Income Tax Appellate Tribunal on Addition under Section 68 for Share Capital and Premium.

The ITAT deleted the addition made under Section 68 of the Income Tax Act, 1961 towards unexplained share capital and premium. The Tribunal held that the assessee had discharged its onus by providing documentary evidence proving the identity, creditworthiness of investors, and genuineness of transactions. The Assessing Officer (AO) failed to bring any contrary material to show that the funds represented accommodation entries or unaccounted income.

1. The assessee company, M/s Best City Projects India Pvt. Ltd., engaged in real estate development, filed its return of income for AY 2012–13 declaring income of ₹ 1,89,360.
2. During scrutiny, the AO noticed receipt of share capital and premium aggregating to ₹ 6,00,00,000 from two companies—M/s Mayank Buildwell Pvt. Ltd. and M/s Ganga Infin Pvt. Ltd.
3. The AO issued notices under Section 133(6) but concluded that the investors were non-existent or lacked creditworthiness, treating the share capital and premium as unexplained cash credit under Section 68.
4. The CIT(A) confirmed the addition, holding that the investor companies had meagre income and did not have financial capacity to invest.

1. The assessee had submitted extensive documentary evidence, including:
2. Certificates of incorporation, PAN, audited financial statements, and income-tax returns of both investor companies.
3. Bank statements reflecting the transactions through normal banking channels.
4. Board resolutions and share allotment details confirming the investments.
5. The AO did not dispute the existence of these documents nor conducted any independent inquiry to disprove them.
6. The Tribunal reiterated that once the assessee establishes the three ingredients under Section 68 — identity, creditworthiness, and genuineness — the burden shifts to the Revenue to prove the contrary.
7. Merely relying on low income of investor companies or presumption of accommodation entries, without any corroborative evidence, cannot justify an addition.
8. The Tribunal found that both investors were duly assessed to tax, had filed returns, and made payments via banking channels. Hence, there was no basis for treating the share capital as unexplained.

1. The ITAT held that the addition of ₹ 6 crore made under Section 68 was unsustainable in law and directed its deletion.
2. The assessee’s appeal was allowed.

1. Section 68, Income Tax Act, 1961 – Unexplained cash credits.
2. Section 133(6) – Power to call for information.
3. Section 143(3) – Regular assessment procedure.

1. Assessee’s burden under Section 68 is limited to establishing identity, creditworthiness, and genuineness of the transaction.
2. If the AO fails to disprove these with tangible evidence, no addition can be sustained merely based on suspicion or low income of investors.
3. Documentary evidence and banking records play a crucial role in proving genuineness of share capital transactions.
4. The ruling reaffirms that suspicion cannot substitute proof in income-tax assessments.

Citation: 2025:ITAT:DEL:5294

Case: M/s Best City Projects India Pvt. Ltd. v. Income Tax Officer, Ward-4(3), New Delhi

Court: Income Tax Appellate Tribunal, Delhi Bench “F”

Coram: Shri Anubhav Sharma (Judicial Member) & Shri Amitabh Shukla (Accountant Member)

Date of Decision: 27 October 2025

ITA No.: 5294/Del/2019 (Assessment Year 2012–13)