1 Court No. - 35 Case :- INCOME TAX APPEAL No. - 34 of 2016 Appellant :- M/S Prem Castings (P) Ltd. Respondent :- Commissioner Of Income Tax (Appeals) Counsel for Appellant :- Rahul Agarwal Counsel for Respondent :- S.C.,S.S.C. I.T. Hon'ble Bharati Sapru,J. Hon'ble Saumitra Dayal Singh,J. Heard Sri Rahul Agarwal, learned counsel for appellant and Sri Praveen Kumar, learned counsel for revenue. This appeal has been filed by assessee under Section 260-A of Income Tax Act, 1961 (hereinafter referred to as 'the Act') against order of Income Tax Appellate Tribunal, Delhi dated 11.09.2015 for Assessment Year 2007-08. It has been admitted on following question of law: Whether Assessing Officer was justified in making addition under Section 68 of Income Tax Act? Admittedly, assessee is private limited company engaged in manufacture and sale of Iron and Steel products. For Assessment Year 2007-08 it filed it's return of income disclosing book profits Rs. 21,77,195/-. assessment was taken as scrutiny case under Section 143(3) of Act. In course of assessment proceedings amongst others Assessing Officer doubted genuineness of cash credit entries Rs. 3,46,00,000/- that had been recorded against share capital subscribed by 37 persons, being 23 corporate 2 entities and 14 individuals. assessee provided names, addresses and other details of investors who it claimed, had made investment of Rs. 3.46 crores. assessee further claimed to have provided PAN details, date of transactions, etc. According to Assessing Officer these details had been provided with some delay. Assessing Officer then randomly picked up 9 of aforesaid 37 persons and adopted process under Section 133(6) of Act with respect to those 9 persons. Also, Assessing Officer obtained opinion of handwriting expert to examine signatures of alleged investors on basis of documents supplied by assessee. PAN details were also sought to be verified. Out of 9 persons to whom notices were sent under Section 133(6) of Act, 7 addressees/alleged investors could not be located at such addresses. remaining inquiry in respect of two persons went to common address to two corporate entities. It was alleged one Sardar Surender Pal Singh was found at that address who claimed to have remained director of those two companies till March, 2006 only. He further disclosed that said companies had closed down in March, 2006. statement of said Sardar Surender Pal Singh was recorded and extracted in assessment order. In short, Assessing Officer reasoned that no 3 person was found existing at any of address disclosed by assessee. conclusion drawn by Assessing Officer with regard to handwriting expert opinion are not being referred to here because in order passed by Tribunal giving rise to present appeal Tribunal has chosen not to rely on that opinion of handwriting expert. inquiries with regard to PAN details also resulted in negative confirmation inasmuch as Assessee Information System (in short AIS) database of department did not support/confirm claim made by assessee with regard to identity of persons who assessee claimed had made investment. Thus, Assessing Officer disbelieved explanation furnished by assessee in support of cash credit entries amounting to Rs. 3.46 crores found recorded in books of account of assessee and consequently he made addition of that amount to income of assessee. Upon appeal, CIT (Appeals) however, accepted explanation furnished by assessee and allowed appeal. Being aggrieved, revenue carried matter to Tribunal. While considering case of parties before it, Tribunal noted in paragraph 38 of its order that assessee, being private limited company had admitted in its correspondence with Assessing Officer that investors in question were close friends and 4 business associates of assessee. This position of fact as recorded by Tribunal is not disputed by assessee in present appeal. Tribunal thereafter found that genuineness of transactions had not been established by assessee inasmuch inquiries made under Section 133(6) of Act resulted in negative confirmation of details given by assessee and also AIS database had similarly resulted in negative confirmation of information furnished by assessee as to identity of alleged investors. Then, Tribunal further held that burden to establish identity of investors and genuineness of transaction rested on assessee which, according to Tribunal was never discharged. On such reasoning, Tribunal has set aside order of CIT (Appeals) and confirmed assessment order. In present appeal, Sri Rahul Agarwal, learned counsel for assessee submits that in so far as assessee is concerned, it is undisputedly company. cash credit entries in respect of which addition has been made were admittedly entries reflecting subscription made to share capital of company. That investment having been made by third parties, assessee was not in position to offer any further details other than that which was available with it. According to 5 him, if such details had been found to be false or wrong, it was for department to make additions at hands of persons who had subscribed to share capital of assessee and not at hands of company itself. Opposing submission so made by learned counsel for assessee, Sri Praveen Kumar, learned counsel for department submits that assessee is not public company and no subscription document was issued by assessee to invite subscription to it's share capital. In fact, as noted by Tribunal alleged investment was made by persons who according to assessee were close friends and business associates. He therefore, submits, once assessee private limited company, admitted that alleged investors were close friends and business associates of directors and/or share holders of assessee company, burden to establish their identity and genuineness of transaction rested strictly on assessee. It was not open to assessee to thereafter submit that it cannot be burdened to lead any further evidence to establish identity of investors or genuineness of transactions. According to him, order of Tribunal is wholly just. In any case, said order records finding of fact based on