Section 68 Inapplicable to Earlier-Year Funds Converted into Preference Shares: ITAT Delhi

Mantarav Private Limited Vs DCIT (ITAT Delhi)

Summary: The Delhi Bench of the Income Tax Appellate Tribunal considered an appeal by Mantarav Private Limited against the order of the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre dated 14.01.2026 for AY 2022-23. The assessee, engaged in operating a business-to-business service platform under the brand name “Exmyb”, had returned a loss of Rs.5,03,16,759/- and claimed TDS refund of Rs.12,67,250/-. During the relevant year, it issued preference shares to various investors and received share capital/share premium. The Assessing Officer made an addition under section 68 of the Income-tax Act, 1961, alleging failure to establish genuineness and creditworthiness. The grounds also challenged invocation of section 56(2)(viib), the valuation report, validity of notices and penalty proceedings.

The assessee submitted that it had furnished primary documentary evidence including shareholder names, PAN and addresses, allotment details, bank statements, audited financial statements, SEBI registration certificate of the venture capital/AIF investor, KYC and incorporation documents, FIRC, RBI Form FC-GPR acknowledgement and a valuation report issued by a SEBI registered Category I Merchant Banker. It contended that the initial burden under section 68 stood discharged and that the Assessing Officer, if still dissatisfied, ought to have conducted independent enquiries under sections 131/133(6).