ACIT CIRCLE 15(1)(2), MUMBAI, MUMBAI vs. CHALO MOBILITY PRIVATE LIMITED, NAVI MUMBAI

आयकर अपीलीय अिधकरण �ायपीठ मुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. No. 9421/Mum/2025 (Assessment Year: 2023-24) Chalo Mobility Private Limited DCIT-15(1)(2) 1st Floor, Aaykar Bhavan, Mumbai F-610, 611, Tower 2, Seawoods Grand Central Mall, Seawood, Vs. Navi Mumbai, Nerul Node-III S.O, Thane-400706 PAN: AAACZ7443D Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

I.T.A. No. 883/Mum/2026 (Assessment Year: 2023-24) ACIT Circle 15(1)(2), Mumbai Chalo Mobility Private Limited Room No.126B, 1st Floor, Aaykar F-610, 611, Tower 2, Seawoods Grand Vs. Bhawan, Mumbai-400020 Central Mall, Seawood, Navi Mumbai, Nerul Node-III S.O, Thane-400706 PAN: AAACZ7443D Revenue- अपीलाथ� / Appellant Assessee-��थ�/ Respondent :

Assessee by : Shri Nishit Gandhi Revenue by : Shri Ajay Soneji, Sr. DR Date of Hearing : 02.07.2026 : 25.09.2026 Date of Pronouncement O R D E R Per Arun Khodpia, AM: These two cross-appeals are filed by the assessee and the revenue against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 07.11.2025 for the

. Assessment Year (AY) 2023-24, arises from the assessment order under section 143(3) r.w.s 144B of the Income Tax Act, 1961 [in short, “the Act”] dated 25.03.2025, passed by Assessment Unit, Income Tax Department [in short, “the Ld. AO”].

. Act, 1961, by failing to appreciate that the assessee did not fulfill the three-pronged test of identity, creditworthiness of the creditor, and the genuineness of the transaction. 2. The Ld. CIT(A) erred in law by ignoring the proviso to Section 68, which casts an additional burden on the assessee to offer a satisfactory explanation about the nature and source of any sum credited as share application money or share premium, there by the Ld. CIT(A) failed to note that the assessee did not provide contemporaneous evidence to explain the source of the source of the funds invested by the creditors. 3. The Ld. CIT(A) erred in holding that the creditworthiness and genuineness of the transaction stood established merely because the investors were SEBI-registered Alternative Investment Funds (AIFs), there by the Ld. CIT(A) failed to appreciate that SEBI registration and regulatory corpus requirements are mere eligibility criteria for operation and do not constitute ipso facto proof of the financial capacity or availability of liquid funds for a specific investment at a specific point in time. 4. The Ld. CIT(A) erred in law by not applying the principles laid down by the Hon'ble Supreme Court in the case of PCIT vs. NRA Iron & Steel Pvt. Ltd. (2019), wherein it was held that the Assessing Officer is duty-bound to investigate the capacity of the investor and the source of the funds, and that mere production of bank statements or income tax returns is insufficient to prove creditworthiness. 5. The Ld. CIT(A) erred in law and on facts by failing to scrutinize the valuation and commercial expediency of the substantial share premium received and in the absence of a justified valuation report or business logic for such a high premium, the Ld, CIT(A) ought to have upheld the AO's finding that the transaction lacked genuineness. 6. The Ld. CIT(A) erred in overlooking the fact that the investors failed to respond to notices issued under Section 133(6) of the Act during the assessment proceedings, which significantly undermined the verification of the identity and genuineness of the transactions. 7. The appellant craves leave to add, amend, alter, or withdraw any ground(s) of appeal before or during the course of the hearing it is prayed that the order of the Ld. CIT(A) on this issue be set aside and the order of the Assessing Officer be restored.” 3. The brief facts of the case are, that the assessee, Chalo Mobility Private Limited, had filed its return of income for A.Y. 2023-24 on 31.10.2023 declaring total income at Nil and reporting carry forward losses of Rs.99,82,52,063/-. The assessee also declared deemed total income under section 115JB at (- Rs.95,30,17,576). The return was selected for scrutiny through the Centralized Allocation System for Scrutiny Selections (CASS) on account of, inter alia, lower disallowance under section 40(a)(ia) as compared with the amount reported 3

. in the tax audit report, low net profit under certain specified business codes and substantial amounts not credited to the Profit and Loss Account as reported in Schedule A-OI of the return. Notice under section 143(2) was issued on 19.06.2024, followed by notices under section 142(1), calling for various details and explanations. The assessee furnished its responses and supporting documents from time to time.

. 5. The Assessing Officer further examined capital receipts of Rs.49,46,39,043/- credited during the year, which were stated by the assessee to comprise share capital and securities premium. The assessee was required to furnish evidence regarding the identity and creditworthiness of the investors and genuineness of the transactions. In response, the assessee furnished various documents, including investor confirmations, PAN details, ITR acknowledgements, audited financial statements, bank statements, share certificates, Board resolutions, Share Subscription Agreements, PAS-3 forms, MCA records and valuation reports. The Assessing Officer also made enquiries by issuing notices under section 133(6) to the investors.

. 7. Before the appellate authority, the assessee reiterated that it had discharged the primary onus under section 68 by establishing the identity of the investors, their creditworthiness and the genuineness of the transactions. It was submitted that the investments were received through normal banking channels and were duly supported by statutory corporate records and financial documentation. In particular, it was pointed out that a substantial portion of the impugned receipts had been received from SEBI-registered Alternative Investment Funds and other institutional investors. The assessee also relied upon the valuation report prepared under the Discounted Cash Flow (DCF) method and contended that the valuation could not be rejected merely on the ground that the assessee was incurring losses or that projected financial results had not materialized as anticipated. It was further contended that mere non-response of certain investors to notices under section 133(6), in the absence of any adverse material establishing accommodation entries, round-tripping or return of funds, could not by itself justify an addition under section 68.

