Allahabad High Court
Cit vs Vijay Agricultural Industries on 21 February, 2005
Author: R.K. Agrawal
Bench: R.K. Agrawal, Prakash Krishna
JUDGMENT R.K. Agrawal, J.
1. The Income Tax Appellate Tribunal, Allahabad, has 1 referred the following question of law under Section 256(1) of the Income Tax Act, 1961, (hereinafter referred to as "the Act"), for opinion of this Court:
Whether, on the facts and in the circumstances of the case, theIncome Tax Appellate Tribunal was legally correct in holding that onlythe amount of peak credit should be added as unexplained cash creditunder Section 68 of the Income Tax Act, 1961 ?
2. The reference relates to the assessment year 1979-80.
3. Briefly stated, the facts giving rise to the present reference are as follows:
4. The respondent is being assessed to income-tax in the status of a 4 registered firm. It is engaged in the manufacture and sale of agricultural implements and iron scrap, etc. For the assessment year in question, the assessing officer 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 assessing officer had noticed the following cash credits in the squared up accounts of the various persons:
Rs.
S/Sri Riras Ram Numberdar 5,000 S/Sri Bhagwan Das 2,200 S/Sri 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 sources under Section 68 of the Act Rs.
1.
Paras Ram Numberdar 2,000
2. Bhagwan Das 2,200
3. Mahesh Chandra Jain 2,000
4. Mahesh Chandra Mistri 2,000
5. Prayag Das Agrawal 1,800
6. Din Dayal 1,500
7. Saukat 2,000
8. Sirajuddin 2,000
9. Halke 1,200
10. Hussain Mohd.
2,500
11. Muniuddin 2,500
12. Amit Deo 1,500 23,200
6. It may be mentioned here that in respect of Sri Paras Ram Numberdar he 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 Appellate Assistant Commissioner 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 beert considered for addition under Section 68 and not Rs. 22,300 as added by the Income Tax Officer con-firmed by the Appellate Assistant Commissioner.
7. 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 Judicial Member was of the view that the peak credit should be deter-mined by the Income Tax Officer and only the amount of peak credit be added as unexplained cash credit under Section 68 of the Act. However, the Accountant Member 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 dated January 10, 1989, has expressed his agreement with the Judicial Member. 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 assessing officer and only the amount of peak credit should be added as unexplained cash credit under Section 68 of the Act.
8. We have heard Sri Shambhoo Chopra, learned standing counsel for the revenue. Nobody has appeared on behalf of the respondent-assessee.
9. We find that in respect of the squared up accounts of the two depositors, mentioned above, the assessing officer himself had taken the peak credit as unexplained deposit and added the same under Section 68 of the Act.
10. So far as the remaining deposits are concerned, there was no transaction between the depositors and the respondent-assessee. This Court in Income-tax Reference No. 226 of 1998, Bhaiyalal Shyam Behari v. CIT decided on January 19, 2005, has held that the principle of peak credit is not applicable in case where the deposits remained unexplained under Section 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.
11. Respectfully following the aforesaid decision, we are of the considered opinion that the Tribunal was not justified in directing the assessing officer to take the peak credit for the purposes of Section 68 of the Act.
12. We accordingly answer the question referred to us in the negative, i.e., in favour of the revenue and against the assessee. There shall be no order as to costs.