Anil Dev Singh, J.— This is a revision petition against the order of the learned Additional Sessions Judge dated January 24, 1997 whereby the order of the learned Additional Chief Metropolitan Magistrate dated July 28, 1995 was set aside. The facts giving rise to this petition are as follows:—
A criminal complaint-No. 901 of 1987 for the alleged commission of the offences under section 276E of the Income Act, 1961 (for short ‘the Act’), was filed by Shri R. Prasad, Income Tax Officer, Company Circle XXV, New Delhi, against the petitioners as per the following allegations:
Petitioner No. 1 is a company registered under the Companies Act, 1956. Petitioners 2 to 4 were the Directors of the petitioner No. 1 during the period relevant to the assessment year 1984-1985 and they were incharge of and responsible to the company for the conduct of its business at the time when the offence is said to have been committed. During the course of the assessment proceedings for the period relevant to the assessment year 1984-1985 the complainant found that the company had shown deposits in its books of accounts in the name of Summan Steel & Rolling Mills Pvt. Ltd. and M/s. Universal Properties Limited. Repayment of deposits amounting to Rs. 1,00,000/- and Rs. 3,50,000/- were made to Summan Steel & Rolling Mills Pvt. Ltd. in cash by the petitioner company on January 28, 1984 and February 12, 1984 respectively. Similarly, repayment of deposit of Rs. 10,000/- was made by the petitioner company to M/s. Universal Properties Ltd. on September 12, 1983. The case of the complainant is that the repayments were made in contravention of section 269T of the Act inasmuch as the were made in cash instead of by cheques resuling in commission of offence punishable under section 276E of the Act. Petitioner No. 1 was issued a notice by the complainant on March 2, 1987 requiring it to show cause why action under section 276E of the Act be not initiated against it. The company as well as its directors (petitioners 2 to 4), however, failed to give any reply to the notice.
The learned trial court by its order dated July 28, 1995 acquitted the petitioners on the ground that the provisions of section 269T of the Act were not attracted as it was not a case of repayment in connection with the deposits, but it was a case of repayment of loans. It was held that the repayment of loan by cash payment will not constitute contravention of section 269T of the Act. The complainant being aggrieved of the order of the Additional Chief Metropolitan Magistrate filed a revision petition before the Additional Sessions Judge, Delhi. The Additional Sessions Judge by his order January 24, 1997 reversed the order of the learned Additional Chief Metropolitan Magistrate holding that the repayment was towards deposits as contemplated by section 269T of the Act. It further came to the conclusion that the term “deposit” means any deposit of money which is repayable after notice and repayable after a fixed period of time. It also observed that it was too early for the trial court to jump to the conclusion that the loans repaid by the petitioner company were not deposits as contemplated by section 269T of the Income-tax Act.
I have heard learned counsel for the parties. In order to appreciate the question as to whether the petitioners have violated the provisions of the Act it would be necessary and convenient to extract section 269T thereof:—
Mode of repayment of certain deposits.
(1) No company (including a banking company), co-operative society or firm shall repay to any person any deposit otherwise than by an account payee cheque or account payee bank draft where the amount of the deposit, or where the amount of the deposit is to be repaid together with any interest, the aggregate of the amount of the deposit and such interest, is ten thousand rupees of more:
Provided that where the repayment is by a banking company or cooperative bank, such repayment may also be made by crediting the amount of such deposit to the account (if any) with such company or bank of the person to whom such deposit has to be repaid: Provided further that nothing in this sub-section shall apply to or in relation to the repayment of any deposit on or after the date on which the Income-tax (Second Amendment) Act, 1981, receives the assent of the President.
(2) No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the deposit if -
(a) the amount of the deposit together with interest, if any, payable thereon, or
(b) the aggregate amount of the deposits held by such person with the branch of the banking company or co-operative bank, or as the case may be, the other company or co-operative society or the firm, either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such deposits, is twenty thousand rupees or more:
Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such deposit to the savings bank account or the current account (if any) with such branch of the person to whom such deposit has to be repaid:
Provided further that nothing in this sub-section shall apply to or in relation to the repayment of any deposit before the date on which the Income-tax (Second Amendment) Act, 1981, receives the assent of the President.
Explanation - For the purposes of this section, -
(i) “banking company” shall have the meaning assigned to it in clause (i) of the Explanation to section 269SS;
(ii) “co-operative bank” shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);
(iii) “deposit” means any deposit of money which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes deposit of any nature.”
