TaxTMI 
TaxTMI 
1987 (8) TMI 137
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....wing of Rs. 20,000 was done by the assessee allegedly against a hundi otherwise than by an a/c payee. cheque, the ITO invoked the provisions of sec. 69D to the assessee's case and brought to tax the said sum of Rs. 20,000 in his hands. The assessee raised the following pleas before the ITO. (i) That the document, against which loan had been obtained by the assessee, was not a hundi but promissory note, and (ii) that the transaction was genuine one and so it was not justified to make addition of Rs. 20,000 in the assessee's hands. In support of the above proposition, the assessee relied on the order of the ITAT in the case of Second ITO v. Grahalakshmi and Co. [1982] 2 ITD 420 (Mad.) and the judgment of the Hon'ble Calcutta High Court in the case of CIT v. S. C. Ghosal [1977] 106 ITR 980. The above submissions of the assessee were rejected by the ITO, who pointed out after detailed examination of what is a hundi and what is a promissory note, that the document in question was a hundi and not a promissory note. In his opinion the said hundi was negotiable and the document it self described it as hundi and, therefore, there was no merit in the assessee's contention that the documen....
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.... of sec. 40A. There also the legislature wanted to discourage the use of cash as amens of payment against purchases and services rendered and therefore, provided that, even if the purchases be genuine, yet if they had been paid for in cash exceeding Rs. 2,500 per payment the payments in question would be ignored and the amounts so paid would be added to the assessee's total income as if the payments in question had never been made and the liability in question had never been made and the liability in question had never been incurred. There was, however, a saving grace with regard to section 40A (3), namely, the proviso thereto in terms of which rule 6DD (j) and other clauses of Rules 6DD were incorporated. If payment in cash were made in the circumstances indicated in the various clauses of Rule 6DD, the rigour of sec. 40A (3) was to be eased. With regard to sec. 69D, however, the legislature did not contemplate any escape route and, there is no rule whatsoever under which the provisions of sec. 69D can be ignored if once a borrowing is shown to have been done through a hundi otherwise than by an a/c payee cheque. 6. The above being the true import of section 69D it was, in our ....
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....f the present case and take into account the findings given by the ITO and pass a speaking order indicating his findings with regard to the nature of the document. If possible, the document itself may be made an annexure to the order of the AAC so that it maybe possible in future to examine the language of the document with a view to come to the conclusion with regard to its nature, in case the matter is brought in appeal to the Tribunal later. So far as the judgment of the Hon'ble Calcutta High Court in the of S. C. Ghosal is concerned it does not help the assessee's case at all, because it pertains to the asst. year 1959-60, when the provisions of sec. 69D were not on the statute book and, their Lordships of that reference. 8. With these observations we set aside the order of the learned AAC and restore the matter back to him for doing the needful in accordance with law. Per Shri M. C. Agarwal, Judicial Member - I have gone through the order prepared by my learned brother, but with great respect, I am unable to agree to his conclusions regarding the application of sec. 69D of the Income-tax Act, 1961, to the facts of the present case. 2. In this case the assessee had bor....
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.... is raised, otherwise than through account payee cheque. It will also apply it although the loan was raised through an account payee cheque, but was not repaid in the same manner. In the present case on a requisition from the ITO the assessee paid the sum of Rs. 20,000 into the State Bank ofIndiathrough challans issued by the ITO and not through account payee cheques. Therefore, even if the assessee had borrowed the amount through an account payee cheque, it could still be held liable u/s 69D, because the amount was not repaid through account payee cheques, but was paid to the ITO concerned in the manner required by him. If we give a literal interpretation to section 69D and hold it to be imperative, the result would be patently absurd and thoroughly unjust. Such a state of things that can never be resumed to have been intended by the Legislature. In my view, therefore, section 69D is not imperative and should be interpreted to be merely discretionary to be applied in a proper case. The present case, as the facts set out by my learned brother disclose, is not one to which section 69D can be justly applied and I am, therefore, of the opinion that the Revenue's appeal should be dismi....
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....n the hundi and a promissory note and held that it was not in the nature of a promissory note and held that it was not in the nature of a promissory note. He also referred to the provision of section 14(1) of the Uttar Pradesh Registration of Money Lending Act of 1976 which required that loans of amounts above Rs. 1,000 had to be give by cheque. This, however, did not apply to 'hundis' and the Income-tax Officer inferred that Shri Chander Prakash Gupta must be knowing the provision of law as he was an Advocate and, therefore, cash loan was given through a hundi. The Income-tax officer referred to the fact that the alleged lender Surendra Kumar did not exist and this meant that the document was negotiable. The Income-tax Officer distanced the facts in this case from the facts in the case of Grahalakshmi and Co. which was relied upon by the assessee. In that case on the consideration of the document the Tribunal had held that it was a promissory note and not a hundi. The Tribunal had further observed that if it had been hundi, the position could not be different as the source of the money had been established and the transaction was genuine. It was held that provision of section 69D ....
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....reas there were certain exceptions to the provisions of section 40A (3), there were no exceptions to the provisions of section 69D. In view of this position, the learned Accountant Member was of the view that the Appellate Assistant Commissioner should have given a finding whether the money had been borrowed against hundi. He distinguished the decision in the case of Grahalakshmi & Co. and observed that the language of the section was clear and there was no ambiguity in it. In view of this position, the Accountant Member was of the view that the justice of the case required that the order of the Appellate Assistant Commissioner should be set aside to enable him to give a finding regarding the nature of the document, on the basis of which the borrowing had taken place. He also directed that the document should be made an annexure to the order. He also referred to the decision of the Calcutta High Court in S. C. Ghosal's case and held that the provisions of section 69D were not in existence for the relevant year. 8. The learned Judicial Member did not agree with the above view and according to him, a document executed in favour of a non-existing person was a nullity, and it could ....
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....this amount of Rs. 20,000 as the deemed income of the assessee. He contended that the document in question on the basis of which the borrowing had taken place was not a hundi but only a promissory note. We inquired from the learned counsel whether he had an authentic copy of the document but he submitted that the same was not with him and it was obtained by the Income-tax Officer as it had been found during the search in the premises of Shri Chander Prakash Gupta. The Departmental Representative referred to the difference in the language of the provisions of section 68 and other following provisions deeming certain amounts as the income and the language of section 69D. He pointed out that whereas in the other provisions some explanation had to be given and the Income-tax Officer had to apply his mind to that explanation, there was no such requirement in section 69D. He submitted that on the basis of discussion in the order of the Income-tax Officer it was clear that the document in question was a hundi but the learned Appellate Assistant Commissioner did not consider it necessary to decide this issue. The Departmental Representative was also not having any authentic copy of the doc....