. the availability of substantial free reserves, stated to be significantly in excess of the amount advanced to Vogo, and contended that the mere fact that the assessee had also raised funds through interest-bearing debentures could not establish a nexus between the borrowed funds and the loan advanced to the related party.

. material demonstrating the specific business benefit or commercial necessity underlying the concessional advance. The disallowance of Rs.1,47,00,000/- was accordingly sustained. 11. Consequently, the appeal of assessee was partly allowed by Ld. CIT(A).

. 5.3. The assessee in response to the SCN vide letter dated 12.03.2025, submitted that the loans advanced to Vogo are out of the interest free owned funds available at the disposal of the company and not from the borrowed funds. Further, the loan advanced to Vogo was for furtherance of appellant business for driving business synergies. 5.4. However, the Ld. AO alleged that the interest-bearing loan of 14.50% and 13.90% were utilized to advance loan of Rs. 21 crores to Vogo at lower interest rate i.e. 7.5%. Accordingly, the Ld. AO disallowed the differential interest of Rs. 1,47,00,000/- under section 36(1)(iii) of the Act, being an interest of 7% [14.5% - 7.5%] on the sum of Rs. 21 crores advanced to Vogo. 6. Submission Proposition 1: The company had sufficient own funds to advance loan to Vogo 6.1. At the beginning of the year i.e. 01.04.2022, the owned funds of the assessee is as under:

Particulars Amount (Rs.) Amount (Rs.) Share Capital 2,50,74,246 Share Premium 3,93,94,96,158 Profit & Loss (2,23,22,11,038) 1,70,72,85,119 Owned Funds as at 01.04.2022 1,73,23,59,365

The details of the owned and borrowed funds as on 31.03.2023 are hereunder:

Particulars Amount (Rs.) Amount (Rs.) Share Capital 2,93,97,668 Share Premium 4,43,41,35,202 Profit & Loss (3,18,52,28,615) 1,24,89,06,587 Owned Funds (A) 1,27,83,04,255 Particulars Amount (Rs.) Secured Long Term Borrowings - Non-Convertible Debentures 44,93,89,000 Secured Short Term Borrowings Particulars Amount (Rs.) - Non-Convertible Debentures 44,94,17,000 Unsecured Short-Term Borrowings - BEST Assistance for purchase of EV Buses 10,80,00,000 Total Borrowed Funds 1,00,68,06,000 6.2. On perusal of the above, it can be seen that both, as on the opening date as well as the closing date, the Assessee had sufficient own funds far in excess of the funds advanced to Vogo of Rs. 21 crores. 6.3. In this regard, it is submitted that where an assessee has owned funds as well as borrowed funds, a presumption can be made that the advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. There is a plethora of judgements in support of our contention. 6.4. In this regard, the Assessee places reliance on the decision of the hon'ble Supreme Court in case of South Indian Bank Ltd. v. CIT [2021] 438 ITR 1 (SC), wherein the Apex Court has held that where interest free own funds available with Assessee exceeded their investments in tax-free securities, investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted. 6.5. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd. (Civil Appeal No. 10 of 2019) held as under:

"Insofar as the first question is concerned, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee." 6.6. In the case of CIT v. Reliance Utilities & Power Ltd. [2009] 313 ITR 340 (SC), the Hon'ble Bombay High Court held that "where an assessee has his own funds as well as borrowed funds, a presumption can be made that the advances for non- business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. Accordingly, the disallowance of the interest on the borrowed funds is not justified." 6.7. In light of the above, it is submitted that where an assessee has his own funds as well as borrowed funds, a presumption can be made that the advances for non- business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. Accordingly, the disallowance of the interest on the borrowed funds is not justified.

. 6.8. Thus, where the assessee has adequate interest free owned funds, disallowance u/s 36(1)(iii) is not warranted.

Proposition 2: Borrowings are made after the funds are advanced to Vogo 6.9. The Assessee submits that the entire sum of Rs. 21,00,00,000/- was advanced to Vogo on April 13, 2022. However, the NCDs are issued by the Assessee subsequent to the said advancement of funds to Vogo, as can be understood from the table below:

Date of Issue Rate of Balance as on NCD Type and Issued to of NCD Interest 31.03.2023 (Rs.) Series F unlisted, redeemable, non- convertible debentures of face value of 26.04.2022 13.90% 8,75,00,000 Rs 1,00,000 each issued to Stride Ventures Debt Fund II Series D unlisted, redeemable, non- convertible debentures of face value of 04.05.2022 14.50% 15,00,00,000 Rs 10,00,000 each issued to Trifecta Venture Debt Fund II Series G unlisted, redeemable, non- convertible debentures of face value of 25.08.2022 13.90% 10,00,00,000 Rs 1,00,000 each issued to Stride Ventures Debt Fund II Series E unlisted, redeemable, non- convertible debentures of face value of 26.08.2022 14.50% 35,00,00,000 Rs 10,00,000 each issued to Trifecta Venture Debt Fund II Series G unlisted, redeemable, non- convertible debentures of face value of 30.09.2022 13.90% 20,00,00,000 Rs 1,00,000 each issued to Stride Ventures Debt Fund II TOTAL 88,75,00,000

6.10. The said fact itself suggests that the Assessee has used its own funds to advance loan of Rs. 21 crores to Vogo, because the borrowings which are alleged to have been utilised for advancing money to Vogo, was not even made when the funds were so advanced to Vogo. 6.11. The said fact itself justifies that own interest-free funds of the Assessee were utilized for advancing the sum of Rs. 21 crores to Vogo, and, therefore, no 11

