AO noticed that the return filed by the assessee on 21.8.2000 without enclosing the power of attorney in favour of Jarnail Singh and with incorrect address, was an invalid return. The verification had also been found to be improper and thus return was invalidated on that account as well.

It was further noticed that the ITO, Jalandhar, had dropped the proceedings under Section 147 of the Act for want of jurisdiction, making a noting that jurisdiction was territorial and would not depend upon address of the power of attorney holder of the assessee. In short, it was felt that merely because power of attorney holder of the assessee was a resident of Jalandhar, there would not be jurisdiction of Jalandhar but would remain with the Income Tax Officer, Kapurthala. In this backdrop, the Income Tax Officer, Kapurthala had held that the jurisdiction over the case of the assessee was rightly vested with it. Making calculations and taking into account quantum of compensation received as Rs.1,04,54,474/-, long term capital gain was computed at Rs.26,50,340/-. Penalty proceedings under Section 271(1)(c) of the Act were also initiated separately for concealment of income. This order was challenged in appeal by the assessee; it was dismissed.

On appeal, the Tribunal accepted the version of the assessee by holding that notices should have been served on the agent of the assessee Jarnail Singh, power of attorney, and notices issued by the Income Tax Officer, Kapurthala-I, under Sections 148 as also 143(2) of the Act were bad in law and the assessment made thereunder was liable to be quashed. Accepting version of the assessee, assessments were quashed.

The plea of the Revenue was that when the Tribunal had accepted the claim of the assessee that notices issued by the Income Tax Officer, Kapurthala under Section 147 as also under Section 143(2) of the Act had neither been served on the assessee nor on his agent Jarnail Singh and thus, were of no legal significance, the assessee should not have been just let off. It was contended that when liability of the assessee to pay tax on capital gains was undisputed, he should have been brought back within the ambit and scope of law to discharge his liability.

Having heard the parties, the HC held that,

++ there is force in contention of the revenue that once service of notice under Section 148, 143(2) and 142(1) of the Act was held to be bad observing that the assessee was no more residing at the last known address and was accessible only through his attorney Jarnail Singh, it was incumbent on the Tribunal not to quash the whole proceedings as it amounted to leaving the assessee go scot-free, though he is liable to pay tax on the capital gains. It is nowhere denied that compensation for compulsory acquisition of the land was received by the assessee. As such, he cannot deny his liability to pay long term capital gain tax. Merely because there was some error in service of notices on the assessee, statutory liability of the assessee to pay tax on capital gain was not over. Because of procedural lapses, the assessee should not be a gainer and that too by default to escape his liability. Sequelly, order of the Tribunal also lacks merit;

++ looking from another angle, default made by the revenue in compliance with the procedure in place for service of the assessee ipsofacto, is not a circumstance to let the assessee go scot free from the taxation regime when his liability of payment of capital gain tax is not questioned. When the proceedings had been started by the Income Tax Officer, Kapurthala-I, Kapurthala but the same were found to be defective on technical and procedural grounds of service of the assessee, liability of payment and capital gains tax which had accrued against the assessee, would not be lost sight of and forgotten, as has been projected by the assessee;

++ it is, thus, ordered that the Income Tax Officer, Kapurthala-I, Kapurthala would start the proceedings afresh after seeking appearance of the assessee either in person or through his power of attorney and would decide the matter afresh from the stage of issuance of notice to the assessee;

++ since the land is located at village Mansoorwal Dona, District Kapurthala and the proceedings are not required to be conducted at the place of residence of power of attorney of the assessee and, in fact, the assessment proceedings are to continue at District Kapurthala where the land acquired is situated, the time spent in conducting the proceedings would be duly considered by the authorities if any question with regard to limitation at any stage arises;

++ all the substantial questions of law enumerated in earlier portion of the judgment to the extent already discussed are answered in favour of the revenue. By setting aside the impugned orders, the appeals, consequently, are allowed in favour of the revenue

SC : Denies loss carry forward to amalgamating co-operative societies absent specific IT-Act provisions
Rajasthan R.S.S. & Ginning Mills Fed. Ltd.

May 01 2014

SC upholds Rajasthan HC's judgment denying benefit of set off of accumulated losses of amalgamating co-operative societies against profits of amalgamated co-operative society

SC dismisses assessee's SLP against Delhi HC judgement; HC had upheld levy of concealment penalty where assessee offered to tax undisclosed income pursuant to search in another assessee's case

The Income Tax Appellate Tribunal Bar Association, Mumbai

Subscribe To Our Newsletter	IMPORTANT: Please add editor@itatonline.info to your contacts to prevent mails from us going into the Spam/ Junk folder

CBDT Announces Ambitious National Judicial Reference System Project

May 1st, 2014

The CBDT has announced the setting up of a "National Judicial Reference System" (NJRS).

The NJRS comprises of two components, the "Appeals repository and Management System" and the "Judicial Research and Reference System".

The Appeals repository is a database of all appeals pending in the ITAT, High Court and Supreme Court. The system will enable the status of the appeals to be tracked with an alert system. The big advantage of this database is that the entire litigation history of a tax payer will be available at the press of a button.

The Judicial Research and Reference System is a database of all decisions of the ITAT, High Courts &the Supreme Court. The cases will be indexed, searchable and cross-linked. The database will also have the relevant statutory enactments, circulars etc.

There are several other interesting aspects of the NJRS which you can read in the CBDT's letter dated 29.04.2014. From the detailed description of the NJRS, it is clear that it will be a mammoth exercise, requiring the active co-operation of a number of agencies, including the judicial bodies.

