TMI Blog2017 (8) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... t of creditors to the bank account of the Assessee, the identity of the creditors and that the money paid from the accounts of the Assessee has returned to the bank accounts of the creditors. The Assessee has to discharge the primary onus of disclosure in this regard. While the AO in the present case did not question the working out of the peak credit by the Assessee, he, at the same time, insisted that the additions made by him to the returned income of the Assessee should be sustained. The peak credit worked out by the Assessee was on the basis that the principle of peak credit would apply, notwithstanding the failure of the Assessee to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. That is not permissible in law as explained by the Allahabad High Court in the aforementioned decisions which, this Court concurs with. As already noted, the ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia, stated thus: I have already stated to your honour on the statement recorded and the subsequent note on the activities carried by me that I was indulged in the business of providing entries to the parties who are in need for the same. The entries were routed thru agriculture companies. I have earned an income of ₹ 1,91,168/- from the said business during the year 1994-95 and in the subsequent year I could not earn the income because the demand for fresh entries were negligible. The calculation and the detail how I have earned income are enclosed herewith for both the years. The entries consists of loan entries and loan entries for applying shares in public issues. I was getting merely 1 % commission / services charges and 0.25% on amount utilized in public issues. The name of the companies are also enclosed herewith giving the quantum of entries provided as loan and for subscription in public issues. Assessment order 5. In the assessment order dated 28th March, 2002, the AO noted that the Assessee was not in a position to prove the source of deposits made in his bank accounts. Inquiries were made with the Union Bank of India, Karol Bagh, to obtain the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the AO. On 8th July 2003, the AO submitted a remand report wherein the peak balance in the two bank accounts, as worked out by the Assessee at ₹ 5,87,374, as on 6th December, 1995, was accepted. However, the AO reiterated his stand that the additions made separately, for the cash deposits as well as for the peak credit on account of cheque transactions with the three companies viz., M/s Anuradha Pharmaceuticals, M/s Sai Fisheries and M/s Premchand Plantations, were justified. 8. By the order dated 21st August 2003, the CIT (A) dismissed the Assessee s appeal and upheld the assessment order. It was categorically noted by the CIT (A) that the Assessee could not substantiate his stand through documentary evidence. The AO tried to locate the concerned persons/beneficiaries through the addresses given in their account opening forms, however, to no avail as, most of these addresses were found to be incorrect. It was noted that the Assessee was involved in the activity of providing cheques by accepting deposits in cash. In the circumstances, noting that the AO had duly accounted for squared off transactions and made additions only to the extent to which there was no convincing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the Revenue 11. Mr. Ruchir Bhatia, learned Senior Standing counsel for the Revenue, submitted that the approach of the ITAT was erroneous inasmuch as the ITAT has failed to appreciate that the Assessee had not provided an explanation for all the cheque deposits or even the cash deposits and the corresponding cheques issued from his account. According to him, the concept of working out the peak credit would arise only if it was possible to square off the deposits made in an account against the cheques issued therefrom. If A made a deposit in the account and the ultimate payment was made to A either in A s account by cash or cheque then to that extent, the peak credit can be worked out. However, where a source of deposit is not explained and the corresponding outgo is also unexplained, the question of giving the Assessee the benefit of peak credit would not arise. He placed reliance on the decision of the Allahabad High Court in CIT v. Vijay Agricultural Industries (2007) 294 ITR 610 which in turn followed its earlier decision in Bhaiyalal Shyam Bihari v. CIT (2005) 276 ITR 38 (All). Submissions of learned counsel for the Assessee 12. Dr. Rakesh Gupta, learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, PAN number, income tax returns, bank accounts, names and addresses of the directors and so on, the Courts have insisted on the AO to make a proper enquiry to examine the identity and creditworthiness of such companies and the genuineness of the transactions in question. Where the AO fails to make such an enquiry, a Court might delete the additions made by the AO. 15. The present case, however, is of a different nature. Here, we are dealing with an Assessee who does not deny that he is an accommodation entry provider. He, in fact, makes no bones of the fact that he either owned or floated 'paper companies' only for that purpose. He also does not dispute the fact that he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts. 16. The Assessee's plea that he should be taxed only on a composite 'peak credit' is based entirely on principles of accountancy. He questions the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in cash. He also questions the practice of working out separate peak credits for cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the creditors and that the money paid from the accounts of the Assessee has returned to the bank accounts of the creditors. The Assessee has to discharge the primary onus of disclosure in this regard. 20. While the AO in the present case did not question the working out of the peak credit by the Assessee, he, at the same time, insisted that the additions made by him to the returned income of the Assessee should be sustained. The peak credit worked out by the Assessee was on the basis that the principle of peak credit would apply, notwithstanding the failure of the Assessee to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. That is not permissible in law as explained by the Allahabad High Court in the aforementioned decisions which, this Court concurs with. Conclusion 21. As already noted, the ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against t ..... 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