. disallowance of any interest, either in entirety or in proportion, is warranted in terms of section 36(1)(iii) of the Act. Proposition 3: The loans advanced to Vogo was for furtherance of business of the assessee for driving business synergies 6.12. The assessee plans to focus on increasing sustainable e-vehicles on the road - both buses and e-bikes, and further enhancing its tech capabilities towards 100% digitization. Vogo in turn, creates synergy to the assessee's vision by augmenting the latter's bus technology services by powering first and last mile rides at major bus stops and other public places across India. Vogo bridges the gap and offers a mobility solution to the people with one subscription plan, which allows travellers to commute passively without booking multiple tickets. 6.13. The assessee had loan extended to Vogo, with the purpose of supporting its operations in the personal mobility sector. By supporting Vogo, which uses advanced technology to provide innovative mobility solutions like keyless rides, the assessee is investing in a growing and future-ready industry. This aligns with the assessee's goal of being part of cutting-edge, high-potential sectors that can boost its overall financial performance and reputation. 6.14. Therefore, the commercial expediency for advancing money to Vogo cannot be doubted. Under such circumstances, without prejudice to the primary contention that no borrowed funds were utilized for advancing loans to Vogo, even if one was to hypothetically assume that borrowed funds were indeed utilized for advancing loans to Vogo, it should be appreciated that Vogo was engaged in similar line of business as that of the Assessee and was a sister concern of the Assessee, and the advancement of loan to Vogo is therefore out of commercial expediency in line with the business and commercial interests of the Assessee. 6.15. It is a settled position of law that even if borrowed funds are used to advance funds to group concerns engaged in similar line of business, the interest expense incurred on borrowed funds which are utilized for advancing money to group concerns constitutes to be "for the purpose of business", and the interest incurred on borrowed funds is for the purpose of business of the Assessee, and, therefore, no interest disallowance is warranted under section 36(1)(iii) of the Act. 6.16. Reliance in this regard is placed on the decision of Hon'ble Apex Court in case of S.A. Builders Ltd. [2007] 288 ITR 1 (SC), wherein Hon'ble Supreme Court emphasized that the expression 'for the purpose of business' occurring under the provision of section 36(1)(iii) is wider in scope than the expression 'for the purpose of earning income, profits or gains'. The money can be said to be advanced to a sister concern for commercial expediency in many circumstances. However, where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans. 6.17. Reliance is further placed on the decision of the hon'ble Supreme Court in case of Sharp Business System v. CIT [2025] 181 taxmann.com 657 (SC) (Relevant paragraphs 36 to 42), wherein the Apex Court has reiterated that advancement of 12

. funds to sister concern amounts to being commercially expedient, and interest incurred on borrowed funds utilized for purpose of advancing money to sister concern is an allowable deduction under section 36(1)(iii) of the Act. 6.18. The said ratio is reiterated by the hon'ble Supreme Court in case of L.K. Trust v. CIT (Civil Appeal No. 527/2012, dated May 07, 2026) (SC). 6.19. Reliance is placed on the decision of Hon'ble Apex Court in the case of Hero Cycles (P.) Ltd v. Commissioner of Income Tax (Central), Ludhiana (63 taxmann.com 308) wherein it was held that once it is established that there is nexus between expenditure and purpose of business revenue cannot justifiably claim to put itself in arm-chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case. 6.20. Thus, there is indeed commercial expediency in the transaction with Vogo and therefore disallowance u/s 36(1)(iii) ought to be deleted. In view of the above, it is humbly prayed that disallowance of interest of Rs. 1,47,00,000/- made u/s 36(1)(iii) of the Act be deleted.”

. submissions extracted (supra) amongst which the judgment in the case of South Indian Bank Ltd. vs. CIT is decided on the issue wherein the principle of law drawn was that, where interest-free own funds available with assessee exceeded their investment in tax-free securities, investments would be presumed to be out of the assessee’s own funds and proportionate disallowance was not warranted u/s 14A on the ground that separate accounts were maintained by the assessee for investment and other expenditure incurred for earning tax-free income. On this aspect, Ld. AR further placed his reliance on the decision of CIT vs. Reliance Industries wherein a similar principle has been laid down that the interest-free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest-free funds available with the assessee.

. Convertible Debentures (NCDs) were issued by the assessee only subsequently, during the period from 26.04.2022 to 30.09.2022. It was, therefore, contended that the said advance could not have been made out of the funds raised through the NCDs, since the advance preceded the issuance and receipt of funds pursuant thereto.

. facts of the present case, be attributed to the funds subsequently raised through issuance of NCDs.

. identity and creditworthiness of the investors and genuineness of the transaction. Ld. AO has also issued notices u/s 133(6) to the shareholders, however except two investors, other six investors have not responded to such notices. Ld. AO accepted the reply in case of two investors and for remaining investors, in absence of any response have made the addition u/s 68.

