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2021 (10) TMI 192 - HC - Indian LawsRecovery of suit amount on the basis of promissory note - Money Suit - legally enforceable debt or not - suit was dismissed after holding that presumption under Section 118 of the Negotiable Instruments Act, 1881 could not be invoked - transaction did not conform to the mandate set out in Section 269SS of the Income Tax Act, 1961 - HELD THAT:- Section 118 of the Negotiable Instruments Act, 1881 states that the presumptions set out therein 'shall be made'. This is equivalent to saying 'shall presume'. It was held in PR. METRANI VERSUS COMMISSIONER OF INCOME-TAX [2006 (11) TMI 136 - SUPREME COURT] that a presumption in the form of 'shall presume' leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. Therefore, the first appellate court had no option but to apply Section 118 of the Negotiable Instruments Act, 1881. In case after case, it has been held that merely because the transaction in question has not been shown in the income tax returns, it would not be rendered void. If the lender has advanced a certain amount which ought to have been reflected in the tax returns but he failed to disclose the same in his returns, that would not exonerate the borrower from the liability to repay. The default committed by the lender may attract penal action from the department. But his right to recover the amount from the borrower cannot be extinguished - the law of limitation can render a claim otherwise valid unenforceable. The government of the day can bring in legislation offering succour to debtors. If the suit transaction falls within the scope of a debt relief legislation, the lender cannot maintain an action outside its framework. But failure to disclose in the tax returns cannot render the amount irrecoverable. It cannot extinguish the right of the creditor. A civil remedy can be stifled only by a statutory provision and not by judicial innovation. In the case on hand, the first appellate court contrary to the statutory mandate failed to presume a certain fact in favour of the plaintiff and that led to the dismissal of the suit. It also misconstrued the evidence on record - the substantial questions of law is answered in favour of the appellant - second appeal allowed.
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