ASSTT CIT Vs. BISSHESHWARLAL MANNALAL SONS

JUDGEMENT

(1.) This revenue's appeal is directed against the order dated 31-7-1996 passed by the learned Commissioner (Appeals)-V, Calcutta, in the matter of assessment order under section 143(3) for the assessment year 1992-93. Solitary grievance of the revenue is against Commissioner (Appeals)'s 'deleting the addition of Rs. 45,28,754 made under section 69D on account of borrowal made by the assessee in cash on hundies'.

(2.) Briefly stated the relevant facts of the case are that the assessee is a Calcutta-based firm and owns a tea garden at Rosekandi in Cachar District of Assam. During the relevant previous year, the assessee had an arrangement with one M/s Baldeodas Satya Narayan (hereinafter referred to as the local moneylender), which had an office at a location near assessee's tea garden, i.e., at Janigang Bazar in Silchar, and under this arrangement the tea garden office of the firm could borrow money in cash from the local moneylender for meeting local expenses such as labour payments, etc., but immediately upon doing so, the local office would issue internal instructions to the head office to make the payment of the borrowed sum directly to the moneylender. As a matter of fact, the money was given by the moneylender in exchange of such internal payment instructions issued by the local office to the head office. As a part of this arrangement, head office of the assessee-firm was making instructed payments to the moneylender, by crossed cheques, usually within 2-3 days of such payment instruction being issued by the tea estate office. Thus, effective borrowing period was time required in implementing the payment instructions issued by the tea estate office to the head office, which worked out to, on an average, less than 3 days. In consideration of these services, the moneylender was charging a flat interest of 75 paisa per hundred rupees. On these undisputed facts, the learned assessing officer was of the opinion that this arrangement by the assessee was in nature of borrowing against hundi and since these borrowings were in cash, section 69D was attracted. Accordingly, the assessing officer made an addition of Rs. 45,28,754, i.e., the total amount of borrowings by the tea estate office from the aforesaid Baldeodas Satya Narayan, during the relevant previous year. In appeal, however, it was held that there were no borrowings by the assessee, as the account credited by the tea garden office was HO remittance and not that of the moneylender. It was further held that even if there was a borrowing, in any case the transaction did not involve any hundi. In coming to this conclusion, the Commissioner (Appeals) was influenced by the factors that : (i) a hundi is a bill of exchange and therefore, it must have three parties whereas there are only two parties in the present case, (ii) a hundi is generally drawn in vernacular language whereas the payment instructions were issued in English and therefore such a payment construction cannot be construed as hundi, and (iii) even if the payment instruction is treated as hundi, since money is payable on demand, this has to be treated as darshani hundi which, by the virtue of CBDT Circular No. 221 dated 6-6-1977, is to treated as outside the ambit of scope of section 69D. Reliance was also placed on the judgments in the case of CIT v. Paranjothi Salt Co., 1995 217 ITR 141 and CIT v. Dexan Pharmaceuticals (P) Ltd., in arriving at these conclusions. Aggrieved by this order of the learned Commissioner (Appeals), the revenue is in appeal before us.

(3.) We have heard Shri D.K. Ghosh, learned Departmental Representative, and Shri R.N. Bajoria, learned Senior Advocate. We have considered the rival contentions, perused the orders of the lower authorities, as well as paper book filed by the assessee, and deliberated upon the judicial precedents and Board circulars cited before us.