{"id":12986,"date":"2025-12-16T12:27:22","date_gmt":"2025-12-16T12:27:22","guid":{"rendered":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/?p=12986"},"modified":"2025-12-16T12:39:34","modified_gmt":"2025-12-16T12:39:34","slug":"navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881","status":"publish","type":"post","link":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/","title":{"rendered":"Navigating the Intersection of Section 269SS of Income Tax Act,1961 and Section 138 Negotiable Instrument Act,1881"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\" id=\"cheque-credibility-and-legal-consequences\"><span class=\"ez-toc-section\" id=\"Cheque_Credibility_And_Legal_Consequences\"><\/span>Cheque Credibility And Legal Consequences<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>\u201cA cheque is as good as cash, but only if it&#8217;s backed by the credibility of the issuer.\u201d<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #0c0c0c;color:#0c0c0c\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #0c0c0c;color:#0c0c0c\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Cheque_Credibility_And_Legal_Consequences\" >Cheque Credibility And Legal Consequences<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Cash_Transactions_And_Tax_Compliance\" >Cash Transactions And Tax Compliance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Link_Between_Section_269ss_And_Section_138_Ni_Act\" >Link Between Section 269ss And Section 138 Ni Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Section_269ss_Statutory_Provision\" >Section 269ss: Statutory Provision<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Section_269ss_Mode_Of_Taking_Or_Accepting_Certain_Loans_Deposits_And_Specified_Sum\" >Section 269ss. Mode Of Taking Or Accepting Certain Loans, Deposits And Specified Sum<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Exceptions_To_Section_269ss\" >Exceptions To Section 269ss<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Explanation\" >Explanation<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Object\" >Object<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Basic_Prohibition_Under_Section_269SS\" >Basic Prohibition Under Section 269SS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Example\" >Example<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Additional_Example_Illustrating_Section_269SS\" >Additional Example Illustrating Section 269SS<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Applicability_To_Proceedings_Under_Section_138_Of_The_NI_Act\" >Applicability To Proceedings Under Section 138 Of The NI Act<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Judicial_View_Supreme_Court_And_High_Court\" >Judicial View: Supreme Court And High Court<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Courts_View_on_Breach_of_Section_269SS_of_the_IT_Act_1961\" >Court\u2019s View on Breach of Section 269SS of the IT Act, 1961<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Implications_on_Proceedings_Under_Section_138_of_the_NI_Act\" >Implications on Proceedings Under Section 138 of the NI Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Legal_Position_in_a_Nutshell\" >Legal Position in a Nutshell<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Illustrative_Example\" >Illustrative Example<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Consequences\" >Consequences<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Conclusion\" >Conclusion<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/navigating-the-intersection-of-section-269ss-of-income-tax-act1961-and-section-138-negotiable-instrument-act1881\/#Note\" >Note<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<p>This saying highlights the importance of ensuring that cheques are issued with sufficient funds and genuine intent, as dishonour can lead to proceedings under Section 138 Ni Act, 1881.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"cash-transactions-and-tax-compliance\"><span class=\"ez-toc-section\" id=\"Cash_Transactions_And_Tax_Compliance\"><\/span>Cash Transactions And Tax Compliance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As regards Section 269ss of Income Tax Act, 1961 it&#8217;s often said, \u201cCash is king, but only if it&#8217;s accounted for.\u201d<\/p>\n\n\n\n<p>This emphasizes the importance of complying with tax laws and regulations when dealing with cash transactions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"link-between-section-269ss-and-section-138\"><span class=\"ez-toc-section\" id=\"Link_Between_Section_269ss_And_Section_138_Ni_Act\"><\/span>Link Between Section 269ss And Section 138 Ni Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 269ss of the Income Tax Act and Section 138 of the Ni Act are connected because they both deal with cash transactions and aim to prevent misuse of cash.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Section 269ss prohibits taking or accepting loans or deposits of Rs. 20,000 or more in cash, aiming to curb black money and promote digital transactions.<\/li>\n\n\n\n<li>Section 138 Ni Act deals with cheque dishonour, making it an offence if a cheque is dishonoured due to insufficient funds or other reasons.<\/li>\n<\/ul>\n\n\n\n<p>The connection lies in the fact that if a loan or deposit is taken or repaid in cash (in violation of Section 269ss), and a cheque is issued for such a transaction, it may lead to proceedings under Section 138 Ni Act if the cheque is dishonoured.<\/p>\n\n\n\n<p>This is because the transaction underlying the cheque may be considered invalid or illegal under Section 269ss, affecting the enforceability of the cheque.