High Court Of Allahabad
CIT vs. Vijay Agricultural Industries
Section 68
Asst. Year 1979-80
R.K. Agrawal & Prakash Krishna, JJ.
IT Ref. No. 21 of 1990
21st February, 2005
Counsel Appeared: Shambhoo Chopra, for the Revenue: None, for the Assessee
R.K. Agrawal, J. :
JUDGMENT
The Tribunal, Allahabad has referred the following question of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”) for opinion to this Court :
“Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that only the amount of peak credit should be added as unexplained cash credit under s. 68 of the IT Act, 1961 ?”
2. The reference relates to the asst. yr. 1979-80. Briefly stated, the facts giving rise to the present reference are as follows : The respondent is being assessed to income-tax in the status of a registered firm. It is engaged in the manufacture and sale of agricultural implements and iron scrap, etc. For the assessment year in question, the AO had noticed certain cash credits in the squared up accounts. He required the assessee respondent to prove the genuineness of the deposits whereupon the respondent filed only confirmatory letters and did not produce any other evidence in support of the cash credits. It may be mentioned here that the AO had noticed the following cash credits in the squared up accounts of the various persons : Rs. S/Sri Paras Ram Numberdar 5,000 Bhagwan Das 2,200 Amit Deo 1,500 M/s Mahesh Chandra Keshav Chand 7,000 Sri Mahesh Chandra Mistry 2,000 Sri Mahesh Chandra Jain 3,600 Sri Prayag Das Agrawal 1,800 M/s Agrawal Bartan Bhandar 2,000 Sri Din Dayal 1,500 Sri Halke 1,200 Sri Saukat 2,000 Sri Sirajuddin 2,000 Sri Latif Mohd. 4,500 Sri Maqbool 2,500 Sri Hussain Mohd. 2,500 Sri Mianuiddin 2,500 Sri Salim Mohd. 2,500 He considered the explanation/confirmatory letters and treated the following amounts totalling Rs. 23,200 as unexplained deposits liable to be treated as income from unexplained source under s. 68 of the Act :
3. It may be mentioned here that in respect of Sri Paras Ram Numberdar has made an addition of Rs. 2,000 treating the said amount to be the peak credit. In respect of Mahesh Chandra Jain, the addition was only Rs. 2,000 being peak credit. Feeling aggrieved, the respondent preferred an appeal before the AAC who has upheld the additions. Still feeling aggrieved, the respondent preferred a second appeal before the Tribunal. Before the Tribunal, the respondent had filed an application seeking permission to raise the following as additional ground of appeal : “That in view of the matter only the peak credits which works out to Rs. 7,200 only should have been considered for addition under s. 68 and not Rs. 22,300 as added by the ITO and confirmed by the AAC.”
4. Before the Tribunal, there was a difference of opinion between the two Members and the matter was referred to the Third Member for his opinion. The JM was of the view that the peak credit should be determined by the ITO and only the amount of peak credit be added as unexplained cash credit under s. 68 of the Act. However, the AM was of the opinion that all the sums credited for which there was no satisfactory explanation by the respondent assessee, required to be added under the said section. The Third Member, vide order dt. 10th Jan., 1989, has expressed his agreement with the JM. In conformity with the order passed by the Third Member, the Tribunal partly allowed the appeal filed by the respondent that the peak credit should be determined by the AO and only the amount of peak credit should be added as unexplained cash credit under s. 68 of the Act.
5. We have heard Sri Shambhoo Chopra, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent assessee.
6. We find that in respect of the squared up accounts of the two depositors, mentioned above, the AO himself had taken the peak credit as unexplained deposit and added the same under s. 68 of the Act. So far as the remaining deposits are concerned, there was no transaction between the depositors and the respondent assessee. This Court in IT Ref. No. 226 of 1988, Bhaiyalal Shyam Behari vs. CIT, decided on 19th Jan., 2005 [reported at (2006) 202 CTR (All) 515], has held that the principle of peak credit is not applicable in case where the deposits remained unexplained under s. 68 of the Act. It cannot apply in a case of different depositors where there has been no transaction of deposits and its repayment between a particular depositor and the assessee.
7. Respectfully following the aforesaid decision, we are of the considered opinion that the Tribunal was not justified in directing the AO to take the peak credit for the purposes of s. 68 of the Act.
8. We accordingly answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.
[Citation : 294 ITR 610]
