Tribunal upholds decision on income source, distinguishing hundis from promissory notes.

The Tribunal upheld the AAC's decision to delete the addition under 'Income from other sources' for the assessee, determining that the document in question was a promissory note, not a hundi. The Tribunal found that the circular cited did not support the department's position, as it pertained to different types of hundis not subject to section 69D. Based on legal definitions and precedents, the Tribunal dismissed the appeal, emphasizing the distinction between hundis and promissory notes in its decision.

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Issues:
Appeal against deletion of addition under 'Income from other sources' by AAC based on section 69D of the Income-tax Act, 1961. Interpretation of Circular No. 221 dated 6-6-1977 by the Board regarding hundi transactions. Determination of whether the document in question is a hundi or a promissory note.

Analysis:
The appeal before the Appellate Tribunal ITAT Madras-A concerned the income-tax assessment for the year 1979-80 of the assessee, K.A. Khader Sons, Gudiyatham. The primary issue was the objection of the department regarding the deletion of an addition of Rs. 65,000 made by the ITO under the head 'Income from other sources' using section 69D of the Income-tax Act, 1961. Section 69D deems any amount borrowed on a hundi, not through an account payee cheque drawn on a bank, to be the income of the person borrowing the amount. The department contended that the borrowal on documents alleged to be hundi, received in cash, should be added back to the assessee's income.

In the appeal, the AAC deleted the addition based on the assessee's argument, supported by Circular No. 221 dated 6-6-1977, issued by the Board. The AAC also considered the language of the alleged hundis, stating they were in English and not in vernacular, which influenced the decision. The department appealed this decision, leading to the present case before the Tribunal.

During the appeal before the Tribunal, the departmental representative argued against the AAC's decision, emphasizing that the circular did not support the assessee's position in this case. The representative highlighted that the circular covered specific types of darshani hundi transactions and required examination of each case to determine if there was a borrowal on hundis as per section 69D. The assessee's counsel referenced various Tribunal orders and the Calcutta High Court decision to support the contention that the document in question was a promissory note, not a hundi.

Upon reviewing the submissions and the document involved, the Tribunal concluded that the borrowal in this case did not qualify as hundis. The document was deemed to be a promissory note based on its nature and content, similar to the Calcutta High Court decision's analysis. The Tribunal emphasized that the circular did not align with the department's argument, as it pertained to different types of darshani hundis not subject to section 69D. The Tribunal rejected the department's objection and upheld the AAC's order, ultimately dismissing the appeal.

In summary, the Tribunal's decision centered on the interpretation of the document in question, determining it to be a promissory note rather than a hundi, based on legal definitions and precedents. The Tribunal's analysis considered the specific characteristics of hundis and promissory notes, alongside the language of the circular and relevant case law, to support the conclusion that the addition under 'Income from other sources' was rightfully deleted by the AAC.

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