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"section-269ss-statutory-provision\"><span class=\"ez-toc-section\" id=\"Section_269ss_Statutory_Provision\"><\/span>Section 269ss: Statutory Provision<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The provision referred to is to explain it correctly :<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"mode-of-taking-or-accepting-loans\"><span class=\"ez-toc-section\" id=\"Section_269ss_Mode_Of_Taking_Or_Accepting_Certain_Loans_Deposits_And_Specified_Sum\"><\/span>Section 269ss. Mode Of Taking Or Accepting Certain Loans, Deposits And Specified Sum<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>No person shall take or accept from any other person (herein referred to as the (depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,\u2014<\/p>\n\n\n\n<ol style=\"list-style-type:lower-alpha\" class=\"wp-block-list\">\n<li>the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or<\/li>\n\n\n\n<li>on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum 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<\/li>\n\n\n\n<li>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:<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"exceptions-to-section-269ss\"><span class=\"ez-toc-section\" id=\"Exceptions_To_Section_269ss\"><\/span>Exceptions To Section 269ss<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,\u2014<\/p>\n\n\n\n<ol style=\"list-style-type:lower-alpha\" class=\"wp-block-list\">\n<li>the Government;<\/li>\n\n\n\n<li>any banking company, post office savings bank or co-operative bank;<\/li>\n\n\n\n<li>any corporation established by a Central, State or Provincial Act;<\/li>\n\n\n\n<li>any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013);<\/li>\n\n\n\n<li>\u00a0such 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:<\/li>\n<\/ol>\n\n\n\n<p>Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"explanation-to-section-269ss\"><span class=\"ez-toc-section\" id=\"Explanation\"><\/span>Explanation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>For the purposes of this section,\u2014<\/p>\n\n\n\n<ol style=\"list-style-type:lower-roman\" class=\"wp-block-list\">\n<li>\u201cbanking company\u201d means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act;<\/li>\n\n\n\n<li>\u201cco-operative bank\u201d shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);<\/li>\n\n\n\n<li>\u201cloan or deposit\u201d means loan or deposit of money;<\/li>\n\n\n\n<li>\u201cspecified sum\u201d means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.<\/li>\n<\/ol>\n\n\n\n<p>&#8220;`<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"object-of-section-269ss\"><span class=\"ez-toc-section\" id=\"Object\"><\/span>Object<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The primary object of Section 269S of the Income Tax Act is to prevent tax evasion by curbing black money, promoting transparency, tracking financial transactions, reducing cash dependency, and preventing money laundering, ultimately enhancing tax compliance and promoting a more transparent financial system.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"basic-prohibition-under-section-269ss\"><span class=\"ez-toc-section\" id=\"Basic_Prohibition_Under_Section_269SS\"><\/span>Basic Prohibition Under Section 269SS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In simple words, Section 269SS prohibits any person from accepting a loan, deposit, or advance of E20,000 or more in cash. Such transactions must be carried out only through:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Account Payee Cheque<\/li>\n\n\n\n<li>Account Payee Bank Draft<\/li>\n\n\n\n<li>Electronic Modes (NEFT, RTGS, UPI, IMPS, Net Banking, etc.)<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"illustrative-example\"><span class=\"ez-toc-section\" id=\"Example\"><\/span>Example<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Suppose Mr. Sharma takes a loan of 25,000 in cash from his friend, Mr. Gupta. This transaction violates Section 269SS of the IT Act, 1961 because the amount exceeds \u20b920,000 and is not through an account payee cheque, account payee bank draft, or electronic clearing system.<\/p>\n\n\n\n<p>If Section 269SS is violated, the borrower (Mr. Sharma) will be subject to a penalty under Section 271D, equal to the amount of the loan taken.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"additional-examples-section-269ss\"><span class=\"ez-toc-section\" id=\"Additional_Example_Illustrating_Section_269SS\"><\/span>Additional Example Illustrating Section 269SS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>XYZ Enterprises takes a \u20b930,000 loan in cash from a private lender, violating Section 269SS. Penalty under Section 271D may apply.<\/li>\n\n\n\n<li>Rohan borrows f \u20b925,000 in cash from a friend for personal use. This transaction also violates Section 269SS.<\/li>\n\n\n\n<li>Even loans between family members exceeding \u20b920,000 in cash might attract scrutiny under Section 269SS unless specific exemptions apply.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"applicability-to-ni-act-proceedings\"><span class=\"ez-toc-section\" id=\"Applicability_To_Proceedings_Under_Section_138_Of_The_NI_Act\"><\/span>Applicability To Proceedings Under Section 138 Of The NI Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Now the key Question is arise weather the Provision mentioned under section 269ss of IT Act, 1961 is applicable on the Proceedings under section 138 of NI act?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"judicial-view-supreme-court-and-high-court\"><span class=\"ez-toc-section\" id=\"Judicial_View_Supreme_Court_And_High_Court\"><\/span>Judicial View: Supreme Court And High Court<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Supreme Court has affirmed this in SANJABIJ TARI v. KISHORE S. BORCAR &amp; ANR 2025 LiveLaw (SC) 952, Case. Recently, the Kerala High Court in P.C. Hari vs. Shine Varghese &amp; Anr., 2025 SCC OnLine Ker 5535, has taken the view that a debt created by a cash transaction above Rs. 20,000\/- (Rupees Twenty Thousand) in violation of the provisions of Section 269SS of the Income Tax Act, 1961 (for short &#8216;IT Act, 1961&#8217;) is not a &#8216;legally enforceable debt unless there is a valid explanation for the same, meaning thereby that the presumption under Section 139 of the Act will not be attracted in cash transactions above Rs. 20,000\/- (Rupees Twenty Thousand).