Income-Tax----

----Reference---Cash credit--Computation of income representing credits-- Addition made by Tribunal based on facts---No question of law arose---Question whether computation of income should be made by following "peak credit theory" is not a question of law---Indian Income Tax Act, 1961, Ss.68 & 256(2).

A survey was conducted in August, 1979, in the business premises of the petitioner-firm and account books were impounded. These included the Kachi Rokar. The Kachi Rokar maintained from July 25, 1975 to November 3, 1975, contained cash credits. The petitioner moved an application for settlement. The Commissioner of Income-tax sought a report from the Assessing Officer. The petitioner-firm extended assistance to the Assessing Officer to work out credits on "peak theory" basis. Detailed charts were submitted which were verified by the Department from the impounded books. The Department worked out the credits on peak theory basis amounting to Rs.1,42,846 as on October 9, 1975. The petitioner-firm surrendered the said amount. Details of the peak credits arrived at by the Assessing Officer were incorporated by him in the assessment order. However, as the petitioner-firm did not arrive at a settlement with the Department, the Income-tax Officer did not make addition on "peak theory" basis at Rs.1,42,846 but made an addition at Rs.3,58,000 on the basis of credits without deducting debits. The Assessing Officer also estimated case credits at Rs.1 lakh for which no record was found. The Assessing Officer by order dated July 31, 1984, computed the total income at Rs.5,38,580 after inclusion of unexplained investment in the shape of cash credits at Rs.4,58,000. The. Tribunal sustained deletion of addition of Rs.1 lakh made by the Commissioner of Income-tax (Appeals) and restored the addition of Rs.1,42,846 to Rs.3,58,000. The Tribunal did not rely on the practice and convention of working on peak credit basis. On an application to direct reference:

Held, dismissing the application, that it could not be accepted as a broad proposition of law that the question whether the benefit of the "peak credit" theory as a method of computation of income representing cash credits, is a question of law. The question whether an inference is to .be drawn by the Tribunal on the given facts is not always dependent on a question of law or fact: If the inference is of fact, no question with regard to it can be referred to the High Court. The order of the Tribunal was based on facts. No question of law arose from it.

CAIT v. Elembilery Estate, Cardamom Plantations (1993) 203 ITR 638 (Ker.); CIT v. Banswara Textiles Mills Ltd. (1999) 235 ITR 743 (Raj.) (Appex.); CIT (Addl.) v. Dharamdas Agarwal (1983) 144 ITR 143 (MP); CIT v. Jawanmal Gemaji Gandhi (1985) 151 ITR 353 (Bom.); CIT v. K.S.M. Guruswamy Nadar & Sons (1984) 149 ITR 127 (Mad.); CIT v. Precision Finance (Pvt.) Ltd. (1994) 208 ITR 465 (Cal.); CIT v. Tyaryamal Balchand (1987) 165 ITR 453 (Raj.); Ganeriwal (S. L.) v. CIT (1991) 192 ITR 347 (Raj.); Jhamatmal Takhatmal v. CIT (1990) 181 ITR 434 (MP); Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC); Kuppuswami Mudaliar (S.) v. CIT (1964) 51 ITR 757 (Mad.) and Oriental Wire Industries (P.) Ltd. v. CIT (1981) 131.ITR 688 (Cal.) ref.

Vineet Kothari and Anjai Kothari for the Assessee.

