This is departmental appeal on following grounds: 1. learned AAC has erred in deleting addition of Rs. 20,000 being cash hundi loan overlooking fact that provisions of sec. 69D were clearly applicable in case. 2. learned AAC's order may be set aside and that of ITO be restored. 2. assessee, it appears, had borrowed Rs. 20,000 on 15-10-1981 allegedly from Shri Surindra Kumar. In course of assessment proceedings, it transpired that Shri Surindra Kumar was benami of Smt. Urmila Gupta, wife of Sh. Chander Prakash Gupta, Advocate of Saharanpur. Income-tax department, therefore, required assessee to deposit loan due from him to Smt. Urmila Gupta, against tax demand of Smt. Urmila Gupta. money was, accordingly, deposited by assessee in State Bank of India on 3-3-1982. 3. Inasmuch as borrowing of Rs. 20,000 was done by assessee allegedly against hundi otherwise than by a/c payee. cheque, ITO invoked provisions of sec. 69D to assessee's case and brought to tax said sum of Rs. 20,000 in his hands. assessee raised following pleas before ITO. (1) That document, against which loan had been obtained by assessee, was not hundi but promissory note, and (ii) that transaction was genuine one and so it was not justified to make addition of Rs. 20,000 in assessee's hands. In support of above proposition, assessee relied on order of ITAT in case of Second ITO v. Grahalakshmi and Co. [1982] 2 ITD 420 (Mad.) and judgment of Hon'ble Calcutta High Court in case of CIT v. S. C. Ghosal [1977] 106 ITR 980. above submissions of assessee were rejected by ITO, who pointed out after detailed examination of what is hundi and what is promissory note, that document in question was hundi and not promissory note. In his opinion said hundi was negotiable and document it self described it as hundi and, therefore, there was no merit in assessee's contention that document was not hundi but promissory note and that sec. 69D could not have been applied to it. He pointed out that facts in case of Grahalakshmi and Co (supra) were altogether different. There it was case of promissory note and Tribunal had given positive finding on this point after examining in detail nature of document involved in that case. same could not be said of facts of present case. So far as S. C. Ghosal's case (supra) was concerned, ld. D. R. again pointed out that facts altogether different. 4. On behalf of assessee, reliance was placed on order or AAC s also order of Tribunal referred to above and judgment of Hon'ble Calcutta High Court. 5. We have carefully examined facts of present case and rival submissions. Section 69D of Income-tax Act, 1961, is, so far as it is relevant for our purpose in following terms: "Where any amount is borrowed on hundi from, or any amount due thereon is repaid to, any person otherwise than through account payee cheque drawn on bank, amount so borrowed or repaid shall be deemed to be income of person borrowing or repaying amount aforesaid for previous year in which amount was borrowed or repaid, as case may be." It will be clear from aforesaid provision of sec. 69D that question of loan being genuine or otherwise does not enter in to language of sec. 69D. loan may be genuine, but, if it has been taken against hundi otherwise than by a/c payee cheque, sec. 69D requires that amount borrowed shall be deemed to be income of person borrowing ......" It is, thus, clearly deeming provision which ignores reality and presumes certain putative state of affairs to be correct state of affairs. To read genuineness of transaction into sec. 69D is, in our opinion, clearly against grain of language used in said section. purpose of said section is obviously to discourage transaction through cash against hundies because this means of lending and borrowing was highly misused by tax evaders. Legislature in its wisdom, therefore, thought that such transaction should be altogether banned and, accordingly, sec. 69D was placed on statute book w.e.f. 1-4-1977. said section 69D, may it be noted, is somewhat skin to provisions of sub- section (3) of sec. 40A. There also legislature wanted to discourage use of cash as amens of payment against purchases and services rendered and therefore, provided that, even if purchases be genuine, yet if they had been paid for in cash exceeding Rs. 2,500 per payment payments in question would be ignored and amounts so paid would be added to assessee's total income as if payments in question had never been made and liability in question had never been made and liability in question had never been incurred. There was, however, saving grace with regard to section 40A (3) , namely, proviso thereto in terms of which rule 6DD (j) and other clauses of Rules 6DD were incorporated. If payment in cash were made in circumstances indicated in various clauses of Rule 6DD, rigour of sec. 40A (3) was to be eased. With regard to sec. 69D, however, legislature did not contemplate any escape route and, there is no rule whatsoever under which provisions of sec. 69D can be ignored if once borrowing is shown to have been done through hundi otherwise than by a/c payee cheque. 