“We refer to the hearing before Your Honours on 11.06.2026 and 02.07.2026 in reference to the same, we submit as under: 1.1. Chalo Mobility Pvt Ltd ('the assessee') is a technology-driven company operating across India, focused on delivering mobility solutions with a strong emphasis on social impact and

. sustainable public transport. Chalo is recognized as one of the green initiative companies in India, enabling digital riderships, digital payments, and digital audits in public buses. 1.2. The assessee filed its return of income on 31.10.2023, declaring a total loss of Rs. 99,82,52,063/- under the normal provisions of the Income-tax Act, 1961 ("the Act") and computed book loss at Rs. 95,30,17,576/- u/s 115JB of the Act. 1.3. The assessee's case was selected for scrutiny assessment vide notice dated 19.06.2024 issued under section 143(2) of the Act. Thereafter, notices u/s 142(1) were issued to the assessee asking for details/explanations/documents. In response to the notices, the assessee made various submissions from time-to-time and provided detailed explanations/details raised by the Learned Assessing Officer ("Ld. AO"). 1.4. The assessment was completed vide order u/s 143(3) dated 25.03.2025 making addition of Rs. 46,89,64,032/- under Section 68 of the Act and disallowance of interest expense of Rs. 1,47,00,000/- under Section 36(1)(iii) of the Act. 1.5. Aggrieved, the assessee filed an appeal before the Hon'ble CIT(A). The Hon'ble CIT(A) vide order dated 07.11.2025 deleted the addition of Rs. 46,89,64,032/- made under Section 68 of the Act and upheld the interest disallowance of Rs. 1,47,00,000/- under Section 36(1)(iii) of the Act.

1.6. Aggrieved, the assessee filed an appeal before the Hon'ble ITAT against the disallowance of interest of Rs. 1,47,00,000/- under Section 36(1)(iii) of the Act upheld by Hon'ble CIT(A). Department filed an appeal on deletion of addition of Rs. 46,89,64,032/- under Section 68 of the Act by Hon'ble CIT(A). ITA 883/MUM/2026 (Department Appeal) 2. Addition of share premium under section 68 of the Act of Rs. 46,89,64,032/- 2.1 During the year under consideration, the assessee issued 4,27,713 Series & Series G - Optionally Convertible Redeemable Preference Shares ("OCRPS") aggregating to Rs. 49,89,16,174/- of face value Rs. 10 at a premium of Rs. 1,156.48/- per share to 12 allottees. The Assessing Officer accepted the share capital of Rs. 10 per share received by the Assessee and no addition was made in respect of the share capital received by the Assessee from any of the investors. 2.2 During the course of the assessment proceedings, the Ld. AO enquired the identity, creditworthiness, and genuineness of the transactions. In response, the assessee furnished the requisite details from time to time. 2.3 On perusal of assessment order, it is seen that notice u/s 133(6) was issued to various investors enquiring about the transactions taken place with the appellant for the year under consideration and many of those investors have not replied to the said notice. Some of the investors had part-replied to the notice. Accordingly, based on the responses received, the Ld. AO accepted the share premium received from Pawan Munjal Family Trust amounting to Rs. 2,19,52,303/- and Ramachandran Narayan amounting to Rs. 37,22,709/-. However, an addition under Section 68 of the Act in respect of the balance share premium of Rs. 46,89,64,032/- pertaining to 10 allottees was confirmed. The list of 10 allottees is given below:

Face Issue Number Total Total Value Sr. Name of Valu Premium Price of Value of of share No. Shareholder e per per share per shares Share Premium share share allotted Capital

Matrix Partners 10 1,156.48 1,166 3,938 39,380 45,54,218 1 India III AIF Trust

204 Ventures 10 1,156.48 1,166 268 2,680 3,09,937 2

Mayank Bidawatka 10 1,156.48 1,166 54 540 62,450 3

Aprameya 10 1,156.48 1,166 402 4,020 4,64,905 4 Radhakrishna

Stellaris Venture 10 1,156.48 1,166 1,20,738 12,07,380 13,96,31,082 5 Partner India

10 1,156.48 1,166 21,192 2,11,920 2,45,08,124 6 Stellaris SFN Trust 1

Exponentially 10 1,156.48 1,166 5,367 53,670 62,06,828 7 Mobility LLP

Penmasta Teja Raju 10 1,156.48 1,166 4,939 49,390 57,11,855 8

Misha Kohli 10 1,156.48 1,166 8,573 85,730 99,14,417 9

Waterbridge Ventures Alpha 10 1,156.48 1,166 2,40,041 24,00,410 27,76,00,215 10 Trust

Total 4,05,512 40,55,120 46,89,64,032

.  3.1 Identity is established: At Para 7.2.3, Ld. CIT(A) has stated that the identity of the investors is established and not disputed by the revenue. The AO has not brought material to show investor entities are shell, paper, or benami entities. 3.2 Creditworthiness of high networth individual and strict regulated AIFs  demonstrated: At Para 7.2.4 and 7.2.11.1 and 7.2.12, Ld. CIT(A) has stated that it is observed the creditworthiness of investors is demonstrated with bank statement evidencing availability of fund before investment, Computation of income, ITR Acknowledgment etc. The Ld. CIT(A) has also stated that there is no evidence from the AO indicating flow-back of funds from the assessee or its promoters or that the investors lacked financial standing. Further, with respect to SEBI registered AIF, the Hon'ble CIT(A) has acknowledged that as per SEBI regulations, AIF is mandated to have minimum corpus of 20 crores to be eligible for registration and operation. Therefore, the AIF is backed by regulatory oversight, due diligence and disclosure norms. Given this robust regulatory framework, creditworthiness of the SEBI regulatory entities stands sufficiently established and cannot be questioned merely on presumptive grounds. 3.3 The transaction is genuine: At Para 7.2.5 and 7.2.10, the identity and genuineness  of the transaction is established as assessee has filed multiple statutory and financial documents for e.g. PAS 3, Board Resolution, Bank Statements, Confirmation of party, etc. Further, the entire sum was received through banking channel via RTGS/NEFT. 3.4 Non-receipt of reply cannot be basis for addition: At Para 7.2.6 and 7.2.13,  Hon'ble CIT(A) noted that non-response of certain investors to 133(6) notices cannot automatically lead to adverse inference when assessee has discharged its onus with documentary evidence. The appellant cannot be held responsible for the administrative failure or non-cooperation of third-party investors with the AO's verification process. 3.5 The Ld. AO has not doubted the valuation report: At Para 7.2.7, Hon'ble CIT(A)  highlighted the valuation report has been issued by an accredited Merchant Banker and rests on recognized methodology. Courts have held that DCF valuation cannot be rejected merely because future projections differ from actual results or the business is in loss phase. The AO has not invoked any prescribed mechanism to challenge valuation, nor produced any counter-valuation report.  3.6 No allegation of accommodation entry or malafide intent of the assessee: The Hon'ble CIT(A) at para 7.2.8 strongly emphasized that the Ld. AO has not brought on record any evidence to establish that the funds have been routed back to the assessee or its promoters, nor has the AO established any connection with entry-providing entities or accommodation networks. The addition is primarily on suspicion and inadequacy of investor replies. Suspicion, however strong, cannot replace evidentiary burden, and judicial authorities have consistently discouraged rejection of genuine investment merely due to lack of tax revenue in early-stage companies. Conclusion: Accordingly, at Para 7.2.18, the Ld. CIT(A) stated that addition of Rs. 46.89 crores under section 68 of the Act is based on prejudiced mind and disregard for evidence and therefore be deleted. 4. Submission