The above said section shows that the aggregate amount of deposits held by a company shall not be repaid to any person otherwise than by an account payee cheque or account payee bank draft where the amount of deposit, or where the amount of deposit is to be repaid together with any interest, the aggregate of the amount of the deposit and such interest, is ten thousand rupees or above, after the Income-tax (Second Amendment) Act, 1981, received the assent of the President of India. The President of India assented to the Amendment Act on September 19, 1981. It is not disputed that the repayment was made after the Amendment Act was assented to by the President of India. Learned counsel for the petitioner submitted that section 269T(1) of the Act will not be applicable if the repayment was towards deposit as under second proviso to section 269T(1) nothing in the said sub-section will apply to or in relation to any repayment of any deposit on or after the date on which the Income-tax (Second Amendment) Act, 1981, received the assent of the President of India. It does appear to me that this sub-section is not applicable as the assent of the President of India was received earlier to the repayment, but clauses (a) and (b) of sub-section (2) of Section 269T would undoubtedly be applicable if the repayment in the instant case was made in relation to deposits as the repayment was made after September 19, 1981 when the President of India assented to the Amendment Act. Now the only question which remains to be determined is whether the repayment was towards ‘deposit’ or the same was towards ‘loan’. In order to determine this question it will be necessary to consider whether the meaning of the term ‘deposit’ ascribed by the explanation to section 269T includes the term ‘loan’ in its ambit. The distinction between the loan and the deposit is that in the case of the former it is ordinarily the duty of the debtor to seek out the creditor and to repay the money according to the agreement and in the case of the latter it is generally the duly of the depositor to go to the banker or to the depositee, as the case may be, and make a demand for it. This distinction was adopted by the Lahore High Court in the case of Gurcharan Das and another v. Ram Rakha Mal and others, AIR 1939 Lahore 81. Similar view was expressed by a Division Bench of the Oudh High Court in the case of Chaturgun v. Shahzady, AIR 1930 Oudh 395. While drawing the distinction between the words ‘deposit’ and ‘loan’ the court relied upon two earlier decisions of the Madras High Court in V. Balakrishnudu v. Narayanaswamy Chetty, 24 I.C 852, and Kishtappa Chetty v. Lakshmi Ammal, 72 I.C 842. In this regard it held as follows:—
“ The word “deposit” as pointed out by the Madras High Court in V. Balakrishnudu v. Narayanaswamy Chetty is derived from the Latin deposi-tum, a technical word used in the Roman law of bailment for a bailment of a specific thing to be kept for the bailor and returned when wanted, as opposed to commodatum where a specific thing is lent to the bailee to be used by him and returned. In popular language commodatum is translated by the word “loan” and the distinction between deposit and loan is this: that a deposit is to be kept by the depositec for the depositor and the loan is to be kept by the borrower for himself. Thus I deposit my hat in the cloak room. My hat is not to be used by the depositee, but is to be kept for me and returned to me on my demand; but I lend my money to a friend and he can do what he likes with it as long as he returns it to me either on demand or at some specified time. It may be, as observed by Sir Walter Schwabe when Chief Justice of the Madras High Court, in “Kishtappa Chetty v. Lakshmi Ammal, that Art. 145 covers more than the depositum of Roman Law, and his Lordship observed that the framers of the Indian Limitation Act “meant to use simple and plain language,” but I take this to mean that the word “deposit” is used in the ordinary sense of the word in the English language, and as far as I am aware the word “deposit” does not cover a transaction of the nature of a loan. The transaction that we have to consider is a loan. The plaintiff lent the defendant these ornaments to be used by the latter in a religious procession. There was no question of trust or quasi trust. It was a mere loan for the benefit of the borrower and in my opinion Art. 145 has no application.
It may also be noted that while Articles 19 and 21- of the Limitation Act fix the period within which suit for recovery of loan can be filed, Article 22 deals with the period of limitation for suit for money on account of deposit. The starting period of limitation under Articles 19 and 21, on the one hand, and Article 22, on the other, are different. Under Articles 19 and 21 the cause of action in the case of money lent arises from the date of loan, whereas under Article 22 the cause of action in the case of a deposit arises from the date of demand. Therefore, it is necessary to distinguish a deposit from a mere loan.
The provisions of section 269t read with section 276e are penal in nature and must be strictly construed. Since the legislature specifically used the word “deposit” in contradistinction to the term “loan”, the provisions would only be attracted if the repayment has been made in respect of a deposit. The meaning of the word “deposit” occuring in section 269T cannot be stretched to include loan. An assessee must know as to which of his acts would violate a penal provision of a statute, as otherwise unwittingly he may fall in the net cast by a penal provision. In case two interpretations are possible”, an interpretation which takes out an assessee from the clutches of a penal provision must be preferred.
The complainant in the show cause notice dated March 2, 1987 clearly stated that the petitioners raised a loan and a payment was made in cash with reference to the same. This is what the show cause notice states:—
“During the course of assessment proceedings for the assessment year 1984-1985 in your case it is found that you have raised a loan from M/s. Summan Steel & Rolling Mills and made payment for the said loan in the previous year relevant to the assessment year 1984-1985. Copy of the account appearing in your account books is reproduced below:
Receipt
Payment
24/3/84 cash 2,16,800
28/1/84 cash 1,00,000
30/3/84 cash 75,000
12.2.84 cash 3,50,000
14/2/84 cash 1,50,000
27.2.84 cash 2,00,000
20.3.84 cash 1,86,000
It is noticed that the transactions for receipt as well as for the payment of the loan have been made in cash exceeding Rs. 10,000/-. Provision of Section 269T of the I.T Act, 1961 prohibits the payment in cash for the deposit received by you if the amount repaid exceeded to Rs. 10,000/- other than Bank cross cheques and drafts.
xx xx xx “
It is, therefore, obvious that the complainant itself conceded in the above said notice that the transactions for receipt was in the nature of a loan. This being the situation, there was no justification for the complainant to invoke sections 269T read with section 269E of the Income-tax Act. The prosecution of the petitioners, therefore, was not warranted.
Accordingly, the order of the learned Additional Sessions Judge dated January 24, 1997 is set aside and the order of the learned Additional Chief Metropolitan Magistrate dated July 28, 1995 is restored.