CIT Vs D.K. Garg (Delhi High Court)
In Bhaiyalal Shyam Bihari v. CIT (2005) 276 ITR 38 (All), the Allahabad High Court explained that benefit of peak can be given only when the assessee owns up all the cash credits in the books of accounts. It was further held :–
“For adjudicating upon the plea of peak credit the factual foundation has to be laid by the assessee. He has to own all cash credit entries in the books of account and only thereafter can the question of peak credit be raised.”
In CIT v. Vijay Agricultural Industries (2007) 294 ITR 610, it was reiterated 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 repayment between a particular depositor and the assessee.” On the facts of that case it was held that peak credit could be applied only in the case of squared up accounts. In other words, where an Assessee was unable to explain the sources of deposits and the corresponding payments then he would not get the benefit of ‘peak credit’.