Sandeep Bhandawat for the Commissioner

JUDGMENT

M. G. MUKHERJI, C. J.---In this reference under section 256(2) of the Income Tax Act, 1961, the contention, inter alia, of the assessee is that it is partnership firm. The firm is constituted of three partners, namely (1), Shri Dwarka Das Rathi, (2) Smt. Sunder Devil and (3) Shri Anand Prakash. Dwarka Das Rathi was the main working partner and was conducting the business and attending to the affairs of the partnership firm. He died on January 2, 1986. Smt. Sunder Devi, mother of Dwarka Das Rathi, died on or about the year 1981. Anand Prakash was not the working partner, was not attending to the business of partnership firm and was not conducting the business of the partnership firm. The firm stood dissolved long back. The petitioner-firm was dealing in agricultural commodities. and was carrying on arat and had income from interest. The petitioner-firm was maintaining books of account on Diwali year basis. The accounting year for the assessment year 1976-77 ended on November 3, 1975. The petitioner firm returned an income of Rs.20,960 for the assessment year 1976-77 which was assessed under section 143 of the Income Tax Act, 1961, on the total income of Rs.24,580 on January 27, 1977. A survey under section 133A of the Act was conducted by the Income-tax Department on August 3, 1979, in the business premises of the petitioner-firm. Several account books comprising Kachi rokar and truck register were detected and were impounded under section 131 of the Income Tax Act, 1961. The impounded record was retained in the possession of the Income-tax Department, Kachi rokar maintained from July 25, 1975, to November 3, 1975, contained various cash credits and exhibited income. Proceedings under section 148 of the Act were initiated on the basis of the impounded record. Notice was served upon Dwarka Das Rathi on March 29, 1980. He submitted a return on February 16, 1982, declaring income at Rs.20,960. An ex parte assessment under section 144 of the Act was made on March 29, 1982, on an income of Rs.5,36,580. Such assessment was reopened under section 146 of the. Act vide order, dated April 30, 1982. It is contended that Dwarka Das Rathi being ill and infirm could not appear on each and every date and on some of the dates absented from appearance. Dwarka Das Rathi moved an application for settlement to the .Commissioner of Income-tax. The Commissioner of Income-tax, Jodhpur, in his camp at Barmer, discussed the issue with Dwarka Das Rathi and R. S. Rathore, authorised representative of the petitioner-firm. According to the petitioner-firm, the Commissioner of Income-tax advised as under:

(i) To make a settlement petition on the basis of the facts and circumstances of the case;

(2) The Department was prepared to take a sympathetic view provided the assessee-firm comes forward with full and final disclosure of concealed income;

(3) Credits will have to be assessed on a single name being peak credits relevant to the assessment year 1976-77. It was made clear that once the credits are found recorded in the books of account, it is for the assessee to explain the source. In the event of his failure to do so the amounts have got to be treated as income from undisclosed sources and have to be assessed accordingly;

(4) The assessee will give full and final disclosure of its concealed income.

The Commissioner of Income-tax sought a report from the Assessing Officer. The impounded books were in the possession of the Assessing Officer. It is submitted that Dwarka Das Rathi and the authorised representative of the petitioner-firm extended assistant to the Assessing Officer to work out credits on "peak theory" basis. Detailed charts were submitted which were verified by the Department from the impounded books. The Department worked out credits on peak theory basis amounting to Rs.1,42,846 as October 9, 1975. The petitioner firm surrendered the said amount. Details of the peak credits arrived at by the Assessing Officer were incorporated by him in the assessment order. However, as the petitioner firm did not arrive at a settlement with the Department, the Income-tax Officer did not make addition on "peak theory" basis at Rs.1,42,846 but made an addition at Rs.3,58,000 on the basis of credits without deducting debits. The Assessing Officer also estimated cash credits at Rs.1 lakh for which no record was found. The Assessing Officer by order dated July 31, 1984, computed the total income at Rs.5,38,580 after inclusion of unexplained investment in the shape of cash credits at Rs.4,58,000 against addition on "peak theory" basis at Rs.1,42,848. The petitioner relied on the copy of the assessment order, dated July 31, 1984, which is Annexure-A to the reference application.

The petitioner-firm preferred an appeal before the Commissioner of Income-tax (Appeals), Jodhpur. The petitioner-firm submitted a statement regarding peak .of cash credits which were worked our by the Assessing Officer at Rs.1,42,846. A request was made that addition should be sustained at Rs.1,28,264 . against the assessment made at Rs.4,58,000. The Commissioner of Income-tax (Appeals) held that the peak amount at Rs.1,28,264 claimed by the appellant was yet to be decided upon by the Assessing Officer. Keeping the facts arid circumstances in view, the Commissioner of Income-tax (Appeals) held that it was just and fair if the. peak of the said cash credits as appearing in the Kachi rokar was adopted at Rs.1,42,846 in place of the addition of Rs.3,58,000 made by the Assessing Officer. He ordered for deletion of Rs.1 lakh alongwith consequent reduction. He granted relief of Rs.3,15,154. A copy of the order of the Commissioner of Income-tax (Appeals), dated March 15, 1988, is at Annexure B.

