2001 PLP 129 (PTD)

N.V. BALASUBRAMANIAN, J.‑‑‑At the instance of the Revenue, the Income‑tax Appellate Tribunal, Madras, has stated a case and referred the following common question of law for the assessment years 1978‑79 and 1979‑80 under section 256(1) of the Income Tax Act, 1961, (hereinafter referred to as "the Act"), for the opinion of this Court. "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the addition of Rs.24,140 for the assessment year 1978‑79 assessed as income under section 69D of the Income Tax Act, 1961? (2) Whether, the Appellate Tribunal's view that documents executed by the assessee in favour of its creditors should not be treated as Hundis within the meaning of section 69D of the Income Tax Act, 1961, is maintainable in law?" The Income‑tax Officer, while completing the assessments for the years 1978‑79 and 1979‑80, noticed that the assessee has borrowed a sum on Hundis, made repayments thereof and also paid interest. The Income‑tax Officer held that since the transactions were not effected through account- payee cheques drawn on a bank the provisions of section 69D of the Act were attracted and accordingly made an addition of a sum of Rs.24,140 for the assessment year 1978‑79 and another sum of . Rs.12,750 for the assessment year 1979‑80 to the income 'of the assessee. When the assessee preferred appeals to the Commissioner of Income‑tax (Appeals) questioning the additions in view of the specific provisions of section 69D of the Act, the Commissioner of Income‑tax (Appeals) upheld the additions. The assessee carried the matter in appeal before Income‑tax Appellate Tribunal. The Income‑tax Appellate Tribunal followed its earlier order, i.e., ITO v. M.K.A. Chinnaswamy Nadar & Sons (I.T.A. No.1039 (MDS) of 1981, dated March 27. 1982) and found that the document had been written in English and the assessee has promised to pay the amount to a certain person or his order. The Appellate Tribunal held that merely because the documents were written on Hundi papers or the grounds of appeal, were prepared on the basis that they were Hundi documents they cannot be said to be Hundis. In this view of the matter the Tribunal held that they were not Hundis and the provisions of section 69D of the Act were not attracted. A similar question of law, whether the provisions of section 69D of the Act would be attracted on the basis of a mere execution of the document in Hundi papers came up for consideration before this Court in the case of CIT v. Paranjothi Salt Co. (1995) 211 ITR 141, and this Court held that it has to be seen in each case as to what are the contents of the document and unless the contents show that the essential characteristics of the Hundi were present, the provisions of section 69D are not attracted. This Court also held that the mere circumstantial evidence that they were written on Hundi papers would not clothe them with the character of the Hundis. In the instant case there is a finding of the Appellate Tribunal that the assessee has promised to pay the amount to a certain person or his order and hence the documents concerned cannot be regarded as Hundis, though they were written on Hundi papers. In view of the categorical finding of the Appellate Tribunal that they were not Hundis, we are of the view that there is no infirmity in the order of the Appellate Tribunal in deleting the addition of Rs.24,140 for the assessment year 1978‑79 and a sum of Rs.10,750 (wrongly taken as Rs.12,750) for the assessment year 1979‑

80. In view of the factual finding of the Appellate Tribunal, we answered both the common questions of law referred to us in the affirmative and against the Revenue However, in the circumstances there will be no order as to costs. M.B.A./181/FC Reference answered.