It is expected that the NJRS will go-live by November/ December 2014. We wish the CBDT good luck for timely and proper implementation of the NJRS.

Come April 2017, there is likely to be chaos in corporate India. Not because of bad economic conditions or some policy paralysis of the next government, but because of the newly introduced Companies Act. According to the Section 139 of the Companies Act, all companies (with public deposits of above Rs 50 crore) will have to rotate their auditors after 10 years.

In the case of companies which already have an auditor for more than 10 years from the day the new Companies Act kicked in, the law gives them a cooling-off period of three years to change the auditor. It is believed that a long-term relationship leads to coziness between the company and its auditor which creates a potential conflict of interest. A number of Indian firms have had strong relationships with a particular audit firm for over 50 years. That will now come to an end.

The law has come as both a threat and an opportunity for auditors. Bharat Dhawan, managing director of Mazars, says that auditing firms like his will be gainers. He says that most large corporates - Reliance Industries, Tata Group, M&M -currently have one of the four big four firms - EY, KPMG, Deloitte and PricewaterhouseCoopers-as auditors.

"Deloitte and PwC have maximum of listed companies today. I think Deloitte will be a loser to that extent," he adds.
Moving away from the big four, there are only two global auditing firms present in India: Mazars and Grant Thornton. Industry experts say that two things that matters in the auditing space is cost and attention. Mazars says that there's a 30-40 per cent cost difference between them and the big four. Plus, its partners give more attention to each client.

Once a company becomes big, the board of directors forces them to go for one of the big four auditing firms. "But that is changing. We have a lot of private equity investors coming to us and saying that promoters don't want big four because they are too expensive. And they don't give them time," says Dhawan adding that it's target is not Reliance Industries but companies that have an annual turnover of Rs 50 to Rs 7,000 crore. "There are 7,000 listed companies in India out of which active would be 3,000. There may be at least 2,000 which I may target. Actually, if you leave aside the top 100 companies, the rest will be our targets," he says.

KARNATAKA HIGH COURT - Income Tax

Commissioner of Income-tax and DCIT Versus Srinivasa Builders

Validity of order u/s 154 of the Act – Rectification of order - Benefit of carry forward of business loss u/s 80 of the Act – Original return filed not a loss return u/s 139(3) of the Act - Held that:- The assessee had filed return of income declaring the total income on 6-1-1998 - the Assessing Authority once again determined total loss and allowed it to be carried forward - the order allowing the loss to be carried forward was modified invoking Section 154 of the Act - The reasoning of the Appellate Authority that the assessee has not declared the loss within the time specified u/s 139(1) and 139(3) of the Act is factually incorrect – the business loss was allowed to be carried forward - The assessee has not violated any of the conditions u/s 80 of the Act - The assessee had shown positive income in the returns, but in the assessment, the business loss was determined by the AO – thus, the assessee is entitled for the benefit of carry forward of business loss - Whether loss ultimately determined by the Assessing Officer was liable to be carried forward or not, is a debatable issue – Invocation of section 154 is not available for the AO – thus, the order of the Tribunal is upheld – Decided against Revenue

ITAT HYDERABAD - Income Tax

Mr. S. Sambeshwar Rao, Hyderabad Versus ACIT, Circle 1(2), Hyderabad

Deemed dividend u/s 2(22)(e) of the Act – Withdrawal of amount - Held that:- The assessee has contributed substantial funds towards "Share Application account" - the assessee is having a running account with the company, wherein the transactions relating to remuneration, rent, salaries etc. are accounted for - the amount refunded to the assessee during June, 2008 and in subsequent months was debited by the company and the same has converted the credit balance into debit balance on certain dates - the assessee has also prepared combined ledger account combining both his Running account and the balance available in the Share Application account - the assessee's account was always having credit balances, the assessee has not withdrawn any money over and above the money already contributed by him – there was merit in the contentions of the assessee that the "Running account" was wrongly debited with the amounts refunded, instead of debiting the same to the Share Application Account – thus, the assessee should not be penalized for the mistake committed by the company in not accounting the transactions properly - the factual position also shows that there was no intention to avoid payment of taxes by distributing money in the form of loan or dividend instead of distributing the same as dividend.

Relying upon M.D. Jindal Vs. CIT CALCUTTA High Court] - the company only possesses the funds belonging to the assessee, if both the Running account and Share application money contributed by the assessee is taken together - the amounts debited to the Running account of the assessee cannot be considered as deemed dividend in terms of the provisions of sec. 2(22)(e) of the Act - they represents money refunded out of the contribution made by the assessee towards Share Application account – thus, the order of the CIT(A) set aside – Decided in favour of Assessee

Bombay HC categorically states that 'when false statements are made, and on oath, and which are not substantiated, proceedings under the law of contempt are bound to be initiated

CHENNAI, MAY 02, 2014: THE issues before the Bench are - Whether interest on refund u/s 244A, is to be granted on on the sum after adjustment of MAT credit first and then Advance Tax and TDS and Whether carry forward MAT credit available to the assessee is to be adjusted first, before charging interest under sections 234B and 234C. And the case is remanded to the AO.

