Reassessment Based on Borrowed Satisfaction and Section 68

The Kolkata Bench of the Income Tax Appellate Tribunal (“ITAT”) in Baba Metalics Private Limited v. ITO delivered a significant ruling on two recurring controversies under the Income-tax Act, 1961: the legality of reassessment proceedings initiated on borrowed satisfaction and the sustainability of additions under Section 68 in relation to share capital and share premium.

The Tribunal quashed the reassessment proceedings on the ground that the reopening was founded on incorrect and mechanically recorded reasons without independent application of mind by the Assessing Officer (“AO”). 

Simultaneously, the Tribunal also deleted the addition made under Section 68 by holding that the assessee had duly discharged its burden of proving the identity, creditworthiness, and genuineness of the share subscribers through extensive documentary evidence and compliance with notices issued under Sections 131 and 133(6) of the Act.