6. above being true import of section 69D it was, in our opinion incumbent of learned AAC to have examined as to whether or not finding given by ITO that transaction of borrowing Rs. 20,000 in present case was against hundi. It was admittedly in cash and, therefore, if it can be shown to have been on hundi borrowing it would be clearly hit by provisions of sec. 69D. That transaction is genuine would not save it from rigour of sec. 69D. reference by learned AAC to observations of Tribunal in order of Grahalakshmi and Co. (supra) is bereft of setting of facts in which it was given. observation were made in context of facts of case of Grahalakshmi and Co. (supra). It would be totally wrong to regard them as interpretation of sec. 69D, for language of sec. 69D cannot be modified or altered by any court, whose job is to interpret law and not to make law. language of sec. 69D in our opinion being absolutely without any ambiguity, duty of Tribunal, in our opinion, is to give effect to language of Legislature treating it to be in tension of legislature and as such, we are unable to convince ourselves that observations extracted by learned AAC in his order from Tribunal's order in case of Grahalakshmi and Co. (supra) were, in any way, aimed at modifying or restricting import of language of sec. 69D. Tribunal did not do it and, in fact, as in law, court cannot do it. We have to look at language and give effect to its plain meaning unless there be ambiguity about it. If there be ambiguity and if two interpretations are possible of language used in statute, then and then alone, dictum that interpretation, which favour subject should be adopted, would be applicable. In present case, we do not see any ambiguity in language of sec. 69D and, therefore, learned AAC was, in our opinion, wrong to have presumed Tribunal to have modified provisions of sec. 69D as modified, according to him by Tribunal's order. 7. Inasmuch as learned AAC has not examined crux of matter in present case, namely, whether or not document against which loan had been given was hundi or promissory note, justice of case requires that w e should set aside his order and restore matter back to him with direction that he would now re examine facts of present case and take into account findings given by ITO and pass speaking order indicating his findings with regard to nature of document. If possible, document itself may be made annexure to order of AAC so that it maybe possible in future to examine language of document with view to come to conclusion with regard to its nature, in case matter is brought in appeal to Tribunal later. So far as judgment of Hon'ble Calcutta High Court in of S. C. Ghosal (supra) is concerned it does not help assessee's case at all, because it pertains to asst. year 1959-60, when provisions of sec. 69D were not on statute book and, their Lordships of that reference. 8. With these observations we set aside order of learned AAC and restore matter back to him for doing needful in accordance with law. Per Shri M. C. Agarwal, Judicial Member - I have gone through order prepared by my learned brother, but with great respect, I am unable to agree to his conclusions regarding application of sec. 69D of Income-tax Act, 1961, to facts of present case. 2. In this case assessee had borrowed sum of Rs. 20,000 and executed document that purported to be 'hundi' in favour of some Surendra Kumar. ITO has held that Surendra Kumar is non existent person. In my view document executed in favour of non existent person, is nullity and has no legal existence. Therefore, document cannot be treated as 'hundi' and sec. 69D cannot be applied. 3. Further, sec. 69D was admittedly enacted to counter evil of bogus 'hundi loans' shown by assessee. provisions of sec. 69D have already been reproduced by my learned brother in his order. He has also taken note of fact that in this case, before assessee's assessment was taken up, loan in question had been treated by Revenue as genuine loan and recovered from assessee in discharge of liability against one Chandra Prakash Gupta or his wife Smt. Urmila Gupta. assessee on requisition from ITO had deposited amount in State Bank of India on 3-3-1982. It is thus case in which Revenue has treated loan as genuine and, having recovered amount itself, yet wants to burden assessee with liability by taking recourse to sec. 69D. Such result was not intended by legislature when it enacted sec. 69D. Applying sec. 69D to case in which Revenue itself treated loan as genuine and has gone to extent of recovering same, would lead to results which are patently absurd. One of settled principle of interpretation of statute is that absurdities should be avoided. If we interpret sec. 69D in manner that Revenue can deem state of affairs for realizing certain amount from assessee and