appraisal of evidence and therefore, warrants no interference by this Court. Having considered arguments so advanced by learned counsel for parties, we find that Tribunal 6 has dealt with issue elaborately and thereafter recorded its finding on issues raised by assessee. In first place, it found that investors as disclosed by assessee did not exist at addresses disclosed by assessee. It was then found that two of investors as disclosed by assessee effectively denied fact of having made investment. PAN details of alleged investors also did not establish identity of such persons. In that view of matter, Tribunal recorded its finding that identity of investors was not established. Tribunal disapproved reasoning given by CIT (Appeals) to accept claim of investment based solely on fact that investments had been made through banking channel. Also, in respect of bank account of investors, inquiry had been made by Assessing Officer and some of bank account were found to be of persons other than alleged investors. That notwithstanding, Tribunal has reasoned that assessee being private limited company and it being admitted that alleged investors were close friends and business associates, case of assessee stands on completely different footing than that of public company that may receive some amount through banking channel from persons completely unknown to its directors. In those cases argument does arise that even if identity of investor is not established, it cannot lead to 7 consequential addition at hands of assessee - public limited company. position is materially different in case of assessee here, private limited company. In this case subscription to share capital (as claimed) is made through private invitation and not through public document. Therefore, it was assessee/company itself that ought to have known person/s it invited to subscribe to its share capital. assessee cannot hide behind shell of corporate entity to feign ignorance of real person who may have subscribed to its share capital. This is special fact known only to assessee who alone may have been aware of real identity of such persons. Upon failure to disclose and establish identity of such person, adverse inference and consequential addition had to be made at hands of company itself under section 68 of Act by disbelieving cash credit entries found recorded in books of assessee private limited company. One exception where such addition may not be made at hands of private limited company may be where such addition may be proposed to be made at hands of private limited company at very beginning i.e. at time when it may not have conducted any business so as to give rise to any income or money to make such investment. In that case, addition may be warranted at hands of directors etc. However, that 8 is not case here. No other fact has been pleaded or found to exist as may save assessee in this case from addition made u/s 68 of Act. Also, merely because cash credit entries have been shown as share capital cannot be cited as reason to resist addition under section 68 of Act on plea that no company can subscribe to its share capital (as has also been suggested during course of arguments). Once it is found that entries itself are bogus and investors as disclosed are non-existent, reflection of amount in books of account of assesse is only tax evasion device or mere pretence. It is not entry based on or arising from real transaction. There being no transaction, entry is paper entry or bogus entry. It cannot upon be relied to create any legal effect when there exists no factual basis for it's existence. Tribunal has also reasoned, once inspector's report in pursuance of inquiry made under Section 133(6) of Act resulted in negative confirmation of claim made by assessee, onus shifted back to assessee to lead evidence in support of it's claim. assessee having not led any further evidence, it could not derive any benefit from fact that Assessing Officer did not allow assessee any opportunity to cross-examine bank officials or hand writing expert. 9 Thus, we find that it being undisputed that assessee is private limited company and it being further admitted to it that alleged investors were close friends and business associates of its directors and/or share holders, as case may be, burden rested squarely on assessee to disclose true and correct details of persons it claimed had made substantial investments of Rs. 3.46 crores. That burden was not discharged. identity of alleged investors was never established and assessee did not discharge its burden to lead evidence on that issue. finding of Tribunal is finding of fact recorded on basis of evidence and application of correct principle/rule of evidence. same calls for no interference by this Court and it is hereby sustained. Once, identity of investors was not established assessee could not in any case claim to establish either genuineness of transaction or creditworthiness of those persons. Therefore, objection raised by learned counsel for assessee as to lack of opportunity to cross-examine Bank Manager or other witnesses, is largely inconsequential. Even if such opportunity has been granted to assessee by Assessing Officer, it would have led to no different result inasmuch as since assessee failed to establish identity of investors, genuineness of transaction itself gets disapproved for reason that for 10 genuine transaction there must first exist genuine person to perform that transaction. Also, for that reason, creditworthiness of investors could never be established once it was found that there was no person existing who may have entered into such transaction. In view of above, we find that finding recorded by Tribunal are pure findings of fact recorded by Tribunal recorded after applying correct test/principle. They do not warrant any interference by this Court. question of law raised in this appeal is answered in affirmative i.e. against assessee and in favour of revenue. appeal lacks merit and is dismissed. No order as to costs. Order Date :- 29.11.2017 Lbm/- Prem Castings (P) Ltd. v. Commissioner of Income-tax (Appeals)