. Proposition 1: Share Capital accepted but Share Premium not accepted by the Ld. AO 4.1 During the year under consideration, the assessee has raised a total sum of Rs.  49.89 crores through the issuance of optionally convertible preference shares to various investors. This aggregate comprises Rs. 0.43 crores towards share capital and Rs. 49.46 crores towards share premium. The assessee had furnished complete details in support of the share allotments, including the name, address, PAN, confirmation letters, copies of income tax returns, and in certain cases, bank statements of the investors. Based on these submissions, the Ld. AO has accepted the genuineness of the share capital component of the transaction. However, in a surprising and inconsistent approach, the Ld. AO has proceeded to make an addition under section 68 of the Act, in respect of the share premium amount of Rs. 46.89 crores (out of total premium of Rs. 49.46 crores) on the alleged ground that the assessee failed to establish the genuineness and creditworthiness of the investors to that extent. 4.2 It is a settled position in law that Section 68 does not empower the AO to arbitrarily  accept one component of a credit while rejecting the other without cogent evidence or reasoning. There must be a direct and specific finding by the AO to suggest that the share premium is either fictitious, disproportionate to market value, or represents accommodation entries. In the absence of such findings, no adverse inference can be drawn. 4.3 Further, the Assessee submits that the only provision in respect of share premium  without an addition in respect of share capital is under section 56(2)(viib) of the Act. The Assessee submits that firstly, it has never been a case of the Revenue that the share premium is in excess and should be taxable under section 56(2)(viib) of the Act. Secondly, the valuation report has nowhere been doubted by the lower authorities. 4.4 Reliance in this regard is placed on the following decisions:  o SLS Energy (P.) Ltd. v. ITO [2023] 154 taxmann.com 400 (Bom) (Relevant paragraphs 21, 22, 27 to 30). o ACIT v. Aadhaar Wholesale Trading and Distribution Ltd. [2024] 167 taxmann.com 526 (Mumbai - Trib.) (Relevant paragraphs 20 and 22). o ACIT v. Diligent Media Corporation Limited [ITA No. 4074/Mum/2025, dated June 09, 2026] (Mumbai - Trib.) (Relevant paragraphs 54 to 56).

Proposition 2: The Assessee has duly established the identity, creditworthiness of the investors and genuineness of the transaction.

4.5 At the outset, the Assessee submits that section 68 of the Act only requires establishing the nature of the transaction and source of funds of the transaction. However, the Assessing Officer has made the addition in respect of share premium by doubting the creditworthiness of the transaction. In any event, in the present case, the assessee by submitting the documents/details discharged its onus to prove the Identity of the investors;  Creditworthiness of the investors; and  21  Genuineness of transaction 4.6 The CIT(A) accepted the identity and creditworthiness of the transaction and extracted the table which was provided by the Assessee, which the Assessee relies on: Identity and Creditworthiness of the allottee

