Documentary proof of hundi loans prevailed over suspicion where tax authorities failed to verify the creditor properly.

Documentary evidence of hundi loans, including discharged hundies and confirmatory letters with the creditor's address and file number, was accepted as sufficient where the revenue failed to make proper verification. Mere suspicion, an alleged blacklist status, or the creditor's non-production did not by itself disprove genuineness, especially when the assessing authority had not pursued available enquiries in time. On that basis, the additions treating the loans as bogus were deleted and the assessee's explanation was accepted.

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Issues: Whether the additions made on account of alleged bogus hundi loans were sustainable when the assessee had produced discharged hundies and confirmatory letters but the creditor was not personally produced.

Analysis: The assessee had disclosed the loans and furnished confirmatory letters containing the creditor's address and file number, as well as discharged hundies. The assessing authority did not make effective verification at the original stage and, after remand, proceeded after an inordinate delay, by which time the creditor was no longer available. The Tribunal held that the assessing authority had to utilise the material placed before it and make proper enquiries; mere doubt, suspicion, or the fact that the creditor was stated to be blacklisted could not by itself establish that the loans were nongenuine. The absence of personal production of the creditor did not, on the facts, disprove the documentary evidence, especially when no adequate verification was attempted by the department.

Conclusion: The additions on account of the hundi loans were not justified and were deleted; the issue was decided in favour of the assessee.

Final Conclusion: The tribunal accepted the genuineness of the loans on the evidence available and set aside the impugned additions.

Ratio Decidendi: Documentary evidence supporting a loan cannot be rejected on mere suspicion where the revenue fails to carry out available verification and there is no material to disprove the assessee's explanation.

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