“peak credit theory”

Cash Credits & Unexplained ItemsSection 68Section 68215 judgments

The decision most relied on for peak credit theory is Bhaiyalal Shyam Behari v. CIT (276 ITR 38), cited in 63 judgments on BharatTax.

Leading authorities on peak credit theory

Bhaiyalal Shyam Behari v. CIT

276 ITR 38 · 2005 · High Court

citing judgments

The peak credit theory applies only to credits and withdrawals that are held to be non-genuine. If the assessee claims all deposits are genuine, the benefit of the peak credit theory may not be available.

552 (SC) Zaveri Diamonds v. CIT 11-12 3

118 Taxmann.com 166 · 2020 · High Court

citing judgments

The court considers the evidentiary value of unaudited books and loose papers when assessing income, particularly concerning trade creditors and their verification.

Sh. Rajesh Kumar Jain v. ACIT Hon'ble High Court Of Delhi

84 Taxmann.com 257 · 2017 · High Court

citing judgments

The assessment can apply the peak credit theory for additions related to unexplained credits or entries. Furthermore, assessment proceedings are not vitiated merely because the Department proceeded under an incorrect section if material existed to justify the assessment under a proper provision like section 148.

Point E COT v. Vijay Agricultural Industries

294 ITR 610 · 2007 · High Court

citing judgments

The peak credit theory is applicable only when the source and corresponding outgo of a deposit are unexplained, and it does not apply to issues concerning purchases.

Navin Shantilal Mehta v. Income-tax Officer, Ward-32 (2) (4), Mumbai

90 Taxmann.com 16 · 2018 · ITAT

citing judgments

Addition under section 69C for bogus purchases from non-existent suppliers is justified, even if purchase bills are produced and payments are made through banking channels, if other evidence is lacking.

Commissioner of Income Tax v. D.K. Garg

250 Taxmann 104 · 2017 · High Court

citing judgments

An assessee who acts as an accommodation entry provider and cannot explain the sources of deposits and corresponding payments is not entitled to the benefit of peak credit.

III v. Tirupati Construction Co.

55 Taxmann.com 308 · 2015 · High Court

citing judgments

The peak credit theory can be applied to determine unexplained income arising from a series of transactions, even when exact quantum is difficult to ascertain. However, it may not be applicable to singular unexplained credits.

Kaveri Rice Mills v. CIT

157 Taxmann 376 · 2006 · High Court

citing judgments

The High Court determines whether additions based on uncorroborated purchase invoices are justified when the revenue relies on multiple conflicting precedents.

Judgments citing peak credit theory

Shri Prakashbhai Madhavjibhai Thummar, Rajkot vs. The Income Tax Officer, Ward-3(1)(2), Rajkot

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 445/RJT/2018[2010-11]Status: DisposedITAT Rajkot12 May 2023AY 2010-11

Bench: Shri Waseem Ahmed & Shri Siddhartha Nautiyalassessment Year : 2010-11 Prakashbhai Madhvjibhai Income-Tax Officer, Thummar, Vs Ward 3(1)(2), “Dharti”, 10-Krishna Nagar, Near Rajkot Swaminarayan Chowk, Rajkot Pan : Aeipt 6588 G अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : None Revenue By : Shri B.D. Gupta, Sr. Dr सुनवाई की तारीख/Date Of Hearing : 08/05/2023 घोषणा की तारीख /Date Of Pronouncement: 12/05/2023 आदेश/O R D E R Per Waseem Ahmed, Am :

For Appellant: NoneFor Respondent: Shri B.D. Gupta, Sr. DR

Section 139Section 250

made subject to the addition. It is seen that in such kind of situations, the revenue in numerous cases has adopted the peak credit theory for bringing the cash/cheque deposit under the net of taxes. But we note that such an aspect has not been considered by the revenue

ITO, Udaipur vs. Shri Suresh Kumar Khatik, Udaipur

In the result, the appeals of the revenue are allowed for statistical purposes and the cross objections filed by the assessee are dismissed

ITA 169/JODH/2015[2008-09]Status: DisposedITAT Jodhpur13 Mar 2023AY 2008-09

Bench: Shri B. R. Baskaran & Dr. S. Seethalakshmi

Section 144Section 147

facts of the case in sustaining the addition of Rs.7.99.665/- on account of cash. deposit in the bank account taking to peak credit theory. Hence the addition so made by the AO and partly sustained by the CIT(A), being contrary to the provisions of law and facts, hence

ITO, Udaipur vs. Shri Suresh Kumar Khatik, Udaipur

In the result, the appeals of the revenue are allowed for statistical purposes and the cross objections filed by the assessee are dismissed

