SECOND INCOME-TAX OFFICER Vs. GRAHALAKSHMI

JUDGEMENT

(1.) Per Shri T. N. C. Rangarajan, Judicial Member - This appeal by the revenue is directed against an order of the AAc deleting an addition made under Section 69D of the Income-tax Act, 1961 (the Act).

(2.) The assessee is a registered firm. While going through the accounts of the previous year ending 9-11-1977, corresponding to the assessment year 1978-79, the ITO noticed that the assessee had taken loans on hundi and had also repaid loans taken on hundies and such borrowals and repayments had not been made through account-payee cheque or bank drafts. He, therefore, added back the amounts so borrowed or repaid along with the interest amounting to Rs. 41,650 under Section 69D. On appeal, the AAC found that the hundies had been written in English and following an order of the Tribunal dated 24-10-1980 in the case of Paranjothi Salt Co. in IT Appeal No. 1162 (Mad) of 1979, he held that the documents written in English cannot be considered to be hundies and, therefore, the provisions of Section 69D could not be applied. He, accordingly, deleted the additions.

(3.) In this appeal the contention of the revenue is that merely because the documents are written in English, they cannot be taken to fall outside the meaning of the word hundi because though hundies being written in local languages, there is nothing to prevent the hundies being written in English. It was pointed out that the documents in question were written on hundi papers and understood by the parties to the documents as hundies and, therefore, they could not be disregarded in applying the provisions of Section 69D. On the other hand, the contention of the assessee, apart from the point that being written in English they could not be regarded as hundies, is that the wordings of documents showed that they were only promissory notes and, therefore, even otherwise the provisions of Section 69D could not be applied.