can also deem entirely converse state of affairs in respect of same transaction as in present case, result would be patently absurd and legislature cannot be deemed to have intently absurd and legislature cannot be deemed to have intended such absurdity. Although sec. 69D uses words shall be deemed but in interpretative exercise, it is permissible for courts to arrive at correct intentions of Legislature and hold that word 'shall' does not make provision imperative but makes it only directory giving authority concerned, discretion not to enforce provision of law in manner so as to lead to utterly unjust results. Section 69D has two edges. It would apply when loan is raised, otherwise than through account payee cheque. It will also apply it although loan was raised through account payee cheque, but was not repaid in same manner. In present case on requisition from ITO assessee paid sum of Rs. 20,000 into State Bank of India through challans issued by ITO and not through account payee cheques. Therefore, even if assessee had borrowed amount through account payee cheque, it could still be held liable u/s 69D, because amount was not repaid through account payee cheques, but was paid to ITO concerned in manner required by him. If we give literal interpretation to section 69D and hold it to be imperative, result would be patently absurd and thoroughly unjust. Such state of things that can never be resumed to have been intended by Legislature. In my view, therefore, section 69D is not imperative and should be interpreted to be merely discretionary to be applied in proper case. present case, as facts set out by my learned brother disclose, is not one to which section 69D can be justly applied and I am, therefore, of opinion that Revenue's appeal should be dismissed. I order accordingly. REFERENCE UNDER SECTION 255(4) OF INCOME TAX ACT, 1961 As there is difference of opinion between us on following question, same is referred for valued opinion of Hon'ble Third Member. Whether, section 69D applies to facts of present case?" THIRD MEMBER ORDER Per Shri K. C. Srivastava, Accountant Member - This was department p p e l , in which ground taken was that Appellate Assistant Commissioner had erred in deleting addition of Rs. 20,000 being cash hundi loan overlooking provision of section 69D of Income-tax Act. matter had gone up before "A" Bench and there was difference of opinion between learned Accountant Member and learned Judicial Member, and point of difference has been mentioned as follows: "Whether section 69D applies to facts of present case?" 2. President, Income-tax Appellate Tribunal having nominated me as Third Member, I have heard that parties on point of difference. Third Member, I have heard that parties on point of difference. 3. Before proceeding to express my view on issue, facts may be stated in brief. 4. assessee had borrowed Rs. 20,000 on 15-10-1981 allegedly from one Shri Surendra Kumar. Later on it was found that Shri Surendra Kumar was only benami of Smt. Urmila Gupta, who was wife of Shri Chander Prakash Gupta, Advocate of Saharanpur. This fact came to light at time of search of premises belonging to Shri Chander Prakash Gupta. Initially Income-tax Department attached above amount towards demand to be created in respect of above loan. But latter on this amount was assessed in name of Smt. Urmila Gupta and it was attached towards tax demand of Smt. Urmila Gupta, assessee had accordingly deposited amount in State Bank of India on 3-3-1982. 5. Income-tax Officer was of view that money was borrowed on hundi and it had been given in cash and not by account payee cheque. He was, therefore, of view that provisions of section 69D were applicable. assessee, however, had contended before him that document on basis of which money had been borrowed was neither hundi nor promissory note but it was simple paper. Income-tax Officer, however, referred to certain aspects of document and he was of view that this was borrowing on hundi. He distinguished between hundi and promissory note and held that it was not in nature of promissory note and held that it was not in nature of promissory note. He also referred to provision of section 14(1) of Uttar Pradesh Registration of Money Lending Act of 1976 which required that loans of amounts above Rs. 1,000 had to be give by cheque. This, however, did not apply to 'hundis' and Income-tax Officer inferred that Shri Chander Prakash Gupta must be knowing provision of law as he was Advocate and, therefore, cash loan was given through hundi. Income-tax officer referred to fact that alleged lender Surendra Kumar did not exist and this meant that document was negotiable. Income-tax Officer distanced facts in this case from facts in case of Grahalakshmi and Co (supra) which was relied upon by assessee. In that case on consideration of document Tribunal had held that it was promissory note and not hundi. Tribunal had further observed that if it had been hundi, position