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JUDGMENT Sabyasachi Mukharji, J.—In this reference, we are concerned with the assessment year 1961-62. The relevant accounting period is the year ending 31st March, 1961. The assessee is a private limited company carrying on business of purchase of aluminium rods and manufacture of conductors. The trading results, as shown by the assessee, were more or less accepted by the ITO. In the course of the assessment proceedings, the ITO found the following loans in the assessee's account books: Rs. 1.Sri. Kartar Singh 20,000 2.Bhagwandas Khemchand 20,000 3.Narain Singh Amarlal 35,000 4.Jethanand Madhavdas 5,000 80,000 The assessee offered an explanation by its letter dated 18th February, 1966. In the said letter, the assessee stated, inter alia, as follows: "Regarding hundi bankers we are to inform you that we have all the vouchers regarding the same and they are genuine parties. The matter was gone into in detail previously also. They are assessed to tax and all payments to them have been made by cheques. They have their bank accounts and income-tax files and they are not related to any shareholder or director of the company. Obviously they are genuine parties and the transactions cannot be treated as income from undisclosed sources. All the papers will be produced if you so desire. In this connection we would like to draw your kind attention to our letter Nos. SEC/28/5 and SEC/28/6 both dated 20th July, 1965. The file number of Shri V.L. Chandi has already been given. Mrs. Rodrigues appeared before you and explained the position regarding her credit. We hope you will kindly complete the assessment. The delay in making the assessment has caused unnecessary troubles, which could have been avoided had the assessments been completed at an early date. The managing director is out of station and we are experiencing further difficulties for the same. We believe you will appreciate the position." The sums were said to be representing genuine hundi loans from hundi bankers taken in the ordinary course of business. It was submitted that. the assessee was in possession of vouchers evidencing the said transactions and the parties were assessed to income-tax. All payments to…

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