ITA 168/JODH/2015[2007-08]Status: DisposedITAT Jodhpur13 Mar 2023AY 2007-08

Bench: Shri B. R. Baskaran & Dr. S. Seethalakshmi

Section 144Section 147

Rajesh Jain, New Delhi vs. ITO, Ward-42(3), New Delhi

In the result, this appeal of the assessee is partly allowed

ITA 6231/DEL/2019[2010-11]Status: DisposedITAT Delhi14 Feb 2023AY 2010-11

Bench: Shri Shamim Yahya & Ms. Astha Chandra[Assessment Year: 2010-11]

Section 142(1)Section 144Section 147Section 148Section 151

made and again cash is deposited in the bank account. Thus cash is rerouted in the bank account. In such a situation peak credit theory could be applied. There are several items of deposits and withdrawals in the bank accounts. The AO has simply picked up the deposit sides

Santosh, New Delhi vs. ITO Ward - 37(1), New Delhi

In the result, appeal of the assessee is allowed for statistical purposes

ITA 1696/DEL/2020[2011-12]Status: DisposedITAT Delhi02 Feb 2023AY 2011-12

Bench: Sh. Anil Chaturvedi & Sh. Narender Kumar Choudhrysantosh Vs. Ito 190-191, 2Nd Floor, Ward – 37(1) Pocket-2, Sector – 22, New Delhi Rohini, New Delhi- 110085 Pan No. Dcaps 8853 Q (Appellant) (Respondent) Assessee By Shri Subhash Singhal, C.A. Revenue By Shri B. M. Singh, Sr. D.R. Date Of Hearing: 30.01.2023 Date Of Pronouncement: 02.02.2023 Order Per Anil Chaturvedi, Am : This Appeal Filed By The Assessee Is Directed Against The Order Dated 26.02.2020 Of The Commissioner Of Income Tax (Appeals)-Delhi Relating To Assessment Year 2011-12. 2. Brief Facts Of The Case As Culled Out From The Material On Record Are As Under :-

Section 143(2)Section 144Section 147Section 148Section 151

cash or other withdrawls are simultaneous – one after the other. It is logical that only net amount deposited be considered as income or peak credit theory be followed in this case. Adding entire deposit amount is not correct/logical. The assessee is entry operator. Case laws give only percentage

JCIT(OSD), -2(1), Indore vs. Shri Keshav Kumar Nachani, Indore

In the result, all the appeals of the Revenue are dismissed

ITA 441/IND/2018[2014-15]Status: DisposedITAT Indore25 Jan 2023AY 2014-15

Bench: Smt. Madhumita Roy & Shri Bhagirath Mal Biyani

For Appellant: Shri S. S. Deshpande, CAFor Respondent: Shri P.K. Mishra, CIT-DR

Section 132Section 132(4)Section 142(1)Section 143(2)Section 143(3)Section 153ASection 68

more so when as per the data available in the pen-drive, the assessee has maintained separate accounts. The ld.AO further held that peak credit theory is applied when transactions are between two persons or transaction without any names are found and nature o the business is established and also ... recognize and identify any person whose names were found in these three separate accounts. AO also rejected the peak working stating that peak credit theory is applied when transactions are between two persons or transactions without any names are found and nature of the business is established and also source

The DCIT, 2(1), Indore vs. Shri Keshav Kumar Nachani, Indore

In the result, all the appeals of the Revenue are dismissed

ITA 309/IND/2017[2013-14]Status: DisposedITAT Indore25 Jan 2023AY 2013-14

Bench: Smt. Madhumita Roy & Shri Bhagirath Mal Biyani

For Appellant: Shri S. S. Deshpande, CAFor Respondent: Shri P.K. Mishra, CIT-DR

Section 132Section 132(4)Section 142(1)Section 143(2)Section 143(3)Section 153ASection 68

The DCIT, 2(1), Indore vs. Shri Keshav Kumar Nachani, Indore

In the result, all the appeals of the Revenue are dismissed

ITA 244/IND/2017[2012-13]Status: DisposedITAT Indore25 Jan 2023AY 2012-13

Bench: Smt. Madhumita Roy & Shri Bhagirath Mal Biyani

For Appellant: Shri S. S. Deshpande, CAFor Respondent: Shri P.K. Mishra, CIT-DR

Section 132Section 132(4)Section 142(1)Section 143(2)Section 143(3)Section 153ASection 68