The petitioner-firm as well as the Revenue being aggrieved by the order of the Commissioner of Income-tax (Appeals) preferred a further appeal before the Income-tax Appellate Tribunal. The appeal filed by the petitioner-firm was registered as I.T.A. No.248/JP of 1988 and the appeal filed by the Revenue, was registered as I.T.A No.368/JP of 1988. Both the appeals for the assessment year 1976-77 and the two appeals for the assessment year 1980-81 were consolidated and were heard together and disposed of by a common order. The Income-tax Appellate Tribunal sustained deletion of addition of Rs.1 lakh and restored the addition of Rs.1,42,846 to Rs.3,58,000. The Income-tax Appellate Tribunal ignored to rely on the so-called practice and conventions of working on peak credit R basis. The learned Tribunal also ignored the fact that in similar circumstances, on the same basis of the said theory, the addition of Rs.41,551 was made in the assessment year 1980-81 against cash credits of about Rs.8 lakhs. The Tribunal also sustained separate addition of Rs.24,000 without telescoping it with the amount of Rs.1,42,846. A copy of the order of the Income-tax Appellate Tribunal, dated February 25, 1991, is at Annexure-C.

The assessee-petitioner firm submitted that The Tribunal on the basis of the same theory effected an addition of Rs.41,551 for the assessment year 1980-81. A copy of the order for the assessment year 1980-81, dated July 31, 1984, is at Annexure-D.

It is submitted by the assessee-petitioner firm that the peak theory was completely bypassed by the Appellate Tribunal in passing its final verdict. It was submitted that a refinement or extension of the peak theory occurs where the credits appear not in the same account but in the accounts of different persons. If the genuineness of all the persons is disbelieved and all the credits appearing in the different accounts are held to be the assessee's own money, the assessee will be entitled to set off and determination of the peak credit after arranging all the credits in chronological order. It was admitted that these propositions should not, however, be treated as propositions of law. They are inferences based on normal probabilities and can be displaced by material on record which may indicate fats to the contrary.

The assessee-firm thereafter, made a reference application under section 256(1) of the Income Tax Act, 1961, on the following purported questions of law:

"(1) Whether the learned Tribunal was right in law in sustaining addition of Rs.3,58,000 against the order sustained by the Commissioner of Income-tax (Appeals) at Rs.1,42,846, which amount was calculated and computed by the Income-tax Officer for purposes of settlement?

(2) Whether, the learned Tribunal was right in law in not sustaining peak credit addition at Rs.1,42,846 for the reason that the assessment by the Income-tax Officer was under section 144 of the Income Tax Act, 1961?

(3) Whether the learned Tribunal was right in law in ignoring/distinguishing the. decisions cited before it and recorded in para. 9 of the impugned order?

(4) Whether the learned Tribunal was right in observing that in the normal working of a business this modus operandi of introducing one's own money in the shape of cash credit and withdrawing it later on when not required is adopted in the regular books of account, which are produced before the Department in order to show that money was available for making payments for the transactions, which are recorded in those books of account?

(5) Whether the learned Tribunal was right in holding that Kachi rokar was not admittedly produced before The income-tax authorities particularly when admittedly Kachi rokar was impounded in the survey, is still in the possession of the Department and entire working for peak credit of Rs.1,42,846 was done by the Income-tax Officer on the basis of such Kachi rokar?

(6) Whether the learned Tribunal was right in law in not sustaining peak credit addition at Rs.1,42,846 when on the same theory and in the same manner addition of Rs.41,551 was 'made against credits of about Rs.8 lakhs for the assessment year 1980-81?

(7) Whether the learned Tribunal was right in law in not sustaining addition on peak credit theory at Rs.1,42,846 because the assessee failed to make formal. settlement application on the terms offered to him;

(8) Whether the learned Tribunal was right in law in sustaining separate addition at Rs.24,000 and, the addition made in the original assessment without telescoping it with the amount of Rs.1,42,846?"

The application was registered as R. A. No. 116/JP of 1991 and it was dismissed by the Tribunal by its order, dated August 27, 1993, holding that no question of law did arise from the order of the Tribunal. A copy of the order of the Tribunal, dated August 27, 1993, is at Annexure E.

