In recent years, there has been a notable increase in the interest toward microfluidic devices for microbubble synthesis. The upsurge can be primarily attributed to the exceptional control these devices offer in terms of both the size and the size distribution of microbubbles. Among various microfluidic devices available, capillary-embedded T-junction microfluidic (CETM) devices have been extensively used for the synthesis of microbubbles. One distinguishing feature of CETM devices from conventional T-junction devices is the existence of a wall at the right-most end, which causes a backflow of the continuous phase at the mixing zone during microbubble formation. The back flow at the mixing zone can have several implications during microbubble formation. It can possibly affect the local velocity and shearing force at the mixing zone, which in turn can affect the size and production rate of the microbubbles. Therefore, in this work, we experimentally and computationally understand the process of microbubble formation in CETM devices. The process is modeled using computational fluid dynamics (CFD) with the volume-of-fluid approach, which solves the Navier-Stokes equations for both the gas and liquid phases. Three scenarios with a constant liquid velocity of 0.053 m/s with varying gas velocity and three with a constant gas velocity of 0.049 m/s at different liquid velocities were explored. Increase in the liquid and gas velocity during microbubble formation was found to enhance production rates in both experiments and simulations. Additionally, the change in microbubble size with the change in liquid velocity was found to agree closely with the findings of the simulation with a coefficient of variation of 10%. When plotted against the time required for microbubble generation, the fluctuations in the pressure showed recurrent crests and troughs throughout the microbubble formation process. The understanding of microbubble formation in CETM devices in the presence of backflow will allow improvement in size reduction of microbubbles.