Iftekhar Mukhtar Siddiqui, Mumbai vs. Income Tax Officer 26(1)(5), Mumbai

In the result, appeal filed by the assessee is allowed for statistical purposes

ITA 5275/MUM/2019[2010-11]Status: DisposedITAT Mumbai05 Sept 2022AY 2010-11

Bench: Shri Pavan Kumar Gadale & Shri Gagan Goyaliftekhar Mukhtar Siddiqui, Room No. 60, Prem Nagar, Behind Lucky Hotel, Sion Agra Road, Sion, Mumbai-400022 Pan: Bgsps0603N ...... Appellant Vs. Ito-26(1)(5), C-1 Building, Kautilya Bhavan, Bandra Kurla Complex, Mumbai-400051. ..... Respondent Appellant By : None Respondent By : Ms. Kavita Kaushik Date Of Hearing : 07/06/2022 Date Of Pronouncement : 05/09/2022 Order Per Gagan Goyal, A.M:

For Appellant: NoneFor Respondent: Ms. Kavita Kaushik

Section 142(1)Section 144Section 147Section 148Section 234ASection 271FSection 274Section 44ASection 69A

frozen. 5. Assessee counsel further argued on two fronts: 4 ITA No. 5275 Mum 2019-Iftekhar Mukhtar Siddiqui a) A.O should apply peak credit theory instead of adding back the whole amount of Rs 17,62,700/-. b) Applicability of sec 44AD of the Act. Means gross figure

Dr. P. Dayananda Pai, Bangalore vs. The Deputy Commissioner of Income Tax, Circle- 2(2), Bangalore

In the result, appeal of the Assessee is partly allowed for statistical purpose

ITA 150/BANG/2020[2005-06]Status: DisposedITAT Bangalore26 Jul 2022AY 2005-06

Bench: Shri N. V. Vasudevan & Ms. Padmavathy Sassessment Year :2005-06 Dr. P Dayananda Pai, Vs. Dcit, 10/1, Lakshminarayana Complex, Circle – 2(2), Palace Road, Bengaluru. Bengaluru – 560 052. Pan : Abapp 4418 Q Appellant Respondent Assessee By : Shri. R. Ramakrishnan, Ca Revenue By : Smt. Susan Dolores George, Cit(Osd)(Itat), Bengaluru. Date Of Hearing : 19.07.2022 Date Of Pronouncement : 26.07.2022 O R D E R Per N. V. Vasudevan: This Is An Appeal By The Assessee Against The Order Dated 9.12.2019 Of Cit(A)-11, Bengaluru, Relating To Ay 2005-06. 2. The Assessee Is An Individual. He Is Also Referred To As “Pdp” In This Order. He Is In The Business Of Real Estate For Over Four Decades. He Carried On Business Of Real Estate In His Individual Capacity. From Ay 95-96 He Transferred All The Rights In Properties Under Various Agreements To A Partnership Firm “M/S.P.Dayanand Pai”, Vide Deed Of Partnership Dated 1-4-1994. In This Firm Mr.P.Dayanand Pai & His Brother Mr.P.Satish & 9 Other Individuals Were Partners. Thereafter By A Deed Of Partnership Dated 9.6.2000 The Firm “M/S.P.Dayanada Pai” Merged Its Business With Another Partnership Firm “M/S.Canara Housing Development Company” (Hereinafter Page 2 Of 39

For Appellant: Shri. R. Ramakrishnan, CAFor Respondent: Smt. Susan Dolores George, CIT(OSD)(ITAT), Bengaluru

Section 10Section 132Section 139Section 143(3)Section 147Section 148Section 149Section 151Section 153Section 153A

receipt and the purpose of payment. But from this, we are unable to agree with the conclusion arrived at by the Department, that peak credit theory cannot be applied in the present case and that undisclosed income of the Applicant should be arrived at on the basis of gross receipts ... Having said so, we now proceed to determine the Applicant's income for A.Ys 2006-07 to2009-10, on the basis of the peak credit theory as applied to the entries made in theDummy Tally. There are two calculation of peak credit before us. The one worked

DCIT 1(3)(1), Mumbai vs. Late Shri Haresh A. Dhakan Through His Legal Heir Mr.Krunal H. Dhakan, Mumbai