It is submitted before us by the assessee-firm as petitioner that the order of the Income-tax Appellate Tribunal, dated August 27, 1993, is erroneous, because it is well settled law and accepted practice with the Department to make addition on the basis of peak credit when the cash credits remain unexplained or are found to be bogus. It was further submitted that in the instant case at the, behest of the respondent, the Assessing Officer worked out peak. credit at Rs.1,42,846 after verification and complete satisfaction and incorporated such working in the assessment order, which working was not found and could not be found to be wrong by the Tribunal and which working was made as a base for addition by the first appellate authority. It was further submitted that in similar and identical circumstances in the case of the petitioner firm itself for the assessment year 1980-81, addition was made at Rs.41,551 against cash credit of Rs.8 lakhs for the assessment Year 1980-81. Such assessment has become final, and ought to have been honoured by the parties: It was further submitted that other addition deserved to be telescoped in the sustained addition. It was further submitted by the assessee firm that the working done by the Assessing Officer at the peak credit amount and the addition affirmed by the Commissioner of Income-tax (Appeals) is in accord with the practice prevalent in the Department and is in accordance with the different decisions of the Supreme Court, our High Court and other High Courts -and other Benches of the Tribunal. It was also submitted that The learned Tribunal grossly erred in not following the view expressed by the Supreme Court, various High Courts and. the Tribunals and in enhancing the addition, to Rs.3,58,000 against Rs.1,42,846 sustained by the Commissioner of Income tax (Appeals). It was further submitted that the view expressed by the learned Tribunal, particularly, in para. 10 of the impugned order, is arbitrary erroneous, unreasonable, illegal and contrary to the law laid down by the Supreme Court and various High Courts. It was lastly, submitted by the assessee-petitioner that the petitioner firm was not found with the unexplained assets of the equivalent value and was also riot found and could not be found to have spent away the said amount.

On the question as to whether the benefit of "peak credit" theory should be allowed to the petitioner, Mr. Kothari submitted before us a judgment of the Madhya Pradesh High, Court in Jhamatmal Takhatmal v. CIT (1990) 181 ITR 434, where it was held that whether the Tribunal was justified in holding that the benefit of "peak credit" could or could not be granted to the assessee was a question of law fit to be referred.

It was submitted by Mr. Kothari that the theory of peak credit pre supposes an adverse finding against the petitioner that certain borrowings made by the petitioner from the cash creditors are borrowings from non-genuine creditor and, therefore, the same is treated as unexplained funds belonging to the petitioner: Having found that the borrowing had been made from creditors who are not genuine, the question of law arises so as to determine the quantum of the addition to be made under section 68 and for that purpose, the theory of peak credit is .applied so as to ascertain the maximum amount which the petitioner had in the books of account at any particular date in the name of such cash creditors, who are treated as non genuine. As for example, if the petitioner had unaccounted money of Rs.1 lakh which he had shown in the books of account -as funds borrowed from various creditors from time to time, this amount of Rs.1 lakh was rotated, i.e., borrowed and repaid periodically ten times in a year but at any time during the year, the amount of such cash credits did not exceed Rs.1 lakh. In such a situation, the question might arise as to whether addition of Rs.10 lakhs would be justified or such addition should be restricted to only Rs.1 lakh, according to the peak cash credit theory. The question whether such cash credits are unexplained or not, is definitely a finding of fact but Mr. Kothari contended that the question whether addition of Rs.10 lakhs would be made or addition of Rs.1 lakh only by applying peak credit theory, is obviously a referable question of law.

Mr. Kothari further submitted that the logic behind the applicability of the peak credit theory is that if borrowings from certain- persons have been treated as non-genuine, then obviously repayment to such persons should also be treated as non-genuine and in fact such repayment will be treated as repayment to the petitioner himself, which will constitute the requisite source for explaining subsequent borrowings.

It was submitted that the Income-tax Appellate. Tribunal has passed a common order for the assessment year 1976-77 and the assessment year 1980-81. Even though the facts in respect of both the assessment years were almost identical and ex parte assessment under section 144 were made in respect of both these years, the Income-tax Appellate Tribunal denied the benefit of the peak credit theory for the assessment year 1976-77 but in respect of the assessment, year 1980-81 it was approved. The Income-tax Appellate Tribunal held-that making additions in respect of the entire cash credits and not applying the peak credit theory would be like taking a-very technical view so far as the assessment year 1980-81 is concerned. It was submitted that such finding of the Tribunal revealed that the Tribunal was giving contrary findings for two different years involving almost identical facts.. The adverse findings given by the Income-tax Appellate Tribunal would hardly justify an addition on the ground that the petitioner firm had taken loans from cash creditors who are treated as non-genuine-but then it could not be convinced from the facts that the addition should not be made on the basis of peak credit theory. Even in respect of the assessment year 1976-77 and the assessment year 1980-81 taken together, where the facts are almost identical, it was submitted that additions could not be made differently for both these years.

