Chetan Lal had borrowed on Hundi a sum of ₹ 25,000 by way of a bearer cheque on 11.09.2019 and repaid the same with interest in total amounting to ₹ 30,000 by account payee cheque on 12.12.2019. The Assessing Officer (AO

Section 69D of the Income Tax Act, 1961, provides that 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 so borrowed or repaid. For the purposes of this section, the amount repaid shall include the amount of interest paid on the amount borrowed. In this case, Mr. Chetan Lal has borrowed ₹ 25,000 on Hundi by way of bearer cheque. Therefore, it shall be deemed to be the income of Mr. Chetan Lal for the previous year 2019-20. However, the repayment of the same along with interest was made by way of account payee cheque, the same would not be hit by the provisions of section 69D of the Income tax Act, 1961. Therefore, the action of Assessing Officer is not valid in law to the extent of treating the amount repaid by account payee cheque as income during the previous year 2019-20.