Facts of the case

The assessee, company is engaged in the business of Offshore oil well drilling. In respect of the claim for MAT credit u/s 115JAA, Tribunal had directed the AO to give MAT credit before TDS and advance tax for the year under consideration. While giving effect to the same, the AO did not allow any interest on refund u/s 244A. On appeal, CIT(A) upheld the order of the AO and dismissed the appeal. On further appeal, Tribunal had pointed out that while giving effect to the ITAT's order, it was noted that the assessee had TDS of Rs.1,72,90,710/- and the MAT credit available was Rs.83,73,659/-. Thus out of total tax of Rs.2,06,96,452/-, after giving credit to MAT credit of Rs.83,73,659/-, the TDS was adjusted resulting in a refund of Rs.49,67,917/-. In the order passed by the AO, the AO pointed out that for the purpose of finding out the liability to payment of advance tax, the credit of MAT must first be given and then, on the balance of the tax payable, the liability to advance tax was to be worked out for the purpose of charging interest u/s 234B and 234C; the AO also pointed out that since the TDS was exceeding the liability, the question of interest u/s 234B and 234C did not arise. Thus, the Tribunal had pointed out that once MAT credit was to be set off against any tax payable by the assessee on the basis of normal computation and thereafterwards credit for TDS, advance tax and self assessment tax could be given and accordingly, the interest be charged or allowed to the assessee u/s 234B, 234C or 234A. In the light of the results giving effect to the ITAT order, Tribunal directed the AO to allow the claim of the assessee on interest on refund. To that end, the Tribunal followed the decision of Chemplast Sanmar Ltd., Vs. DCIT decision reported in (2004) 83 TTJ Chennai 427.

Held that,

++ a reading of the order passed on 28.02.2005 giving effect to the order of ITAT reveals that on the total tax liability of Rs.2,06,96,452/-, the adjusted MAT credit under Section 115JAA of the Act leaves the tax payable at Rs.1,23,22,793/-, after deducting TDS Rs.1,72,90,710/- the Assessing Officer had shown the refund due as Rs.49,67,917/-. The assessee in its appeal before the CIT(A) apparently sought for interest on the amount of refund due as per Section 244A contending that the Assessing Officer had not granted interest while refunding excess TDS. It pointed out that as per Section 244A of the Act, interest has to be granted upto the date of refund. To that end, the assessee relied on the decision in the case of CIT Vs. T.V.Sundaram Iyengar and Sons Ltd., reported in 236 ITR 524. The CIT(A), however rejected the appeal holding that MAT credit allowed would not bear any interest; consequently, the Assessing Officer did not grant any interest on the MAT credit. On appeal preferred before the Income Tax Appellate Tribunal, the Tribunal, however referred to the decision in the case of Chemplast Sanmar Ltd. Vs. DCIT reported in (2004) (83 TTJ Chennai 427) and allowed the assessee's case;

++ as far as the decision 2009-TIOL-206-HC-MAD-IT relating to CIT Vs. Chemplast Sanmar Limited, which was an appeal against the Income Tax Appellate Tribunal before this Court is concerned, the issue was as to whether the Tribunal was right in holding that carry forward MAT credit available to the assessee was to be adjusted first, before charging interest under sections 234B and 234C of the Act. Confirming the view of the Tribunal, this Court held that credit under Section 115JAA only should be given effect to and not to the tax and interest therefor and that interest under Sections 234A, 234B and 234C should be given after giving MAT credit under Section 115JAA. In so holding in favour of the assessee, this Court referred to the decision of the Delhi High Court in the case of CIT Vs. Jindal Exports Ltd., 2009-TIOL-69-HC-DEL-IT holding that the credit under Section 115JAA should be given effect to before charging of interest under Sections 234A, 234B and 234C. This was confirmed by the Apex Court in the decision 2010-TIOL-114-SC-IT-LB in the case of CIT Vs. Tulsyan Nec Ltd.,

++ thus the issue before this Court is totally different from what was considered in the case of Commissioner of Income-Tax Vs. Chemplast Sanmar Limited,Chemplast Sanmar 2009-TIOL-206-HC-MAD-IT; consequently, we do not think the decisions would be safely relied on by either parties before us. As is evident from the reading of the order of the Assessing Officer dated 28.02.2005, the assessee became entitled to refund consequent upon the deduction given on MAT credit and the TDS. Thus, going by the factual details, the assessee is entitled to a refund of Rs.49,67,917/- and the deduction on TDS itself was before granting or charging any interest under any provisions of the Act. Hence, we hold that the proper course herein would be to remand the matter back to the Assessing Officer to work out interest on the refund payable to the assessee on the sum of Rs.49,67,917/- as ordered in the order of the Assistant Commissioner dated 28.02.2005 in accordance with Section 244A.

HC states that not only DR but Revenue officials shall also be responsible for delay/ lapse for filing appeals, as they are in public service and their acts should be in public good

SC, three judge bench, dismisses Revenue's SLP against Bombay HC judgement in Finolex Cable Ltd.'s case; HC had upheld ITAT's order holding that depreciation of new Unit II

