Law: Income Tax Act, 1961

Section: 69,69D

Income-tax-----Hundi---Amount borrowed or repaid otherwise than by an account payee cheque on a Bank deemed to be income of person borrowing or repaying--­Document in English language---Whether hundi or promissory note--­Language in which instrument is written is not decisive---On facts, instrument held to be a promissory note and not a hundi---Hence S.69D is not applicable to instrument---No addition can be made---Indian Negotiable Instruments Act, 1881, Ss. 1, 4 & 5---Indian Income Tax Act, 1961, S. 69D. The assessee borrowed from four lenders the sums of Rs.10,500, Rs.12,400, Rs.7,500 and Rs.7,500. The repayments were not made by cheque but by cash. The Departmental Authorities held that these amounts fell within the mischief of section 69D of the Income Tax Act, 1961, and, accordingly, added these amounts to the income of the assessee. On appeal by the assessee, the Appellate Tribunal, deleted these additions as not hit by section 69D of the Act. On a reference: Held, affirming the decision of the Appellate Tribunal, that the language in which the instrument is written is not decisive. Though normally hundis are written in the vernacular language as the traders who used hundis in the past by and large were illiterate in English, that does not lead to the conclusion that if a document which is otherwise a hundi is written in the English language, such a document cannot be regarded as a hundi. It is the contents of the document that matter and not the language in which it is written: Held further that the instrument in question contained a definite promise to pay which promise was unconditional; it was signed by the maker and the sum of money to be paid was certain; the identity of the payee was set out and the provision was made for payment to him or to his order. The time of payment, however, was not merely on demand but at the expiry of the period specified in the instrument. These features answered the definition of promissory note contained in section 4 of the Negotiable Instruments Act, 1881 read with para. 2 of section 5 of the Act. Section 5 of the Negotiable Instruments Act defines a bill of exchange and para. 2 thereof provides that a promise or…

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