COMMISSIONER OF INCOME TAX Vs. KAMARAJA PANDIAN S

JUDGEMENT

(1.) THE assessee is the proprietor of a rice mill and has been carrying on the business of purchasing and selling paddy, rice and gunny bags. For the assessment year 1965-66, the assessee submitted a return on July 30, 1965, disclosing a total income of Rs. 44,997 from his business. During the course of the assessment proceedings, the ITO noticed that the entries in the accounts of the assessee revealed that on December 16, 1964, five hundi loans of Rs. 20,000 each had been advanced to the assessee by five bankers, Atmaram Rupchand, Nandlal Tikamdas, Shamlal Maheshlal, Gopaldas Sugnichand and Paramanand Kishindas and that a sum of Rs. 4,050 has also been paid to them towards interest on these borrowings. Since the assessee did not furnish satisfactory proof of the genuineness of these hundi transactions which figured in his account books, the ITO treated the sum of Rs. 1,00,000 as income from undisclosed sources and computed the total income of the assessee at Rs. 1,27,000. On appeal by the assessee before the AAC, the assessment order was set aside with a direction that an opportunity should be given to the assessee to explain the hundi transactions. Subsequently, the ITO gave a number of opportunities to the assessee to establish that the transactions reflected in the account books are true and genuine.

(2.) THE assessee wrote a letter on February 18, 1971, stating that the hundi transactions were true and genuine and should be accepted. However, the assessee was required to produce the bankers and their books of account for examination. THE assessee was also informed that in the event of the assessee experiencing difficulty in producing the creditors by himself, their personal appearance could be enforced by the issue of summons under s. 131 of the I.T. Act, 1961 (hereinafter referred to as "the Act" ), for examination as witnesses on behalf of the assessee. Accordingly, summons were issued to all the five bankers to their address. Except for the summons issued to one Paramanand Kishindas, the others were all returned undelivered with the endorsement "not known". Paramanand Kishindas appeared before the ITO on February 7, 1972, and stated that though he had signed the hundi papers for Rs. 20,000 as a creditor, he had not advanced any loan as a money-lender, but had acted as a mere name lender for a nominal consideration. THEreafter, the ITO proceeded to consider the available materials in regard to each one of the hundi loans.

(3.) THE learned counsel for the Revenue contended that the Tribunal had not borne in mind the requirements of s. 68 of the Act and had misdirected itself in law in proceeding to hold that the mere entries in the books f account would be sufficient to establish the genuineness of the transactions, when there was no material either as regards the identity of the creditor or his capacity for advancing loans. In this connection, the learned counsel referred to the decisions in Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC), Jayaveerapandia Nadar v. CIT (1964) 54 ITR 401 (Mad), Velji Deoraj & Co. v. CIT (1968) 68 ITR 708 (Bom), Shankar Industries v. CIT and Kant & Co. v. CIT . It was the further contention of the learned counsel that on the materials placed before the Tribunal, the view taken by it was one which could not reasonably be entertained by any Tribunal acting judicially.