SC: Directions for speedy and expeditious disposal of Sec. 138 NI cases

Posted on 02 May 2014 by Vineet Kumar

Court

Supreme Court of India

Brief

The bench comprising of Justice K.S Radhakrishnan and Justice Vikramajit Singh in a Writ Petition filed by Indian Bank Association and others, issued directions to be followed by all the Criminal Courts in the country dealing with cases under Section 138 of the Negotiable Instruments Act, for the speedy and expeditious disposal of cases. The directions are as following: (1) Metropolitan Magistrate/Judicial Magistrate (MM/JM), on the day when the complaint under Section 138 of the Act is presented, shall scrutinize the complaint and, if the complaint is accompanied by the affidavit, and the affidavit and the documents, if any, are found to be in order, take cognizance and direct issuance of summons. (2) MM/JM should adopt a pragmatic and realistic approach while issuing summons. Summons must be properly addressed and sent by post as well as by e-mail address got from the complainant. Court, in appropriate cases, may take the assistance of the police or the nearby Court to serve notice to the accused. For notice of appearance, a short date be fixed. If the summons is received back un-served, immediate follow up action be taken. (3) Court may indicate in the summon that if the accused makes an application for compounding of offences at the first hearing of the case and, if such an application is made, Court may pass appropriate orders at the earliest. (4) Court should direct the accused, when he appears to furnish a bail bond, to ensure his appearance during trial and ask him to take notice under Section 251Cr.P.C. to enable him to enter his plea of defence and fix the case for defence evidence, unless an application is made by the accused under Section 145(2) for re-calling a witness for cross-examination. (5) The Court concerned must ensure that examination-in-chief, cross-examination and re- examination of the complainant must be conducted within three months of assigning the case. The Court has option of accepting affidavits of the witnesses, instead of examining them in Court. Witnesses to the complaint and accused must be available for cross-examination as and when there is direction to this effect by the Court.

Citation

Judgement

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

WRIT PETITION (CIVIL) NO.18 OF 2013

Indian Bank Association and others … Petitioners

Versus

Union of India and others … Respondents

K.S. Radhakrishnan, J.

J U D G M E N T

1. This Writ Petition, under Article 32 of the Constitution

of India, has been preferred by the Indian Banks'

Association (IBA) along with Punjab National Bank and

another, seeking the following reliefs :-

a. Laying down appropriate guidelines/directions to be

followed by all Courts within the territory of India

competent to try a complaint under Section 138 of

the Negotiable Instruments Act, 1881 (the Act) to

follow and comply with the mandate of Section 143 of

the said Act read with Sections 261 to 265 of Criminal

Page 1

Procedure Code, 1973 (Cr.P.C.) for summary trial of

such complaints filed or pending before the said

Courts.

b. Issue a writ of mandamus for compliance with the

guidelines of this Hon'ble Court indicating various

steps to be followed for summary trial of complaints

under Section 138 of the said Act and report to this

Hon'ble Court.

c. Issue a writ of mandamus, directing the respondents,

to adopt necessary policy and legislative changes to

deal with cases relating to dishonor of cheqeus so

that the same are expeditiously disposed off in

accordance with the intent of the Act and the

guidelines to be laid down by this Hon'ble Court.

2. The first petitioner, which is an Association of Persons

with 174 banks/financial institutions as its members, is a

voluntary association of banks and functions as think tank

for banks in the matters of concern for the whole banking

industry. The Petitioners submit that the issue raised in

this case is of considerable national importance owing to

the reason that in the era of globalization and rapid

technological developments, financial trust and

commercial interest have to be restored.

Page 2

3. The Petitioners submit that the banking industry has

been put to a considerable disadvantage due to the delay

in disposing of the cases relating to Negotiable

Instruments Act. The Petitioner banks being custodian of

public funds find it difficult to expeditiously recover huge

amount of public fund which are blocked in cases pending

under Section 138 of the Negotiable Instruments Act,

1881. Petitioners submit that, in spite of the fact, Chapter

XIV has been introduced in the Negotiable Instruments Act

by Section 4 of the Banking, Public Financial Institutions

and Negotiable Instruments Laws (Amendment) Act, 1988,

to enhance the acceptability of cheques in settlement of

liability by making the drawer liable for penalties in case of

bouncing of cheques due to insufficiency of funds, the

desired object of the Amendment Act has not achieved.

4. Legislature has noticed that the introduction of

Sections 138 to 142 of the Act has not achieved desired

result for dealing with dishonoured cheques, hence, it

inserted new Sections 143 to 147 in the Negotiable

Instruments Act vide Negotiable Instruments (Amendment

Page 3

and Miscellaneous Provisions) Act, 2002 for speedy

disposal of cases relating to dishonour of cheques through

summary trial as well as making the offence

compoundable. But, no uniform practice is seen followed

by the various Magistrate Courts in the country, as a result

of which, the object and purpose for which the

amendments were incorporated, have not been achieved.

5. Cheque, though acknowledged as a bill of exchange

under the Negotiable Instruments Act and readily accepted

in lieu of payment of money and is negotiable, the fact

remains that the cheque as a negotiable instrument

started losing its credibility by not being honoured on

presentation. Chapter XVII was introduced, as already

indicated, so as to enhance the acceptability of cheques in

settlement of liabilities. The Statement of Objects and

Reasons appended with the Bill explaining the provisions

of the new Chapter reads as follows :-

"This clause [Clause (4) of the Bill] inserts a new

Chapter XVII in the Negotiable Instruments Act,

1881. The provisions contained in the new

Chapter provide that where any cheque drawn

by a person for the discharge of any liability is

Page 4

returned by the bank unpaid for the reason of

the insufficiency of the amount of money

standing to the credit of the account on which

the cheque was drawn or for the reason that it

exceeds the arrangements made by the drawer

of the cheque with the bankers for that account,

the drawer of such cheque shall be deemed to

have committed an offence. In that case, the

drawer, without prejudice to the other

provisions of the said Act, shall be punishable

with imprisonment for a term which may extend

to one year, or with fine which may extend to

twice the amount of the cheque, or with both.

The provisions have also been made that

to constitute the said offence:

(a) such cheque should have been presented to

the bank within a period of six months of the

date of its drawal or within the period of its

validity, whichever is earlier; and

(b) the payee or holder in due course of such

cheque should have made a demand for the

payment of the said amount of money by giving

a notice, in writing, to the drawer of the cheque

within fifteen days of the receipt of the

information by him from the bank regarding the

return of the cheque unpaid; and

failed to make the payment of the said amount

of money to the payee or the holder in due

course of the cheque within fifteen days of the

receipt of the said notice.