<\/p>\n\n\n\n<p>Setting aside the High Court&#8217;s view, the judgment authored by Justice Manmohan observed;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"court-view-on-breach-of-section-269ss\"><span class=\"ez-toc-section\" id=\"Courts_View_on_Breach_of_Section_269SS_of_the_IT_Act_1961\"><\/span>Court\u2019s View on Breach of Section 269SS of the IT Act, 1961<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>However, this Court is of the view that any breach of Section 269SS of the IT Act, 1961 is subject to a penalty only under Section 271D of the IT Act, 1961. Further neither Section 269SS nor 271D of the IT Act, 1961 state that any transaction in breach thereof will be illegal, invalid or statutorily void.<\/p>\n\n\n\n<p>Therefore, any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the NI Act, 1881 or rebut the presumptions under Sections 118 and 139 of the NI Act because such a person, assuming him\/her to be the payee\/holder in due course, is liable to be visited by a penalty only as prescribed.<\/p>\n\n\n\n<p>Consequently, the view that any transaction above Rs.20,000\/- (Rupees Twenty Thousand) is illegal and void and therefore does not fall within the definition of \u201clegally enforceable debt\u201d cannot be countenanced. Accordingly, the conclusion of law in P.C. Hari (supra) is set aside.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"implications-on-proceedings-under-section-138\"><span class=\"ez-toc-section\" id=\"Implications_on_Proceedings_Under_Section_138_of_the_NI_Act\"><\/span>Implications on Proceedings Under Section 138 of the NI Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here\u2019s a summary &#8211;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Issue<\/th><th>Legal Position<\/th><\/tr><\/thead><tbody><tr><td>Cash Transactions Above \u20b920,000<\/td><td>Breach of Section 269SS attracts a penalty under Section 271D of the same Act but does not render the transaction illegal or unenforceable.<\/td><\/tr><tr><td>Legally Enforceable Debt<\/td><td>Cash loans above \u20b920,000 can still form the basis of a legally enforceable debt under Section 138 of the NI Act.<\/td><\/tr><tr><td>Revisional Jurisdiction<\/td><td>High Courts cannot reappreciate evidence in revisional jurisdiction without finding perversity in the lower court\u2019s judgment.<\/td><\/tr><tr><td>Probation Benefit<\/td><td>Accused persons in cheque bounce cases are entitled to seek the benefit of probation under the Probation of Offenders Act.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"legal-position-in-nutshell\"><span class=\"ez-toc-section\" id=\"Legal_Position_in_a_Nutshell\"><\/span>Legal Position in a Nutshell<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Provision under Section 269SS attracts penalty under Section 271D but does not render the transaction illegal or unenforceable.<\/li>\n\n\n\n<li>Does not affect proceedings under Section 138 of the NI Act or presumptions under Sections 118 and 139 of the NI Act.<\/li>\n\n\n\n<li>Transactions violating Section 269SS can still constitute a legally enforceable debt under the NI Act.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"illustrative-example-cash-loan\"><span class=\"ez-toc-section\" id=\"Illustrative_Example\"><\/span>Illustrative Example<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Suppose &#8211; Suppose Mr. Sharma takes a loan of 25,000 in cash from his friend, Mr. Gupta. This transaction violates Section 26955 because the amount exceeds \u20b920,000 and is not through an account payee cheque, account payee bank draft, or electronic clearing system.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"consequences-of-violation\"><span class=\"ez-toc-section\" id=\"Consequences\"><\/span>Consequences<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If Section 269SS is violated, the borrower (Mr. Sharma) will be subject to a penalty under Section 271D, equal to the amount of y the loan taken.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"conclusion-on-interplay-of-laws\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The judgment emphasizes that breaching Section 269SS attracts a penalty, but does not invalidate the underlying transaction or the cheque. This means lenders and borrowers should focus on complying with tax laws, while also ensuring cheque transactions are secure and enforceable.<\/p>\n\n\n\n<p>It provides clarity on the interplay between tax laws and negotiable instruments, helping parties navigate complex transactions with more confidence.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"personal-note\"><span class=\"ez-toc-section\" id=\"Note\"><\/span>Note<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Note : The views are personal<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cheque Credibility And Legal Consequences \u201cA cheque is as good as cash, but only if it&#8217;s backed by the credibility of the issuer.\u201d This saying highlights the importance of ensuring that cheques are issued with sufficient funds and genuine intent, as dishonour can lead to proceedings under Section 138 Ni Act, 1881. Cash Transactions And<\/p>\n","protected":false},"author":890,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"two_page_speed":[],"_jetpack_memberships_contains_paid_content":false,"_joinchat":[],"footnotes":""},"categories":[7],"tags":[28],"class_list":{"0":"post-12986","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-banking-finance-laws","7":"tag-top-news"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/12986","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/users\/890"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/comments?post=12986"}],"version-history":[{"count":0,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/12986\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/media?parent=12986"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/categories?post=12986"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/tags?post=12986"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}