Mr. Kothari further submitted by way of citation a judgment of the Rajasthan High Court in CIT v. Tyaryamal Balchand (1987) 165 IT 453, and the judgment of the Bombay High Court in CIT v. Jawanmal Gemaji Gandhi (1985) 151 ITR 353. According to Mr. Kothari, in both the cases, the High Court had directed the Income-tax Appellate Tribunal under section 256(2) of the Income-tax Act to draw up a statement of case and refer it to the High Court. In CIT v. Tyaryamal Balchand (1987) 165 ITR 453 (Raj.), while examining the account books of the assessee-firm for the accounting year relevant to assessment year 1966-67, the Income-tax Officer noted that there were deposits from various persons on different dates aggregating to Rs.16,950. These deposits were paid off to the various parties before the close of the accounting year itself so that none of them was reflected in the balance-sheet. The Income-tax Officer' added the amount as income from undisclosed sources. The income-tax Officer also made an addition of Rs.18,117 to the trading results of the assessee. The Appellate Assistant Commissioner deleted the addition of Rs.16,950 but sustained the addition of Rs.18,117. The Tribunal confirmed the order of the Appellate Assistant Commissioner and observed that the amount of Rs.16,950 had been rightly excluded from the total income of the assessee, as even during the present assessment, addition of Rs.18,117 had been made which would sufficiently cover any unexplained income to the extent of Rs.16,950. It was also held that the amount of Rs.16,950 represented the total of the cash credits and not the peak amount of unexplained credit, which would be of a lesser amount. Moreover, substantial additions had been made in the earlier years. It was held by a Division Bench of, the Rajasthan High Court that the Appellate Assistant Commissioner and the Tribunal had committed no error of law in ''holding that the unproved cash credit of Rs.16,950 should be taken to have come out of intangible additions as substantial additions had been made even in the earlier years. It has also been rightly held by the Tribunal that even during the present assessment, an addition of Rs.18,117 had been made, which would sufficiently cover any unexplained income to the extent of Rs.16,950. The amount of Rs.16,950 could not, therefore, be added as income from undisclosed sources. The Division Bench quoted the decision of the Madras High Court in CIT v. Guruswamy Nadar and Sons (K. S. M.) (1984) 149 ITR 127, where it was held that when there are two separate additions, one on account of suppression of profit and another on account of cash credit, it is open to the assessee to explain that the suppressed profits had been brought in as cash credits and one has to be telescoped into the other resulting only in one addition. It was, thus, held that the Tribunal was right in its view in telescoping the additions made towards the cash credits. In the case of Addl. CIT v. Dharamdas Agarwal (1983) 144 ITR 143 (MP), it was held that when cash credits were treated as income from undisclosed sources, the assessee can take an alternative contention before the Appellate Assistant Commissioner that the cash credits were out of undisclosed income taxed in earlier years and the assessee is entitled to raise such alternative plea before the Appellate Assistant Commissioner for the first time. It was held in the case of S. Kuppuswami Mudaliar v. CIT (1964) 51 ITR 757, by the Madras High Court that where the income-tax authorities make an addition to the Income of the assessee over and above the income as disclosed by the assessee on an estimate basis, the amount so added must be treated as the real income of the assessee. It is not open to the authorities to take the view that the addition was only for purpose of taxation and that it should not be regarded as the true income of the assessee. In CIT v. Jawanmal Gemaji Gandhi (1985) 151 ITR 353 (Bom.), it was held that secret profits or undisclosed income of an assessee earned in an earlier assessment year can constitute a fund, though concealed, from which the assessee may draw subsequently. In the reported case there was acquired gold during the latter half of the assessment year and it could be that the undisclosed income earned in that very year constituted a fund from which the asset was acquired. Though before the Income-tax Officer the assessee did not contend that the source for the' acquisition of the gold was the addition made by the Income-tax Officer to the turnover, it was the assessee's case before the Income-tax Officer that the gold had been legitimately acquired. The assessee could not then have known that the Income-tax Officer would make an addition to the Income on the basis of an addition to the turnover. Even before the Tribunal; the assessee had adopted this stand but the assessee had contended in the alternative that the source of the gold could be assumed to have come out of the intangible additions on account of increased turnover. It was held in this case that the Tribunal was justified in deleting the addition of the amount as. income- from undisclosed sources. Mr. Kothari further submitted that where there are conflicting views of the High Courts, the question as to whether the reference is to be made should be answered in the positive and the question should be referred as a question of law. For this proposition, he cited the decision in Commissioner of Agricultural Income tax v. Elembilery Estate, Cardamom Plantations (1993) 203 ITR 638 (Ker.).