It has also been provided that it shall be

presumed, unless the contrary is proved, that

the holder of such cheque received the cheque

Page 5

in the discharge of a liability. Defences which

may or may not be allowed in any prosecution

for such offence have also been provided to

make the provisions effective. Usual provision

relating to offences by companies has also been

included in the said new Chapter. In order to

ensure that genuine and honest bank customers

are not harassed or put to inconvenience,

sufficient safeguards have also been provided in

the proposed new Chapter. Such safeguards

are:

(a) that no court shall take cognizance of such

offence except on a complaint, in writing, made

by the payee or the holder in due course of the

cheque;

(b) that such complaint is made within one

month of the date on which the cause of action

arises; and

Metropolitan Magistrate or a Judicial Magistrate

or a Judicial Magistrate of the First Class shall

try any such offence."

6. The objectives of the proceedings of Section 138 of

the Act are that the cheques should not be used by

persons as a tool of dishonesty and when cheque is issued

by a person, it must be honoured and if it is not honoured,

the person is given an opportunity to pay the cheque

amount by issuance of a notice and if he still does not pay,

he must face the criminal trial and consequences. Section

Page 6

138 of the Negotiable Instruments Act, 1881, is given

below for easy reference :-

"138. Dishonour of cheque for

insufficiency, etc., of funds in the account.

- Where any cheque drawn by a person on an

account maintained by him with a banker for

payment of any amount of money to another

person from out of that account for the

discharge, in whole or in part, of any debt or

other liability, is returned by the bank unpaid,

either because of the amount of money

standing to the credit of that account is

insufficient to honour the cheque or that it

exceeds the amount arranged to be paid from

that account by an agreement made with that

bank, such person shall be deemed to have

committed an offence and shall, without

prejudice to any other provision of this Act, be

punished with imprisonment for a term which

may extend to one year, or with fine which may

extend to twice the amount of the cheque, or

with both:

Provided that nothing contained in this section

shall apply unless-

(a) the cheque has been presented to the bank

within a period of six months from the date on

which it is drawn or within the period of its

validity, whichever is earlier;

(b) the payee or the holder in due course of the

cheque, as the case may be, makes a demand

for the payment of the said amount of money

by giving a notice, in writing, to the drawer of

the cheque, within fifteen days of the receipt of

information by him from the bank regarding the

return of the cheque as unpaid; and

Page 7

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."

7. This Court in Electronics Trade & Technology

Development Corporation Ltd., Secunderabad v.

Indian Technologists & Engineers (Electronics) (P)

Ltd. and Another (1996) 2 SCC 739, held as follows:

"6.…..The object of bringing Section 138 on

statute appears to be to inculcate faith in the

efficacy of banking operations and credibility in

transacting business on negotiable instruments.

Despite civil remedy, Section 138 intended to

prevent dishonesty on the part of the drawer of

negotiable instrument to draw a cheque without

sufficient funds in his account maintained by him

in a book and induce the payee or holder in due

course to act upon it. Section 138 draws

presumption that one commits the offence if he

issues the cheque dishonestly. It is seen that

once the cueque has been drawn and issued to

the payee and the payee has presented the

cheque and thereafter, if any instructions are

issued to the bank for non-payment and the

cheque is returned to the payee with such an

endorsement, it amounts to dishonour of cheque

and it comes within the meaning of Section

138…."

Page 8

8. In Goa Plast (P) Ltd. v. Chico Ursula D'Souza

(2004) 2 SCC 235, this Court, while dealing with the

objects and ingredients of Sections 138 and 139 of the

Act, observed as follows :-

"The object and the ingredients under the

provisions, in particular, Sections 138 and 139

of the Act cannot be ignored. Proper and

smooth functioning of all business transactions,

particularly, of cheques as instruments,

primarily depends upon the integrity and

honesty of the parties. In our country, in a large

number of commercial transactions, it was

noted that the cheques were issued even

merely as a device not only to stall but even to

defraud the creditors. The sanctity and

credibility of issuance of cheques in commercial

transactions was eroded to a large extent.

Undoubtedly, dishonour of a cheque by the

bank causes incalculable loss, injury and

inconvenience to the payee and the entire

credibility of the business transactions within

and outside the country suffers a serious

setback. Parliament, in order to restore the

credibility of cheques as a trustworthy

substitute for cash payment enacted the

aforesaid provisions. The remedy available in a

civil court is a long-drawn matter and an

unscrupulous drawer normally takes various

pleas to defeat the genuine claim of the payee."

9. We have indicated, Sections 138 to 142 of the Act

were found to be deficient in dealing with the dishonoured

cheques. In the said circumstances, the legislature

Page 9

inserted new Sections 143 to 147 by the Negotiable

Instruments (Amendment and Miscellaneous Provisions)

Act, 2002, which is brought into force w.e.f. 6

2003. The object and reasons for the said Amendment

Act are of some importance and are given below :-

"1. The Negotiable Instruments Act, 1881 was

amended by the Banking, Public Financial

Institutions and Negotiable Instruments Laws

(Amendment) Act, 1988 wherein a new Chapter

XVII was incorporated for penalties in case of

dishonour of cheques due to insufficiency of

funds in the account of the drawer of the

cheque. These provisions were incorporated

with a view to encourage the culture of use of

cheques and enhancing the credibility of the

instrument. The existing provisions in the

Negotiable Instruments Act,1881, namely,

sections 138 to 142 in Chapter XVII have been

found deficient in dealing with dishonour of

cheques. Not only the punishment provided in

the Act has proved to be inadequate, the

procedure prescribed for the Courts to deal with

such matters has been found to be

cumbersome. The Courts are unable to dispose

of such cases expeditiously in a time bound

manner in view of the procedure contained in

the Act.

