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[2007] 294 ITR 610 (ALL.) HIGH COURT OF ALLAHABAD Commissioner of Income-tax v. Vijay Agricultural Industries R.K. AGRAWAL AND PRAKASH KRISHNA, JJ. IT REFERENCE NO. 21 OF 1990 FEBRUARY 21, 2005 Section 68 of the Income-tax Act, 1961 - Cash credits â–  Principle of peak credit is not applicable in case where deposits remain unexplained under section 68; 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 assessee [Assessment year 1979-80] 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. The Tribunal held 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. Held that in respect of the squared-up accounts of the two depositors, the Assessing Officer himself had taken the peak credit as unexplained deposit and added the same under section 68. So far as the remaining deposits were concerned, there was no transaction between the depositors and the respondent-assessee. In Bhaiyalal Shyam Behari v. CIT [2005]276 ITR 38 (All.) it was held that the principle of peak credit is not applicable in a case where the deposits remain unexplained under section 68; it cannot apply in a case of different depositors where there has been no transaction of deposit and its repayment between a particular depositor and the assessee. Hence, the Tribunal was not justified in directing the Assessing Officer to take the peak credit for the purposes of section 68. JUDGMENT R.K. Agrawal, J.-The Income-tax Appellate Tribunal, Allahabad, has 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, the Income-tax Appellate Tribunal was legally correct in holding that only the amount of peak…

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