could not be different as source of money had been established and transaction was genuine. It was held that provision of section 69D did not apply to such cases. According to Income-tax Officer, transaction in present case was not genuine as said loan was not recorded in books of lender. lender Shri Surendra Kumar was not identifiable person and he was only benamidar of Shri Chander Prakash Gupta or his wife. In view of this Income-tax Officer had held that facts in case of S. C. Ghosal (supra) did not apply to this case as transaction was not genuine. There was no confirmation from Shri Surendra Kumar and there was no entry in books of creditor. Income-tax Officer in alternative held that creditor being non identifiable person, genuineness of credit was not established and even provisions of section 68 were applicable. He further referred to fact that in certain other cases amounts had been surrendered by borrowers. 6. When matter came before Appellate Assistant Commissioner, he mainly went into question of source of borrowing and held that it had now been established that money had come from Shri Chander Prakash Gupta or his wife. Income-tax Department had treated it as money belonging to Smt. Urmila Gupta and it had been adjusted towards her income tax demand. Appellate Assistant Commissioner referred to decision of Madras Bench in case of Grahalakshmi and Co. (supra), referred to above and held that identity of creditor and genuineness of transaction having been established, amount could not be added in hands of assessee, who was borrowed. Appellate Assistant Commissioner did not consider it necessary to go into question whether amount had been borrowed by way of hundi. 7. Department appealed to Tribunal. learned Accountant Member after referring to language of section 69D, expressed view that t h e question of loan being genuine or otherwise, did not enter into language of section 69D. According to him, even in case of genuine loan taken on hundi, it would be treated as borrower's income unless money had been taken by account payee cheque. According to him, genuineness of transaction was against brain of language used in genuineness of transaction was against brain of language used in said section. He equated provisions of section 69D with similar provisions under section 40A (3) of Income-tax Act and whereas there were certain exceptions to provisions of section 40A (3) , there were no exceptions to provisions of section 69D. In view of this position, learned Accountant Member was of view that Appellate Assistant Commissioner should have given finding whether money had been borrowed against hundi. He distinguished decision in case of Grahalakshmi & Co. (supra) and observed that language of section was clear and there was no ambiguity in it. In view of this position, Accountant Member was of view that justice of case required that order of Appellate Assistant Commissioner should be set aside to enable him to give finding regarding nature of document, on basis of which borrowing had taken place. He also directed that document should be made annexure to order. He also referred to decision of Calcutta High Court in S. C. Ghosal's case (supra) and held that provisions of section 69D were not in existence for relevant year. 8. learned Judicial Member did not agree with above view and according to him, document executed in favour of non-existing person was nullity, and it could not be treated as hundi. He further expressed view that source of money has now been established and money has been treated as belonging to Smt. Urmila Gupta. According to him, once money is established to have come from Smt. Urmila Gupta, it could not be treated as income of assessee, who was borrower. He was further of view that provisions of section 69D had to be interpreted so as to make it directory and not mandatory. He, therefore, held that this was not case to which provisions of section 69D could be justly applied. He, therefore, proposed to dismiss appeal by Department. 9. point of difference drawn up by learned Members in fact does n o t bring out difference between orders recorded by them. Accountant Member has not held that provisions of section 69D applied to facts of present case. He had merely held that Appellate Assistant Commissioner should find out whether borrowing had been on hundi or in any other manner. It was only after ascertaining this fact that question of application of section 69D would arise. It was in view of this that learned Accountant Member and proposed to restore matter to Appellate Assistant Commissioner with direction to give finding regarding nature of instrument on basis of which borrowing had taken place. No doubt, learned Judicial Member has held that provisions of section 69D cannot be applied to this case. actual point of difference is, therefore, whether order of Appellate Assistant Commissioner should be set aside for giving finding on nature of document against which loan had been given or his order should be upheld by holding that provisions of section 69D are not applicable to facts of present case. It is towards resolution of this actual difference that I will direct present order. 