2. A large number of cases are reported to be

pending under sections 138 to 142 of the

Negotiable Instruments Act in various courts in

the country. Keeping in view the large number

of complaints under the said Act pending in

various courts, a Working Group was

constituted to review section 138 of the

February,

Page 10

Negotiable Instruments Act, 1881 and make

recommendations as to what changes were

needed to effectively achieve the purpose of

that section.

3. The recommendations of the Working Group

along with other representations from various

institutions and organisations were examined

by the Government in consultation with the

Reserve Bank of India and other legal experts,

and a Bill, namely, the Negotiable Instruments

(Amendment) Bill, 2001 was introduced in the

Lok Sabha on 24th July, 2001. The Bill was

referred to Standing Committee on Finance

which made certain recommendations in its

report submitted to Lok Sabha in November,

2001.

4. Keeping in view the recommendations of the

Standing Committee on Finance and other

representations, it has been decided to bring

out, inter alia, the following amendments in the

Negotiable Instruments Act,1881, namely:—

(i) to increase the punishment as prescribed

under the Act from one year to two years;

(ii) to increase the period for issue of notice by

the payee to the drawer from 15 days to 30

days;

(iii) to provide discretion to the Court to waive

the period of one month, which has been

prescribed for taking cognizance of the case

under the Act;

(iv) to prescribe procedure for dispensing with

preliminary evidence of the complainant;

(v) to prescribe procedure for servicing of

summons to the accused or witness by the

Court through speed post or empanelled private

couriers;

Page 11

(vi) to provide for summary trial of the cases

under the Act with a view to speeding up

disposal of cases;

(vii) to make the offences under the Act

compoundable;

(viii) to exempt those directors from prosecution

under section 141 of the Act who are nominated

as directors of a company by virtue of their

holding any office or employment in the Central

Government or State Government or a financial

corporation owned or controlled by the Central

Government, or the State Government, as the

case may be;

(ix) to provide that the Magistrate trying an

offence shall have power to pass sentence of

imprisonment for a term exceeding one year

and amount of fine exceeding five thousand

rupees;

(x) to make the Information Technology Act,

2000 applicable to the Negotiable Instruments

Act,1881 in relation to electronic cheques and

truncated cheques subject to such modifications

and amendments as the Central Government, in

consultation with the Reserve Bank of India,

considers necessary for carrying out the

purposes of the Act, by notification in the

Official Gazette; and

(xi) to amend definitions of "bankers' books"

and "certified copy" given in the Bankers' Books

Evidence Act,1891.

5. The proposed amendments in the Act are

aimed at early disposal of cases relating to

dishonour of cheques, enhancing punishment

for offenders, introducing electronic image of a

truncated cheque and a cheque in the

electronic form as well as exempting an official

nominee director from prosecution under the

Negotiable Instruments Act,1881.

Page 12

6. The Bill seeks to achieve the above objects."

10. Section 143 of the Act introduced by 2002

Amendment reads as follows :-

"143. Power of Court to try cases

summarily.-

(1) Notwithstanding anything contained in the

Code of Criminal Procedure, 1973, all offences

under this Chapter shall be tried by a Judicial

Magistrate of the first class or by a Metropolitan

Magistrate and the provisions of Sections 262 to

265 (both inclusive) of the said Code shall, as

far as may be, apply to such trials:

Provided that in the case of any conviction in a

summary trial under this section, it shall be

lawful for the Magistrate to pass a sentence of

imprisonment for a term not exceeding one

year and an amount of fine exceeding five

thousand rupees:

Provided further that when at the

commencement of, or in the course of, a

summary trial under this section, it appears to

the Magistrate that the nature of the case is

such that a sentence of imprisonment for a term

exceeding one year may have to be passed or

that it is, for any other reason, undesirable to

try the case summarily, the Magistrate shall

after hearing the parties, record an order to that

effect and thereafter recall any witness who

may have been examined and proceed to hear

or rehear the case in the manner provided by

the said Code.

(2) The trial of a case under this section shall,

Page 13

so far as practicable, consistently with the

interests of justice, be continued from day to

day until its conclusion, unless the Court finds

the adjournment of the trial beyond the

following day to be necessary for reasons to be

recorded in writing.

(3) Every trial under this section shall be

conducted as expeditiously as possible and an

endeavour shall be made to conclude the trial

within six months from the date of filing of the

complaint."

11. Section 145 of the Act deals with the evidence on

affidavit and reads as follows :

"145. Evidence on affidavit.

(1) Notwithstanding anything contained in the

Code of Criminal Procedure, 1973, (2 of 1974.)

the evidence of the complainant may be given

by him on affidavit and may, subject to all just

exceptions, be read in evidence in any enquiry,

trial or other proceeding under the said Code.

(2) The Court may, if it thinks fit, and shall, on

the application of the prosecution or the

accused, summon and examine any person

giving evidence on affidavit as to the facts

contained therein."

12. The scope of Section 145 came up for consideration

before this Court in Mandvi Cooperative Bank Limited

v. Nimesh B. Thakore (2010) 3 SCC 83, and the same

was explained in that judgment stating that the legislature

Page 14

provided for the complainant to give his evidence on

affidavit, but did not provide the same for the accused.

