In Baba Healthcare Private Limited v. Assistant Commissioner of Income Tax, Circle-1, Faridabad, the Delhi Bench of the Income Tax Appellate Tribunal examined the validity of an addition of ₹61 lakh made under Section 68 of the Income-tax Act, 1961 on account of share capital and share premium received during Assessment Year 2016–17.

The Assessing Officer observed that the assessee had received share capital and share premium from five investor companies. While a valuation report obtained in accordance with Rule 11UA supported the issue price, the Assessing Officer doubted the creditworthiness and source of funds in respect of investments made by two entities, namely Mass Securities Pvt. Ltd. and Deepit Real Estate Pvt. Ltd., which had reported losses in their income-tax returns. The addition was made on the basis that the immediate credits appearing in the investors’ bank accounts prior to issuing cheques raised suspicion regarding the genuineness of the source of funds. The NFAC upheld the addition.

Before the Tribunal, the assessee demonstrated that it had furnished all primary evidences required under Section 68, including income-tax returns, audited financial statements, bank statements, confirmations, and share certificates of the investor companies. It was further contended that the investor companies had recovered loans advanced in earlier years, which constituted the source of funds for the investments made in the assessee company.

The Tribunal observed that while the assessee had prima facie discharged the initial onus under Section 68, the explanation regarding the source of source required factual verification. In the interest of justice, the ITAT set aside the orders of the lower authorities and restored the issue to the file of the Assessing Officer for de novo adjudication, with liberty to the assessee to furnish additional evidence and with a direction to pass a speaking order after proper examination.

Accordingly, the appeal of the assessee was allowed for statistical purposes.

Source Link- https://itat.gov.in/public/files/upload/1767786090-AasKrB-1-TO.pdf

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