Section 69D applies only to hundi transactions, so cash loans and related interest were outside its scope.

Section 69D of the Income-tax Act applies only to transactions in respect of a hundi, and cash borrowing or repayment by itself does not attract the provision. On the facts, the instruments described as loans from a credit corporation were not found to be hundis, so the statutory condition for section 69D was not met. The related interest payment arising from the same transactions also fell outside the provision. The earlier deletion of the addition was therefore sustained, and the reference was answered against the Department.

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Issues: Whether cash borrowings described as loans from a credit corporation could be treated as hundi loans so as to attract section 69D of the Income-tax Act, 1961, and whether the related interest payment also fell within that provision.

Analysis: The reference concerned the scope of section 69D in relation to instruments that were not found to be hundis on their facts. The loans were advanced in cash and the Court followed its earlier decisions on identical facts holding that such instruments could not be regarded as hundis. On that basis, the statutory condition for applying section 69D was not satisfied. The interest payment arising from the same transactions also could not be brought within the same provision.

Conclusion: Section 69D of the Income-tax Act, 1961 was held inapplicable to the loans and interest in question, and the question was answered in favour of the Revenue and against the assessee.

Final Conclusion: The addition deleted by the appellate authorities was upheld as not falling within section 69D, and the reference was answered against the Department.

Ratio Decidendi: Section 69D applies only where the transaction is in respect of a hundi, and where the instrument is not a hundi the section cannot be invoked merely because the borrowing or repayment was in cash.

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