The Court held that even though the legislature in their

wisdom did not deem it proper to incorporate a word

"accused" with the word "complainant" in Section 145(1),

it does not mean that the Magistrate could not allow the

complainant to give his evidence on affidavit, unless there

was just and reasonable ground to refuse such

permission.

13. This Court while examining the scope of Section 145

in Radhey Shyam Garg v. Naresh Kumar Gupta

(2009) 13 SCC 201, held as follows :-

"If an affidavit in terms of the provisions of

Section 145 of the Act is to be considered to be

an evidence, it is difficult to comprehend as to

why the court will ask the deponent of the said

affidavit to examine himself with regard to the

contents thereof once over again. He may be

cross-examined and upon completion of his

evidence, he may be re-examined. Thus, the

words "examine any person giving evidence on

affidavit as to the facts contained therein, in the

event, the deponent is summoned by the court

in terms of sub-section (2) of Section 145 of the

Act", in our opinion, would mean for the

purpose of cross-examination. The provision

seeks to attend a salutary purpose."

Page 15

14. Considerable time is usually spent for recording the

statement of the complainant. The question is whether

the Court can dispense with the appearance of the

complainant, instead, to take steps to accept the affidavit

of the complainant and treat the same as examination-in-

chief. Section 145(1) gives complete freedom to the

complainant either to give his evidence by way of affidavit

or by way of oral evidence. The Court has to accept the

same even if it is given by way of an affidavit. Second

part of Section 145(1) provides that the complainant's

statement on affidavit may, subject to all just exceptions,

be read in evidence in any inquiry, trial or other

proceedings. Section 145 is a rule of procedure which

lays down the manner in which the evidence of the

complainant may be recorded and once the Court issues

summons and the presence of the accused is secured, an

option be given to the accused whether, at that stage, he

would be willing to pay the amount due along with

reasonable interest and if the accused is not willing to

Page 16

pay, Court may fix up the case at an early date and

ensure day-to-day trial.

15. Section 143 empowers the Court to try cases for

dishonour of cheques summarily in accordance with the

provisions of Section 262 to 265 of the Code of Criminal

Procedure, 1973. The relevant provisions being Sections

262 to 264 are extracted hereinbelow for easy reference :

"262. Procedure for summary trials.

(1) In trials under this Chapter, the procedure

specified in this Code for the trial of summons-

ease shall be followed except as hereinafter

mentioned.

(2) No sentence of imprisonment for a term

exceeding three months shall be passed in the

case of any conviction under this Chapter.

263.Record in summary trials.-

In every case tried summarily, the Magistrate

shall enter, in such form as the State

Government may direct, the following

particulars, namely:-

(a) the serial number of the case:

(b) the date of the commission of the offence;

(d) the name of the complainant (if any);

(e) the name, parentage and residence of the

accused;

Page 17

(f) the offence complained of and the offence (if

any) proved, and in cases coming under clause

(ii), clause (iii) or clause (iv) of sub-section (1) of

section 260, the value of the property in respect

of which the offence has been committed;

(g) the plea of the accused and his examination

(if any);

(h) the finding;

(i) the sentence or other final order

(j) the date on which proceedings terminated.

264. Judgment in cases tried summarily. –

In every case tried summarily in which the

accused does not plead guilty, the Magistrate

shall record the substance of the evidence and

a judgment containing a brief statement of the

reasons for the finding."

16. We have indicated that under Section 145 of the Act,

the complainant can give his evidence by way of an

affidavit and such affidavit shall be read in evidence in

any inquiry, trial or other proceedings in the Court, which

makes it clear that a complainant is not required to

examine himself twice i.e. one after filing the complaint

and one after summoning of the accused. Affidavit and

the documents filed by the complainant along with

complaint for taking cognizance of the offence are good

enough to be read in evidence at both the stages i.e. pre-

Page 18

summoning stage and the post summoning stage. In

other words, there is no necessity to recall and re-

examine the complaint after summoning of accused,

unless the Magistrate passes a specific order as to why

the complainant is to be recalled. Such an order is to be

passed on an application made by the accused or under

Section 145(2) of the Act suo moto by the Court. In

summary trial, after the accused is summoned, his plea is

to be recorded under Section 263(g) Cr.P.C. and his

examination, if any, can be done by a Magistrate and a

finding can be given by the Court under Section 263(h)

Cr.P.C. and the same procedure can be followed by a

Magistrate for offence of dishonour of cheque since

offence under Section 138 of the Act is a document based

offence. We make it clear that if the proviso (a), (b) & (c)

to Section 138 of the Act are shown to have been

complied with, technically the commission of the offence

stands completed and it is for the accused to show that no

offence could have been committed by him for specific

reasons and defences.

Page 19

17. Procedure for summary case has itself been

explained by this Court in Nitinbhai Saevantilal Shah

and another v. Manubhai Manjibhai Panchal and

another (2011) 9 SCC 638, wherein this Court held as

under :

"12. Provision for summary trials is made in

Chapter XXI of the Code. Section 260 of the

Code confers power upon any Chief Judicial

Magistrate or any Metropolitan Magistrate or

any Magistrate of the First Class specially

empowered in this behalf by the High Court to

try in a summary way all or any of the offences

enumerated therein. Section 262 lays down the

procedure for summary trial and sub-section (1)

thereof inter alia prescribes that in summary

trials the procedure specified in the Code for the

trial of summons case shall be followed subject

to the condition that no sentence of

imprisonment for a term exceeding three

months is passed in case of any conviction

under the chapter.

