TMI Blog1980 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... se loans was Rs. 3,484. The original assessment was completed on April 29, 1961, accepting the returns and treating the loans as genuine borrowings. On the ground that the ITO came to know that the borrowings from hundi bankers were not genuine, he reopened the assessment and assessed the entire loan amount of Rs. 55,000 and interest of Rs. 3,484 paid thereon as the income of the assessee from undisclosed sources. The assessee preferred an appeal to the AAC and contended that there was no material whatsoever on which the ITO could have come to the conclusion that the borrowings were not genuine. The AAC, after noting that the prevailing hundi racket at the relevant time gave a reasonable inference that some assessees were introducing their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s alleged to have given a hundi loan of Rs. 15,000 on 2-1-1959 to the appellant, finds a place in the list. A statement has been recorded from the said hundi banker on 9-2-1965 wherein he has categorically admitted that he has been doing havala business. Another list of hundi bankers in Madras, who have not themselves made admission in writing but in respect of whom certain borrowers had stated in writing that their loan transactions with these bankers were bogus, was compiled and in this list the name of Dwarkadas Chaithram, who is alleged to have given a loan of Rs. 20,000 to the appellant on 6-3-1959 finds a place. It is on the basis of these investigations conducted by the Income-tax Department, the Income-tax Officer came to know that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bankers from whom the assessee had stated that he had borrowed moneys, will not be sufficient to hold that the assessee had failed to disclose any material fact relating to his assessment. In M. Varadarajulu v. ITO [1974] 97 ITR 476, a Division Bench of this court, to which one of us was a party, had occasion to consider the nature and relevancy of the admissions or statements made by hundi bankers relating to their havala transactions. This court observed (p. 479): "It is true that the department had not questioned the persons who were said to have advanced loans to the petitioner with reference to the particular loan transactions shown by him in his account books. But those statements were recorded from them generally about their busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nker that he had never advanced loans to any person was taken as sufficient material on the basis of which the ITO could have entertained the belief that the assessee had not fully and truly disclosed all material facts. But, in a later judgment in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, the Supreme Court had occasion to consider a similar statement by an individual whose name appeared as a creditor in the accounts of an assessee. He had stated that he had not advanced any moneys and that he was doing only name lending. With reference to this statement, the Supreme Court observed (p. 447): " There is nothing to show that the above confession related to a loan to the assessee and not to someone else much less to the loan of Rs. 2,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Varadarajulu v. ITO [1974] 97 ITR 476 (Mad). These two judgments were noticed by this court in M. Varadarajulu Naidu v. CIT [1978] III ITR 301 as not conflicting with each other, but requiring that in order to constitute as " material ", the statement by a hundi banker should have a relation to the particular credit of the assessee. But, in a later judgment in Asa John Devinathan v. Addl. CIT [1980] 126 ITR 270 (Mad), another Division Bench had observed that in view of the decision in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), the decision in M. Varadarajulu v. ITO [1974] 97 ITR 476 (Mad), to the extent it stated that in a case where a general statement was made by the creditor that he had never advanced any loan, may be taken as ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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