Dr. Radhey Shayam Aggarwal vs State and Another

Dalveer Bhandari, J.—The petitioner has approached this court u/s 482 of the Code of Criminal Procedure, 1973, for setting aside/quashing the order dated August 20,1998, passed by Shri M. K. Gupta, the Additional Chief Metropolitan Magistrate, Delhi, in Criminal Complaint No. 5164 of 1989 (Case No. 198 of 1994) titled as ITO v. Radhey Shayam Aggarwal.

It is incorporated in the petition that the petitioner, Dr. Radhey Shayam Aggarwal, is a medical practitioner having a nursing home at A-22, Vishal Enclave, New Delhi. The petitioner is an Income Tax assessed. The brief facts necessary to dispose of this petition are recapitulated as under :

The petitioner received cash loans during the assessment year 1987-88 from Rakesh Aggarwal and Renu Gupta. The details of the cash loans taken during that period are set out as under :

Serial No. Name of the person from whom loan was accepted Amount of cash (Rs.) Date of receipt

Rakesh Aggarwal 10,000 16-10-1986

Renu Gupta 4,000 16-10-1986

Renu Gupta 5,000 21-11-986

Renu Gupta 5,000 28-11-1986

Renu Gupta 3,000 6-12-1986

The Income Tax Officer found that the acceptance of cash loans to the tune of the aforesaid amounts is vocative of Section 269SS of the Income Tax Act, 1961, and, consequently, Mr. A. K. Monga, the Income Tax Officer, filed a complaint pertaining to the assessment year 1987-88 against the petitioner, Radhey Shyam Agarwal, for committing an offence u/s 276DD of the Income Tax Act, 1961. In the complaint it is mentioned that the complainant has been duly authorised to file the complaint. It is also mentioned in the complaint that the acceptance of cash loan of Rs. 10,000 from Rakesh Aggarwal and cash loan of Rs. 17,000 from Renu Gupta in the assessment year 1987-88, by the petitioner was in contravention of Section 269SS of the Income Tax Act, 1961.

Section 269SS reads as under :

"269SS. Mode of faking or accepting certain loans and deposits.--No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,-

(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or

(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or

(c) the amount or the aggregate amount referred to in Clause (a) together with the amount or the aggregate amount referred to in Clause (b),

is twenty thousand rupees or more :

Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,--

(a) Government ;

(b) any banking company, post office savings bank or co-operative bank ;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956) ;

(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.

Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.

Explanation.--for the purposes of this section,--

(i) ''banking company'' means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in Section 51 of that Act ;

(ii) ''co-operative bank'' shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ;

(iii) ''loan or deposit means loan or deposit of money." That the petitioner was served a show-cause notice on January 12, 1989. Reply to the notice was submitted on February 28, 1989. The learned Additional Metropolitan Magistrate has framed charge against the petitioner u/s 269SS which is punishable u/s 276DD of the Income Tax Act. The petitioner is aggrieved by the order by which the charge has been framed against him and according to him no charge could have been legally framed or sustained against him. He further stated that he had committed no offence whatsoever. It is also mentioned in the petition that on August 24, 1986, the petitioner paid to Shri Rakesh Aggarwal a sum of Rs. 3,000 by a cheque and the petitioner received Rs. 10,000 from Rakesh Aggarwal on October 16, 1986. Accordingly, the petitioner submitted that the Income Tax Officer has deliberately suppressed the fact of repayment of Rs. 3,000 to Rakesh Aggarwal. Thus, the amount of loan taken from Rakesh Aggarwal was reduced only to Rs. 7,000 and, Therefore, the provisions of sections 269SS and 276DD of the Income Tax Act, 1961, cannot be attracted in any event. It is also mentioned in the petition that Section 276DD of the Income Tax Act has been omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, and thus taking of cash loan up to Rs. 20,000 was no longer a criminal offence and the ceiling on receiving cash loans has been enhanced from Rs. 10,000 to Rs. 20,000. Therefore, the short question which falls for consideration is whether receiving of the aforementioned cash loan was an offence on August 28, 1989, when the complaint was filed ?

Learned counsel for the petitioner has placed reliance on the judgment of Salwan Construction Co. and Others Vs. Union of India and Others, delivered on April 26, 2000, in Criminal Miscellaneous (Main) No. 1155 of 1998 by D. K. Jain J. of this court. In this case, the main question which arose for the consideration was whether after the substitution of a new Section 276B, with effect from April 1, 1989, omitting the default of non-deduction of tax at source from the ambit of the said section, a complaint for failure to deduct tax at source during the period prior to April 1, 1989, could still be filed after the said date ? It is held in that case that a bare perusal of the aforenoted provisions read with the object behind the amendment of Section 276B and simultaneous introduction of the new Section 271C in the Act, makes it abundantly clear that with effect from April 1, 1989, the Legislature intended to treat the default of failure to deduct tax at source not as seriously as a default of deducting the tax and not paying, the same to the credit of the Central Government. The court held that the complaint filed on March 31, 1992, u/s 276B of the Act for failure on the part of the petitioner-firm to deduct tax at source is clearly not maintainable and deserve to be quashed.

Learned counsel for the petitioner has also placed reliance on the Constitution Bench judgment of the Supreme Court, i.e., Rayala Corporation (P) Ltd. and M.R. Pratap Vs. Director of Enforcement, New Delhi, . This Judgment has been relied on by the learned judge in the case of Salwan Construction Co. and Others Vs. Union of India and Others, , while quashing the complaint filed by the Income Tax Department.

Mr. Jolly, learned counsel for the respondent fairly conceded that the judgment of Salwan Construction Co. and Others Vs. Union of India and Others, , is squarely applicable to the facts and circumstances of this case. Following the aforesaid judgment, the Criminal Complaint No. 5164 of 1989 (Case No. 198 of 1994), titled as ITO v. Dr. Radhey Shayam Aggarwal is hereby quashed and consequently all the proceedings emanating from the Criminal Complaint No. 5164 of 1989 are also liable to be set aside including the order dated August 20, 1998, passed by Shri M. K. Gupta, the learned Additional Chief Metropolitan Magistrate, in the aforesaid criminal complaint.