Sr Share . Name of the Premium Documents Page About the investors N Party Received (in provided No. o Rs.) Matrix Partners India III AIF Trust is a venture capital fund registered with the Copy of PAN Securities and Exchange Board of India Matrix Confirmation 174 (SEBI) as an Alternative Investment Fund Partners IT 175 (AIF). Matrix Partners India (renamed as India III Acknowledge 176 Z47) has a strong track record, having backed 1 AIF Trust 45,54,218 ment of AY 22- - successful ventures like OlaElectric, Trust 23 and AY 23- 177 Razorpay, Country Delight, Dailyhunt, AAFTM934 24 Screenshot 107 OneCard, Practo, etc. AIF related 1R of SEBI 6 information: https://www.z47.com/legal/fund- registration Investment Portfolio: https://www.z47.com/portfolio Media Presence: https://www.z47.com/in-the-news Copy of PAN Confirmation - IT 178 Penmasta Teja Raju is an Indian entrepreneur Acknowledge 179 and investor based in Hyderabad, Telangana. ment of AY 22- 180 He is involved in multiple ventures across 23 and AY 23- Penmasta - sectors such as infrastructure, technology and 24 - Reply Teja Raju 181 agriculture. His affiliations as seen on MCA 2 57,11,855 filed by BZKPP120 562 suggests that he has a diverse portfolio with investor in 5Q 570 interests spanning across infrastructure, response to 571 technology and real estate sectors. In fact, he notice u/s - has disclosed a returned income of Rs. 92.19 133(6) Bank 923 lakhs in assessment year 2023-24 Statement Shareholder Agreement Misha Kohli, daughter of former CEO of Copy of PAN, Bharti Airtel Shri Manoj Kohli, is an Computation 182 entrepreneur and business leader, known for of income and 183 her work in the startup and venture capital Misha Kohli IT - ecosystem. She has been involved with 3 BGBPK770 99,14,417 Acknowledge 190 various initiatives and investments, often 2B ment of AY 22- 191 focusing on technology, consumer goods, and 23, AY 23-24, - social enterprises. Misha Kohli is recognized Shareholders 242 for her leadership and ability to scale Agreement businesses, along with a strong focus on building sustainable ventures. Media 22 Presence: https://community.thriveglobal.com/ancient- wisdom-indian-manoj-kohli-leadership- lessons-focus/ https://www.linkedin.com/in/misha-kohli/ WaterBridge Ventures Alpha Trust is a registered Alternative Investment Fund (AIF) in India, operating under the Securities and Exchange Board of India (SEBI) regulations. It is managed by WaterBridge Alpha Advisors LLP, a venture capital firm co-founded by Copy of PAN, Manish Kheterpal and Ashish Jain in 2017. Confirmation, WaterBridge Ventures emphasizes a thesis- - IT driven investment approach, seeking to Waterbridg 243 Acknowledge partner with India-centric founders building e Ventures 244 27,76,00,2 ment of AY 23- disruptive technology companies. The firm 4 Alpha Trust 245 15 24 SEBI aims to be the first institutional investor and AAATW649 107 registration the most active partner in their journey, 7A 5 certificate supporting portfolio companies from seed Category II stage through Series C. Their mission is to AIF back founders who are data-driven, socially impactful, and focused on sustainability. AIF related information: https://waterbridge.vc/aif-registration-details/ Portfolio Investor: https://waterbridge.vc/our- portfolio/ Media Presence: https://waterbridge.vc/news/ IT Acknowledge ment of AY 22- 23 and AY 23- 249 Twenty 4 Ventures is an early-stage 24 Reply filed - investment firm based in India that focuses on by investor in 250 backing ambitious startups and founders, 204 response to 542 particularly at the seed and pre-seed stages. Ventures notice u/s - 5 3,09,937 The firm typically invests in technology- AABFZ848 133(6) - Bank 550 driven companies across sectors such as 6G statements - 549 fintech, consumer internet, SaaS, and Ledger of 550 emerging technologies. Website: assessee in 251 https://www.twenty4ventures.com/ books of 204 252 Ventures Copy of PAN, Confirmation Mayank Bidawatka is a prominent Indian Mayank Computation entrepreneur best known as the co-founder of 253 Bidawatka of income of Koo, a microblogging platform launched in 6 62,450 - ALOPB662 AY 22-23 and 2020 as an Indian alternative to Twitter. With 263 9B AY 21-22 a strong background in brand management and marketing, Mayank has previously 23 worked with major companies like ICICI Bank and the Tata Group before venturing into the startup world. He was part of the early team at redBus, one of India's leading bus ticketing platforms, and later co-founded Goodbox, a chat-based commerce platform. Media Presence: https://economictimes.indiatimes.com/tech/fun ding/koo-cofounder-mayank-bidawatka- raises-4-million-for-new-consumer-tech- startup-billion- hearts/articleshow/115461847.cms?from=md r https://www.livemint.com/companies/koo- co-founder-mayank-bidawatka-to-launch- billion-hearts-software-to-create-digital- products-for-global-users- 11726574006088.html Aprameya Radhakrishna is an Indian entrepreneur best known as the co-founder and CEO of Koo, a microblogging platform supporting Indian languages. He previously founded TaxiForSure, which was acquired by Aprameya Ola in 2015 for USD 200 million, and later Radhakrish co-founded Vokal, a vernacular Q&A 7 na 4,64,905 Confirmation 264 platform. An alumnus of IIM Ahmedabad, AOAPR516 Aprameya has consistently built tech ventures 9M aimed at empowering Indian users through localized digital solutions. https://razorpay.com/rize/investors- list/aprameya-radhakrishna https://www.ynos.in/angel-investor/aprameya- radhakrishna-700075 Stellaris is a venture capital firm based in India, focusing on early-stage investments in sectors like technology, consumer products, Copy of PAN, and enterprise solutions. The firm has backed Confirmation, several successful startups, including Meesho IT 516 Stellaris (social commerce), XpressBees (logistics), Acknowledge 517 Venture Lenskart (eyewear e-commerce), Turtlemint ment of AY 22- 518 Partner 13,96,31,0 (insurtech), and SigTuple (healthtech). Known 8 23 and AY 23- - India I 82 for its founder-friendly approach, Stellaris 24 SEBI 519 AARTS6917 provides not only capital but also mentorship registration 107 P and access to a vast network. Details AIF: certificate 4 https://www.stellarisvp.com/investor-relations Category II Portfolio Investment: AIF https://www.stellarisvp.com/portfolio Media Presence: https://www.stellarisvp.com/insights 9 Stellaris 2,45,08,12 Detailed list of 529 Exponentially I Mobility LLP is an investment 24 SFN Trust 1 4 investors with - firm based in Noida, Uttar Pradesh, India, AAXTS6554 Bank 536 with a focus in early-stage ventures J statement and 537 shareholding - pattern 539 540 - 541 Bank Statement of investor, - Confirmation - Copy of PAN, Confirmation, -IT 522 Acknowledge 523 ment of AY 22- 524 mobility, logistics, and technology sectors. It 23 and AY 23- - has notable investments in Vogo Automotive, Exponential 24, Bank 525 LoadShare Network, Super Highway Labs, ly I Mobility Statement of 526 1 Riot Labz and Uolo Technology. Media LLP 62,06,828 the investor - 551 0 Presence: https://www.business- AAFFE592 Reply filed by - standard.com/article/news-cm/spice-mobility- 5R investor in 561 rings-loud-after-subsidiary-divests-stake-in- response to 555 11-1180228001861.html notice u/s - 133(6) Screen 558 shot of MCA 559 portal highlighting capital of 7.26 crores - Ledger confirmation 46,89,64,0 Total 32