13. The manner in which the record in

summary trials is to be maintained is provided

in Section 263 of the Code. Section 264

mentions that in every case tried summarily in

which the accused does not plead guilty, the

Magistrate shall record the substance of the

evidence and a judgment containing a brief

statement of the reasons for the finding. Thus,

the Magistrate is not expected to record full

evidence which he would have been, otherwise

required to record in a regular trial and his

judgment should also contain a brief statement

of the reasons for the finding and not elaborate

Page 20

reasons which otherwise he would have been

required to record in regular trials."

18. Amendment Act, 2002 has to be given effect to in its

letter and spirit. Section 143 of the Act, as already

indicated, has been inserted by the said Act stipulating

that notwithstanding anything contained in the Code of

Criminal Procedure, all offences contained in Chapter XVII

of the Negotiable Instruments Act dealing with dishonour

of cheques for insufficiency of funds, etc. shall be tried by

a Judicial Magistrate and the provisions of Sections 262 to

265 Cr.P.C. prescribing procedure for summary trials, shall

apply to such trials and it shall be lawful for a Magistrate

to pass sentence of imprisonment for a term not

exceeding one year and an amount of fine exceeding

Rs.5,000/- and it is further provided that in the course of a

summary trial, if it appears to the Magistrate that the

nature of the case requires passing of the sentence of

imprisonment exceeding one year, the Magistrate, after

hearing the parties, record an order to that effect and

thereafter recall any witness and proceed to hear or

Page 21

rehear the case in the manner provided in Criminal

Procedure Code.

19. This Court in Damodar S. Prabhu v. Sayed

Babalal H. (2010) 5 SCC 663, laid down certain

guidelines while interpreting Sections 138 and 147 of the

Negotiable Instruments Act to encourage litigants in

cheque dishonour cases to opt for compounding during

early stages of litigation to ease choking of criminal justice

system for graded scheme of imposing costs on parties

who unduly delay compounding of offence, and for

controlling of filing of complaints in multiple jurisdictions

relatable to same transaction, which have also to be

borne in mind by the Magistrate while dealing with cases

under Section 138 of the Negotiable Instruments Act.

20. We notice, considering all those aspects, few High

Courts of the country have laid down certain procedures

for speedy disposal of cases under Section 138 of the

Negotiable Instruments Act. Reference, in this

connection, may be made to the judgments of the

Page 22

Bombay High Court in KSL and Industries Ltd. v.

Mannalal Khandelwal and The State of Maharashtra

through the Office of the Government Pleader

(2005) CriLJ 1201, Indo International Ltd. and another

v. State of Maharashtra and another (2005) 44 Civil

CC (Bombay) and Harischandra Biyani v. Stock

Holding Corporation of India Ltd. (2006) 4 MhLJ 381,

the judgment of the Calcutta High Court in Magma

Leasing Ltd. v. State of West Bengal and others

(2007) 3 CHN 574 and the judgment of the Delhi High

Court in Rajesh Agarwal v. State and another (2010)

ILR 6 Delhi 610.

21. Many of the directions given by the various High

Courts, in our view, are worthy of emulation by the

Criminal Courts all over the country dealing with cases

under Section 138 of the Negotiable Instruments Act, for

which the following directions are being given :-

DIRECTIONS:

(1) Metropolitan Magistrate/Judicial Magistrate

(MM/JM), on the day when the complaint under

Page 23

Section 138 of the Act is presented, shall

scrutinize the complaint and, if the complaint is

accompanied by the affidavit, and the affidavit

and the documents, if any, are found to be in

order, take cognizance and direct issuance of

summons.

(2) MM/JM should adopt a pragmatic and realistic

approach while issuing summons. Summons must

be properly addressed and sent by post as well as

by e-mail address got from the complainant.

Court, in appropriate cases, may take the

assistance of the police or the nearby Court to

serve notice to the accused. For notice of

appearance, a short date be fixed. If the

summons is received back un-served, immediate

follow up action be taken.

(3) Court may indicate in the summon that if the

accused makes an application for compounding of

offences at the first hearing of the case and, if

Page 24

such an application is made, Court may pass

appropriate orders at the earliest.

(4) Court should direct the accused, when he

appears to furnish a bail bond, to ensure his

appearance during trial and ask him to take notice

under Section 251Cr.P.C. to enable him to enter

his plea of defence and fix the case for defence

evidence, unless an application is made by the

accused under Section 145(2) for re-calling a

witness for cross-examination.

(5) The Court concerned must ensure that

examination-in-chief, cross-examination and re-

examination of the complainant must be

conducted within three months of assigning the

case. The Court has option of accepting affidavits

of the witnesses, instead of examining them in

Court. Witnesses to the complaint and accused

must be available for cross-examination as and

when there is direction to this effect by the Court.

Page 25

22. We, therefore, direct all the Criminal Courts in the

country dealing with Section 138 cases to follow the

above-mentioned procedures for speedy and expeditious

disposal of cases falling under Section 138 of the

Negotiable Instruments Act.

23. Writ Petition is, accordingly, disposed of, as above.

New Delhi,

April 21, 2014.

…..………………………J.

(K.S. Radhakrishnan)

………………………….J.

(Vikramajit Sen)

Page 26

__._,_.___

receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan" [COST FREE] SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE. To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.com

Visit Your Group

New Members 3

• Privacy • Unsubscribe • Terms of Use

Chartered Accountant Finance

Friday, May 2, 2014

[aaykarbhavan] Judgment and Information