In the result, appeals filed by the revenue is Allowed for statistical purposes

ITA 6334/MUM/2017[2007-08]Status: DisposedITAT Mumbai08 Jun 2022AY 2007-08

Bench: Shri Aby T Varkey & Shri Gagan Goyaldcit-1(3) (1), Aayakar Bhavan, M.K. Marg, Mumbai-400020. ..... Appellant Vs. Late Shri Haresh Dhakan Through His Legal Heir Mr. Krunal H. Dhakan, A-304, Classique Centre, Plot No. 26, Mahal Industrial Estate, Andheri (West), Mumbai-400093 Pan: Aadpd5584B ........Respondent Dcit-1(3)(1), Aayakar Bhavan, M.K. Marg, Mumbai-400020. ..... Appellant Vs. M/S Sss Sai Shipping Services Pvt. Ltd. A-304, Classique Centre, Plot No. 26, Mahal Industrial Estate, Andheri (West), Mumbai-400093 Pan: Aalcs4908D ........Respondent Appellant By : Sh. Anil S. Sant, Sr.Dr Respondent By : Sh. Vinod Bindal With Sh. Gaurav Bansal (Ay- 2007-08 & 2011-12) Date Of Hearing : 12/05/2022 Date Of Pronouncement : 08/06/2022 Order Per Gagan Goyal, A.M:

For Appellant: Sh. Anil S. Sant, Sr.DRFor Respondent: Sh. Vinod Bindal with Sh. Gaurav Bansal

Section 131Section 133A

pocket of the assessee, then benefit of those withdrawals will not be available to explain the deposits. The crux in applying peak credit theory is a reasonable certainty that withdrawals have not gone elsewhere, either as investment in some assets, or meeting some expenditure, or to the pocket of other

Kady Mercantile Pvt. Ltd., Mumbai vs. ITO - 1(3)(4), Mumbai

In the result, appeal filed by the assessee is dismissed

ITA 3262/MUM/2018[2011-12]Status: DisposedITAT Mumbai31 Mar 2022AY 2011-12

Bench: Shri Amarjit Singh, Hon'Ble & Shri S. Rifaur Rahman, Hon'Ble

For Appellant: NoneFor Respondent: Ms. Neha Thakur

Section 143(3)Section 144Section 147Section 234BSection 68

Ld.CIT(A) observed as under: - “3.1 During the course of appellate Proceedings, the appellant was asked to justify its claim relating to Peak Credit Theory. The same is not applicable in the appellant's case, as the appellant has failed to establish the incoming and outgoing cash flow

Balram Dahiya, Gurgaon vs. ITO Ward - 1(3), Gurgaon

In the result, the appeal of the assessee is allowed

ITA 3979/DEL/2019[2011-12]Status: DisposedITAT Delhi31 Jan 2022AY 2011-12

Bench: Shri Kul Bharat[Assessment Year : 2011-12]

Section 148Section 68

account of the appellant for which addition under section 68 of the Act was made by the AO. He ought to have applied peak credit theory based on the facts and circumstances of the case. 3. That the Ld CIT(Appeals) has erred in law in confirming the addition

J. Builders Pvt. Ltd., Mumbai vs. ITO 10 (2)(1), Mumbai

In the result, the appeal of the assessee allowed for statistical purposes

ITA 7203/MUM/2019[2012-13]Status: DisposedITAT Mumbai20 Jan 2022AY 2012-13

Bench: Shri Om Prakash Kant () & Shri Pavan Kumar Gadale ()

Section 143(3)Section 68Section 69A

appellant to submit a detailed cash flow indicating recycling of money and claiming that the addition should have been limited to peak credit theory. 5 ITA 7203/Mum/2019 Scrutiny of bank account clearly indicate number of inconsistency, infirmity and improbability in the argument based on recycling theory. The pattern of cash

Sri Ramesh Harish, Bangalore vs. Income Tax Officer Ward-2(1), Bangalore

In the result, assessee’s appeal is partly allowed

ITA 3114/BANG/2018[2011-12]Status: DisposedITAT Bangalore18 Jan 2022AY 2011-12

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year : 2011-12 Shri Ramesh Harish, Vs. The Income-Tax Officer, #54/5, 7Th Cross, Lakshmi Road, Ward-2(1), Shanthinagar, Bengaluru. Bengaluru-560 027. Pan –Aauph 4344 N Appellant Respondent Assessee By : Shri V Srinivasan, Advocate Revenue By : Shri Sankar Ganesh K, Jcit(Dr Osd) Date Of Hearing : 03.01.2022 Date Of Pronouncement : 18.01.2022 O R D E R Per Beena Pillai

For Appellant: Shri V Srinivasan, AdvocateFor Respondent: Shri Sankar Ganesh K, JCIT(DR OSD)

Section 143(3)Section 69

circumstances to show that the earlier withdrawals could not be available to the assess as a source for the subsequent deposit. The peak credit theory has to take into consideration before treating the entire cash deposit as unexplained cash credit. In such circumstance one has to see the peak credit