Businessman Sentenced to One-Year Imprisonment for Bounced Cheques to Income Tax Department

By: Admin
April 30, 2024
Categories: Income Tax News|News
4 Min Read

A businessman was sentenced by a Gandhinagar court to a year in prison following a lawsuit from the income tax department due to his bounced cheques. The department had initiated recovery procedures against Mehulkumar Barot, a Chandkheda resident and operator of Merge India Business Solution under his wife’s name, for dues amounting to Rs 2.34 crore for the fiscal year 2013-14. An initial demand of Rs 1.04 crore was made, to which Barot responded by issuing five cheques totaling Rs 20 lakh in 2019. However, two of these cheques, each valued at Rs 5 lakh, were returned due to insufficient funds in Barot’s account.

Upon Barot’s refusal to settle the payment, the tax recovery officer of the I-T department filed a legal action under Section 138 of the Negotiable Instruments Act. Yusuf Shaikh, the department’s special prosecutor, confirmed that the lawsuit was filed with proper authorization, supporting his claim with various notices and communications proving the recovery from Barot was overdue and that the cheques were written for this purpose.

Barot defended himself by questioning the tax recovery officer’s authority to initiate the lawsuit, arguing that the assessment for the year 2013-14 was untimely. He claimed he was coerced into writing the cheques and challenged the legitimacy of the department’s notice. Barot also contested the tax demand, arguing that the amount was excessively high for an individual and that the demand should have been directed at his wife since the income was generated by the business.

Nonetheless, the court sided with the income tax department, finding Barot responsible for the dishonored cheques. He was sentenced to one year of imprisonment and ordered to compensate the department in the amount equivalent to the cheques. Should he fail to pay the compensation, he faces an additional three months in jail.