Mr. Sandeep Bhandawat, advocate, appearing for the Revenue submitted before us several judgments of different High Courts and one judgment of the Supreme Court in support of his contention. In CIT v. Banswara Textiles Mills Ltd. (1999) 235 ITR 743 (Raj.) (Appex.)-D. B. Income-tax Reference Application No.6 of 1995, a Division Bench of our Court comprising B. R. Arora and P. C. Jain, JJ. by their judgment; dated January 17., 1996, held that whether the addition of an amount made by the assessing authority out of a larger amount of total addition as made by the initial taxing authority was proper or not or how such addition is to be made is purely a question of fact, which could be only decided on the basis of the materials available on record. Unless the findings of fact arrived at by the Commissioner of Income-tax (Appeals) and the Tribunal are based on misapplication of any rule of law or are based on no evidence or the authority had ignored material evidence, such finding cannot be taken as perverse and these findings do not raise any question of law to be referred to the High Court. In CIT v. Precision Finance (Pvt.) Ltd. (1994)208 ITR 465, a Division Bench of the Calcutta High Court held that it is for the assessee to prove the identity of the creditors, their credit worthiness and the genuineness of the transactions. Mere payment by account payee cheque is also not sacrosanct nor does it make a non-genuine transaction genuine. It was held in this case that in the course of assessment proceedings the Assessing Officer had found various cash credits in the books of the asses see whereupon enquiries were conducted through the inspector on different dates and it was found that either the files did not exist as per details given by the assessee or the records did not tally with the facts mentioned by the assessee and apart from enquiries made by the inspector, several letters were also issued to the assessee bringing to its notice that the loans could not be verified and adequate proof was required but the assessee did not respond. In such a case, the Tribunal was not justified in law in deleting the addition of the amount as unexplained credits and interest thereon for the relevant assessment years. In Kale Khan Muhammad Hanif v. CIT (1963) 50 ITR 1 (SC), it was held that the amounts of the cash credits could be assessed to tax as income from undisclosed sources in addition to the business income computed by estimate. The taxing authorities were not precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appeared in the books of a business whose income they had previously computed on a percentage basis. The inference by the Appellate Tribunal may be one of fact or of law. If the inference is of fact, no question with regard to it can be referred to the High Court but if it is one of law, then the question whether the inference can in law be drawn might be referred to the High Court. The question whether an inference drawn by the Tribunal is one of law or of fact is not a question which can arise out of the decision of the Tribunal and a question in that form cannot be referred to the High Court.

In Oriental Wire Industries (P.) Ltd. v. CIT (1981) 131 ITR 688' (Cal,), it was held by a Division Bench of the Calcutta High Court that where an alleged loan appeared in the books of the assessee, it was for the assessee to prove that the transaction was genuine and that would entail the production of evidence of source of loan, the capacity of the person who is supposed to give the loan and also that the loan was in fact given by the person concerned on the date mentioned. If there was no evidence to show that the loan was actually given and there was no evidence to show that the amount was lying un invested with the lady who advanced the loan, it was held that the conclusion of the Tribunal was not perverse in law. In S. L. Ganeriwal v. CIT (1991) 192 ITR 347 (Raj.), a Division Bench of the Rajasthan High Court held that where any sum is found credited in the books of an assessee maintained for any previous year; and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, it is for the assessee to furnish an explanation in respect of any sum found credited in his books of account and after considering the same, the assessing authority could come to the opinion as to whether explanation is satisfactory or not. The question whether any cash credit is genuine or not is basically a question of fact.

We cannot accept as a broad proposition of law the view expressed by the Madhya Pradesh High Court in Jhamatmal Takhatmal v. CIT (1990) 181 ITR 434, that the benefit of "peak credit" theory could or could not be granted to the assessee is really a question of law fit to be referred. In not accepting the "peak credit" theory as a method of computation, if at all, the Income-tax Appellate Tribunal might have made a wrong assessment on the facts as regards the total extent of undisclosed income which was liable to be added to the total income of the petitioner firm in respect of the assessment year which is the subject-matter of the present dispute. We do not think that there is a wide range of conflicting views on the subject as to whether or at all a reference is to be made when "peak credit" theory is not accepted by the Appellate Tribunal or the assessing authority as the only alternative. The question whether an inference is to be drawn by the Tribunal on the given facts is not always dependent on a question of law or fact. If the inference is of fact, no question with regard to it can be referred to the High Court. We think that this .is not a fit case for making a reference at of within the meaning of section 256(2) of the Income Tax Act, 1961, and that being sowe reject the application.

M.B.A./4113/FCApplication rejected.