10. Before me Departmental Representative has kly relied on order o f learned Accountant Member whereas learned counsel for assessee has relied on order of Appellate Assistant Commissioner as well as order of learned Judicial Member. He contended that source of money having been established, and money having come from Smt. Urmila Gupta being accepted, where there should be no question of assessing this amount of Rs. 20,000 as deemed income of assessee. He contended that document in question on basis of which borrowing had taken place was not hundi but only promissory note. We inquired from learned counsel whether he had authentic copy of document but he submitted that same was not with him and it was obtained by Income-tax Officer as it had been found during search in premises of Shri Chander Prakash Gupta. Departmental Representative referred to difference in language of provisions of section 68 and other following provisions deeming certain amounts as income and language of section 69D. He pointed out that whereas in other provisions some explanation had to be given and Income-tax Officer had to apply his mind to that explanation, there was no such requirement in section 69D. He submitted that on basis of discussion in order of Income-tax Officer it was clear that document in question was hundi but learned Appellate Assistant Commissioner did not consider it necessary to decide this issue. Departmental Representative was also not having any authentic copy of document which has been held to be hundi by Income-tax Officer. He only submitted that section 69D deems amount as income of borrower even if lender was known and money is returned to known lender. He submitted that requirement of law was that hundi should have been accompanied by account payee cheque and not by cash. 11. Having considered submissions of both parties and having perused orders of learned Accountant Member and learned Judicial Member, I am of opinion that first question to be decided in case of application of provisions of section 69D is whether document in question was hundi or not. This document was not there before Bench which heard matter. It has not been placed before me by either of parties. There is only brief reference to some parts in order of Income-tax Officer. Appellate Assistant Commissioner has not gone into this matter at all. For purpose of application of section 69D one has to find whether amount is borrowed on hundi. Unlike sections 69 to 69C principles underlying this section are operated only from date of enactment and it cannot be considered as clarificatory provision. It is specific provision which enables Revenue to insist that certain loans unless taken in particular form will be treated as borrower's income. It is, therefore, necessary to ascertain nature of document. I am not inclined to agree with learned Judicial Member that only because Surendra Kumar was not real person and his name was being used for giving loan on behalf of somebody else document could not be 'hundi'. Whether lender was one person or other, could not change nature of document on basis of which money had been lent or borrowed. In case of Grahalakshmi & Co. (supra), Tribunal considered document in question and came to conclusion that document was not hundi. That document was written in English and it did not enjoy privilege of negotiability without endorsement available by local usage for hundis. It is true that Bench expressed alternative opinion presuming document to be hundi. In present case learned counsel for assessee has vehemently challenged finding of Income-tax Officer that document in question was 'hindi'. This issue has, therefore, first to be resolved and I find that, it is with reference to this that difference has arisen. I am of view that direction of learned Accountant Member that Appellate Assistant Commissioner should find out whether document was hundi or not, is correct direction and order of Appellate Assistant Commissioner has rightly been set aside. For this it is not necessary for me to express any opinion on other question regarding establishment of source of money being decisive factor for not applying provisions of section 69D. learned Judicial Member has not held that document in question was hundi and even then it could not be subject-matter of consideration for assessment under section 69D. His order has proceeded on his finding that document was not hundi. As I have stated above, I do not agree with reason given for this finding. I, therefore, agree with final conclusion recorded by learned Accountant Member in paragraph 6 of his order. 12. matter will now go back to Bench for passing order in accordance with majority of opinions. *** INCOME TAX OFFICER v. OM PRAKASH