4.7 The Assessee submits that out of the total addition of Rs. 46,89,64,032/- made on account of share premium received, an amount of Rs. 42,17,85,515/- from parties referred hereunder represents funds received from SEBI-registered AIFs:

Sr. Name of the Fund Share Premium No. (Rs.) 1 Matrix Partners India III 45,54,218 AIF Trust 2 Waterbridge Ventures 27,76,00,215 Alpha Trust 3 Stellaris Venture Partner 13,96,31,082 India I 25

. Total 42,17,85,515 4.8 These AlFs are governed by stringent regulatory requirements under the SEBI (AIF) Rules, 2012. As per Rule 10 of the said Regulations, an AIF is mandatorily required to have a minimum corpus of Rs. 20 crores to be eligible for registration and operation. These regulatory norms ensure that only entities with significant financial standing and credibility are granted registration as AIFs. Accordingly, the investments made by such entities are backed by thorough due diligence, both at the time of registration and during their functioning, under SEBI's oversight. Given this robust regulatory framework and the high entry pander interins of net worth and compliance requirements, the creditworthiness of these SEBI-registered AIF's is beyond question. Therefore, the share premium received from these entities cannot be doubted merely on presumptive grounds. and the identity and creditworthiness of the investors are duly established through their SEBI registration and compliance history. Genuineness of the transaction 4.9 The assessee in the course of assessment submitted the following documentary evidence to prove the genuineness of the transaction: a. Details of allottees to whom the OCRPS were issued along with Certified copies of the Board Resolutions approving such allotments (Refer page 45 to 53 of the Paperbook) b. Copies of Form PAS-3 i.e. return of allotment filed with the Ministry of Corporate Affairs, (Refer page 54 to 68 of the Paperbook) c. Extracts of bank statements of the assessee evidencing the receipts of the amounts (Refer page 71 to 75 of the Paperbook) d. Copies of share certificates (Refer page 76-85 of the Paperbook) e. Valuation report (Refer page 91 to 115 of the Paperbook) f. Sample shareholders agreement with two of the subscribers (Refer page 116 to 167 of the Paperbook) 4.10 Further, all the funds have been remitted through proper banking channels duly recorded in the books of accounts and financials of the Company which are audited under Companies Act, 2013. Therefore, there cannot be any doubt on the genuineness of the transaction. Proposition 3: Primary onus was discharged by the Assessee 4.11 The Assessee submits that, as is stated above, the identity and creditworthiness of the transactions in respect of share premium received from all ten parties has been duly established by the Assessee. Further, the Assessee had established the genuineness of the transaction as has been stated above, and in any event, the Ld. AO having accepted the premium from two parties out of twelve, therefore accepts the genuineness of the transaction and the same cannot be doubted. 26

. 4.12 Having discharged the primary onus with respect to the said transactions, it is incumbent on the Ld. AO to rebut the evidences produced and explanations provided by the Assessee. Under such circumstances, it is for the Revenue to bring on record some material to justify that the premium received by the Assessee is not genuine and requires addition under section 68 of the Act. In this regard, the Assessee places reliance on the following decisions: Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723 (Bombay HC) (Copy enclosed-Pages 36 to 43), wherein the High Court has held the following: "It seems to ux... Where the entry stands not in the name of any such person having a close relation connection with the assessee, but in the name of an independent party, the burden will still the upon him to extablish the identity of the said party, and to satisfy the Income-tax Officer that the entry is real and not fictitious. When, however, in a case where the entry stands in the name of the third party, the assessee satisfies the Income-tax Officer as co the identity of the third party and also supplies such other evidence which will show, prima facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will then shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material" Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gauhati HC) (Copy enclosed -Pages 44 to 52) (Relevant paragraphs 11 to 16) PCIT v. Jagdish Thakkar [2022] 145 taxmann.com 414 (Bombay HC) (Copy enclosed- Pages 53 to 60) (Relevant paragraph 28) Proposition 4: Addition cannot be made on mere non-receipt of reply to notice under section 133(6) of the Act 4.13 The Assessee submits that mere non-response by certain third parties cannot, by itself. constitute a valid basis for making an addition in the hands of the assessee. The addition made by the Ld. AO on account of circumstances beyond the control of the assessee is unjustified and unsustainable in law. 4.14 The Assessee had already submitted the details with regards to its investors, the initial onus to prove the genuineness of investment is duly discharged by the assessee by filing requisite details as mentioned above. Further, it is pertinent to note that some of the investors have responded to the notice under section 133(6) of the Act, however, the replies have not been considered by Ld. AO in the order. 4.15 In this regard, we rely on following judicial precedents wherein it is held that non- reply to details in response to notice u/s. 133(6) by investors to the AO cannot be concluded that the transactions entered into by the assessee are not genuine:

.  CIT v. Orchid Industries (P) Ltd. [2017] 397 ITR 136 (Bom) (Copy enclosed Pages 61 to 62) (Relevant paragraph 6), wherein the jurisdictional High Court has held that only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee.  CIT v. Nikunj Eximp Enterprises (P.) Ltd. [2015] 372 ITR 619 (Bom) (Copy enclosed Pages 63 to 64) (Relevant paragraph 7), wherein in respect of allegations of bogus purchases, the jurisdictional Bombay High Court has held that merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the Assessee.  The decision of Hon'ble Mumbai ITAT in the case of Sonicwall Technology System India Pvt. Ltd. Vs ACIT (ITA no. 3860/Mum./2019)(Mum - Trib) (Copy enclosed - Pages 65 to 70) (Paragraph 8), the Tribunal held that when the assessee has provided all the information available with it regarding the transaction, merely on the basis that the entity has not responded to notice issued under section 133 (6) of the Act, the transaction cannot be doubted and be treated as non-genuine.  Reliance is also placed on decision of Hon'ble Delhi ITAT in the case of Randeep Investment Pvt. Ltd. Vs ITO (ITA no. 4991/Del./2014) (Del -Trib) (Copy enclosed Pages 71 to 97) (Paragraph 14) wherein the ITAT has held that no adverse inference can be drawn against the assessee, if notice u/s 133(6) was duly served but no reply was received from the parties.  Similarly, the Hon'ble Delhi ITAT in the case of M/s Kesha Appliances Pvt. Limited v. ITO (ITA No. 2175/Del/2016) (Del-Trib) (Copy enclosed - Pages 98 to 125) (Relevant paragraph 28) held that assessee cannot be penalized merely on the ground that the six companies as discussed above failed to reply to the notices issued to them under section 133(6) of the Act. 4.16 In view of above, we state that notice u/s 133(6) is only one mode of cross- verification of details furnished by the assessee and non-receipt of reply to notice u/s 133(6) of the Act cannot be basis for making additions. In view of the above, it is humbly prayed that the addition made u/s 68 of the Act of Rs. 46,89,64,032/- has rightly been deleted by the Ld. CIT(A).”

. Further, the assessee's reliance on investments received from SEBI-registered AIFs is misplaced, as SEBI registration by itself does not discharge the statutory onus under section 68 of the Income-tax Act to establish identity, creditworthiness, and genuineness of the transaction. The minimum corpus requirement of Rs. 20 crore under the SEBI (AIF) Regulations, 2012 is only a threshold condition for registration and cannot be treated as conclusive proof of availability of funds for a specific investment or of financial capacity at the relevant time. The assessee has failed to demonstrate, through credible and contemporaneous evidence, that the particular funds invested as share premium were sourced from explained and verifiable means. In the absence of satisfactory justification for the commercial rationale and valuation supporting the substantial share premium, and as mere routing of funds through banking channels or filing of confirmations does not establish genuineness, the Assessing Officer was justified in making the addition, which deserves to be sustained.”

. (i) Matrix Partner India III AIF Trust – ITR reflecting NIL income; audited financial statements and bank statement not furnished. Investment in share premium: ₹45,54,218/-.

(ii) Waterbridge Ventures Alpha Trust – ITR reflecting NIL income; audited financial statements and bank statement not furnished. Investment in share premium: ₹27,76,00,215/-.

(iii) Stellaris Venture Partner India I – ITR reflecting NIL income; audited financial statements and bank statement not furnished. Investment in share premium: ₹13,96,31,082/-.

. the Assessing Officer could not require the assessee to explain or establish the source of the source of the investment. However, the aforesaid observation does not appear to be germane to the facts of the present case, since the year under consideration is AY 2023-24, which falls substantially subsequent to the statutory amendment enlarging the scope of enquiry in respect of certain credits, including share capital, share premium and similar amounts. Therefore, the legal position applicable to the pre-amendment period cannot, without examining the statutory provision applicable to the year under consideration, be mechanically applied to the present assessment year.

. 32. In the present case, therefore, the relevant question is not merely whether the Assessing Officer had made adequate enquiries or whether certain deficiencies existed in the assessment order, but whether, on the basis of the material actually available on record, the identity of each investor, its creditworthiness and the genuineness of the relevant transaction, as required under section 68, can be said to have been established. This assumes particular significance where the assessment year under consideration is AY 2023-24 and the statutory framework applicable to such year is materially different from the pre-amendment position referred to by the Ld. CIT(A.).

. 35. We also find that considerable reliance has been placed upon the fact that certain investors are SEBI-registered Alternative Investment Funds (AIFs). While such regulatory status may constitute a relevant fact, the same, by itself, does not dispense with the requirement of examining the material relevant to the ingredients contemplated under section 68 of the Act. The issue is required to be examined with reference to the facts and documentary evidence pertaining to each investor. The order of the Ld. CIT(A), however, does not disclose any such investor-wise examination and proceeds substantially on the general assertion that the primary onus cast upon the assessee stood discharged.

. 38. Accordingly, in the interest of proper appreciation and determination of the facts, the matter is restored to the file of the Ld. CIT(A.) for fresh examination and adjudication in accordance with law. The Ld. CIT(A.) shall examine each investor independently and investor-wise, with reference to the relevant documentary evidence available on record as well as such further evidence as may be furnished by the assessee. In particular, the Ld. CIT(A.) shall examine the primary documents indicated hereinabove, including the audited financial statements, bank statements, income-tax returns and such other financial and supporting documents as may be necessary for determining the financial capacity and creditworthiness of the respective investors and for examining the genuineness of the corresponding transactions. The assessee shall furnish all such requisite documents and explanations as may be called for by the Ld. CIT(A) in the course of the proceedings. Thereafter, the Ld. CIT(A.) shall record a specific and reasoned finding in respect of each investor and adjudicate the issue afresh in accordance with the provisions of section 68 of the Act and the legal position applicable to the year under consideration, after affording adequate and effective opportunity of being heard to the assessee.

. during the first round of appellate proceedings. The assessee shall ensure that the requisite documents are furnished investor-wise and within the proceedings before the Ld. CIT(A), so as to facilitate a proper and effective examination of the financial capacity of each investor in accordance with law.

Order pronounced in the open court on 25-09-2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 25-09-2026. Ankit K., Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai 35