9911796707
TMI Blog1978 (7) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... t came to light that the assessee company had taken loans from certain Multain bankers, who were reported to have accommodated many tax payers with false Hundies or pronotes enabling them to introduce black money into the books, otherwise known as hawala transaction". When the assessee-company went in appeal to the AAC, he originally set aside the assessments observing that necessary and proper investigation regarding the genuineness or otherwise of the credits has not been done by the Department and directed that the assessments should be redone after giving an opportunity to the assessee to cross-examine the various Multani bankers who were reported to have done hawala business. The AAC also observed that the assessee has in his possession Hundi documents to show Prima facie evidence that it had received the loans as reflected in the books of accounts and that the Department should have positive materials to conclude that he transactions were fictitious. While reframing the assessment by the ITO on 29th March, 1975, he (sic) stated as follows: (a) The bankers had helped the assessee to bring unaccounted money under the guise of Hundi loans and such malpractices were prevailing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of the Hundi loans was that the assessee failed to produce the Hundi bankers. The AAC sought support from the decision of the Kerala High Court in the case of CIT vs. Adam (1), and came to the conclusion that he assessee had to discharge the onus of proving the source and nature of money received from the Hundi bankers. According to him the production of counterfoils of cheques and discharged Hundies would not go to prove the genuineness of the credits. The AAC, however, found that the creditors fell into two categories the first category being the creditors who have given statements of Department that they had done only Hawala business and the second being those where the Department has some material to show that the credits in the case of black-listed Hundi bankers only should be included in the total assessment as the assessee's income under undisclosed sources and that where additions have been made on suspicion no addition should be made. Before the AAC the assessee contested that after the lapse of 14 years the assessee should not be required to prove the genuineness of the credits. Thus he arrived at the peak credit of Rs. 1,75,000 as found in paragraph 13 of his ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the assessee referred to the decision of the Supreme Court in the case of ITO vs. Lakhmani Mewal Das (2). 5. Since the detection of racketeering by Hundiwalas in Hundi transactions there has been a perennial conflict between the assessee and the Department as to the nature of genuineness of Hundi transactions. The position came to such a stage that the Parliament, in its wisdom laid down a dictum as to the circumstances when the Hundi transactions are to be treated as genuine by the introduction of s. 69D which has been inserted by Taxation Laws (Amendment) Act, 1975 w.e.f. 1st day of April, 1977. s. 69D of the Act states that "where and amount is borrowed on a Hundi from, or any amount due thereon is repaid to, any person otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or repaying the amount aforesaid for the previous year in which the amount was borrowed or repaid, as the case may be : Provided that, if in any case any amount borrowed on a Hundi has been deemed under the provisions of this section to be the income of any person, such person shall not be liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was an escapement of income of the assessee from the assessment in the particular year because of his failure to disclose fully and truly all material facts. When this is the case with regard to formation of belief a fortiori it will apply to the case where the ITO comes to the conclusion that the credits in the name of Hundi loans were nothing but concealed income of the assessee. As stated by the Calcutta High Court in Northern Bengal Jute Trading Co. Ltd. vs. CIT(3), though the initial onus is entirely upon the assessee, whether such onus has been duly discharged by the assessee or had been shifted to the Revenue can only be determined after evaluation of all the surrounding circumstances and there cannot be a universal proposition of the type which could be the guiding yard-stick in the matter and each case has to be decided on the facts and circumstances of that case. 6. In this connection it will be appropriate to mention that when the original assessment was completed on 14th Aug., 1962 and the reassessment has been done finally on 29th March, 75, in the circumstances of the case the assessee should not be called upon to prove the source of source of the credit. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to prove that the creditors were in a position to give the loans. The Department failed to produce evidence that eh Hundiwalas were not in a position to advance the loans. After the service of the summons the parties did not turn up. After a lapse of time the ITO could have completed the attendance of these parties because the Hundiwalas proved to be witnesses of the Department. In this case when facts have been taken by the assessee through cheques, when interest was also paid to the bankers by cheques and when the assessee had given the names and addresses of the bankers who had advanced the moneys to it and amounts borrowed from these have been repaid and when these bankers were income-tax assessee and when the bankers had originally confirmed the transactions, we are of the opinion that in the circumstances of the case the assessee has reasonable proved that all the credits in the accounts of the Hundiwalas did not belong to it. As a corollary it follows that the interest paid by the assessee to these parties is to be accepted as genuine. Thus we delete the additions made during these years and allow the payment of interest by the assessee to the Hundiwalas, in all the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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