138 NI Act | Failure To Produce Income Tax Returns Not Fatal To Cheque Bounce Case If Debt Is Established: Delhi High Court

"Scope of interference by this Court in revisional jurisdiction is extremely narrow, aimed at ascertaining if there is any perversity in the judgments of the trial court and/or the appellate court," Delhi High Court, in a recent ruling, has clarified that the failure of a complainant to produce Income Tax Returns (ITRs) reflecting a loan transaction is not necessarily fatal to a prosecution under Section 138 of the Negotiable Instruments Act.

A single-judge bench of Justice Girish Kathpalia observed that where the signatures on the cheque are admitted and the statutory notice has been received, the concurrent findings of lower courts regarding the existence of a debt cannot be easily unsettled in revisional jurisdiction.

The matter arose from a friendly loan of Rs. 5,00,000 extended by the respondent to the petitioner in March 2015. To discharge this liability, the petitioner issued a cheque in February 2016, which was subsequently dishonored due to "insufficiency of funds." Following a full trial, the Metropolitan Magistrate convicted the petitioner, a decision that was later upheld by the Court of Sessions.

The primary question before the court was whether the non-production of ITRs by the complainant, despite claiming the loan was reflected therein, would render the conviction bad in law. The court was also called upon to determine the extent of its interference in a revision petition against concurrent findings of conviction.

Narrow Scope of Revisional Jurisdiction

The Court began by emphasizing that its powers under revisional jurisdiction are significantly more restricted than those of an appellate court. It noted that it cannot re-appreciate evidence unless there is a visible perversity in the findings of the lower courts.

The bench noted that the scope of interference is "extremely narrow, aimed at ascertaining if there is any perversity in the judgments of the trial court and/or the appellate court." It found that both the Trial Court and the Sessions Court had conducted a detailed analysis of the evidence brought on record.

Non-Production of ITRs Not Fatal to Conviction

The petitioner argued that since the respondent stated in cross-examination that the loan was reflected in his ITRs, the failure to actually file those returns before the court should be fatal to the prosecution's case. However, the High Court rejected this contention, maintaining that such a technicality does not automatically displace the presumption of a legally enforceable debt.

The Court observed that neither of the arguments advanced by the petitioner could succeed in unsettling the concurrent judgments. It found that the lack of ITR documents did not outweigh the other evidentiary factors that established the petitioner's liability.

Admitted Signatures and Presumption of Liability

A critical factor in the court’s decision was the petitioner's admission regarding the cheque. During the trial, the petitioner categorically admitted that the cheque in question was signed by him and that he had received the statutory legal notice, despite initial denials.

"The learned trial court after elaborate discussion with the help of judicial precedents held that mere filling of particulars on the cheque by the complainant does not amount to any material alteration in a case where the drawer of the cheque does not dispute his signatures on the same."

Inconsistency in Defense Versions

The Court highlighted the shifting stands taken by the petitioner throughout the proceedings. Before the Trial Court, the petitioner claimed the cheques were stolen from his office drawer, whereas, in the revision petition, he argued they were related to a property dispute and were misused.

The bench found no "incorrectness, illegality or impropriety" in the lower courts' dismissal of these defenses. It noted that when a drawer admits his signatures, the complainant’s act of filling other details does not constitute a material alteration that would void the instrument under the Negotiable Instruments Act.

Dismissing the revision petition as "completely devoid of merits and frivolous," the Court upheld the sentence of imprisonment till the rising of the court and the direction to pay a compensation of Rs. 7,40,000. Additionally, the Court imposed a cost of Rs. 10,000 on the petitioner for initiating meritless litigation, ordering the total fine to be cleared within three days.

Date of Decision: 07 May 2026