ITAT Delhi Deletes Rs. 45 Lakh Addition Under Section 68 — Share Capital and Premium from Investor Companies Held Genuine
Case Overview
Saffron Groceries Pvt. Ltd. Vs ITO (ITAT Delhi)
Assessment Year: 2016-17
Order Date: 25.03.2026
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) recently ruled in favour of the assessee by striking down an addition of Rs. 45 lakh that had been made under Section 68 of the Income Tax Act, 1961. The addition pertained to share capital and share premium received from two investor companies during Assessment Year 2016-17. The Tribunal found the transactions to be genuine, the investors creditworthy, and the documentation furnished by the assessee to be sufficient for discharging the onus cast under Section 68.
Background of the Dispute
Saffron Groceries Pvt. Ltd., the assessee company, had issued 56,250 equity shares with a face value of Rs. 10 each at a premium of Rs. 70 per share to two investor companies, namely:
- M/s Pearl Multicon Private Ltd.
- M/s Pearl Propcon Private Ltd.
The breakup of the share allotment and associated financials was as follows:
| Investor Name | No. of Shares | Share Capital (Rs.) | Share Premium (Rs.) |
|---|---|---|---|
| Pearl Multicon Private Ltd. | 25,000 | 2,50,000 | 17,50,000 |
| Pearl Propcon Private Ltd. | 31,250 | 3,12,500 | 21,87,500 |
The Assessing Officer (AO) raised serious doubts about the creditworthiness of the investors and the genuineness of the transactions. Consequently, the AO treated the share application money and the share premium as unexplained cash credits and made an addition of Rs. 45,00,000/- under Section 68 of the Income Tax Act, 1961.
The Commissioner of Income Tax (Appeals) [Addl./JCIT(A)-2], Mumbai, upheld the addition vide order dated 17.11.2025, prompting the assessee to prefer an appeal before the Tribunal.
Grounds of Appeal Raised by the Assessee
The assessee challenged the CIT(A)'s order on the following grounds:
That the Ld. AddI/JCIT (A)-2, Mumbai has grossly erred in law as well as on facts in sustaining the addition of Rs. 45,00,000/- made by Ld. AO u/s 68 of the IT Act, 1961 on account of share capital and share premium received from the shareholders, whose nature and source of credit have been explained and details have been furnished by the appellant, thereby, discharging the burden u/s 68 of the Act.
That the order passed by Ld. AddI/JCIT (A)-2, Mumbai is bad in law as the same has been passed without appreciating that the investor companies are separate Income-tax-assesses and the explanation and documents sought have duly been furnished which have not been controverted, and therefore cannot be rejected arbitrarily.
That the Ld. CIT(A), Addl/JCIT (A)-2, Mumbai has grossly erred in law as well as on facts in not appreciating the fact that valuation of shares was made in accordance with the Rule 11UA(2)(a) of Income Tax Rules, 1962 i.e., Net Asset Value Method, which is one of the prescribed methods for valuation of shares.
That Ld. Addi/JCIT (A)-2, Mumbai erred in law as well as on facts in not admitting additional evidences filed under Rule 46A of the Income Tax Rules, 1962 and rejecting the same in an arbitrary manner.