9911796707
TMI Blog1996 (9) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on business in cloth. Regular books of account have been maintained. For the purpose of accounting, the Diwali year is followed. During the accounting year, Diwali 1977-78, relevant to the assessment year 1979-80, the Income-tax Officer, A-Ward, Jabalpur, found that the assessee had taken hundi loans in cash from various parties after April 1, 1977, in the following manner : --------------------------------------------------------------------------------------------------------------------------------------------------- Sl. Name of Date of Amounts No. party hundi loan (Rs.) --------------------------------------------------------------------------------------------------------------------------------------------------- 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire amount to the total income of the assessee. In terms of section 69D of the Act, which came into force from April 1, 1977, the Assessing Officer, while disposing of the explanation submitted by the assessee, held that the question whether the loans are genuine or not does not arise, as the provision of the Act has to be complied with strictly, and it admits of no exception. The Income-tax Officer accordingly added these loans amounting to Rs. 51,000 and interest of Rs. 3,318, total Rs. 54,318, to the total income of the assessee and assessed them to tax. The income determined in the case of the firm was allocated to the partners and the partners were also assessed on the share income which included the loans treated as income under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under : " 69D. Amount borrowed or repaid on hundi.---Where any 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 to be assessed again in respect of such amount under the provisions of this section on repayment of such amount. Explanation.---For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the transaction should be through the medium of the bank so that such transaction can be examined properly. In this connection, learned counsel has invited our attention to the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC), wherein section 40A(3) of the Income-tax Act, 1961, came up for challenge as being ultra vires articles 14 and 19(1)(c) of the Constitution of India and while upholding the validity of this Act, their Lordships observed : " In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also invited our attention to various other judgments with reference to section 40A(3), in Sajowanlal Jaiswal v. CIT [1976] 103 ITR 706 (Orissa), U. P. Hardware Store v. CIT [1976] 104 ITR 664 (All) and Attar Singh Gurmukh Singh v. ITO [1982] 136 ITR 589 (P H). The aforesaid reasoning is applicable in the present case also. The whole idea behind checking this payment by way of hundi is that it does not lend transparency to the transaction whereas in the transaction through the bank loan, there is transparency as the transactions can be verified. In this connection, our attention was also invited to section 269SS of the Act regarding taking or accepting certain loans and deposits. Section 269SS reads as under : " 269SS. --- No perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1987, with effect from April 1, 1989 : " Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act. Explanation.---For the purposes of this section,--- (i) 'banking company' means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act ; (ii) 'co-operative bank' shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ; (iii) ' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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