Share transaction evidence defeats bogus capital gains allegations and collapses consequential commission additions.

Share transactions supported by purchase bills, bank payments, demat records, allotment documents and stock exchange sales at prevailing market price could not be treated as bogus merely on the basis of investigation reports or uncorroborated third-party statements. The absence of any material linking the assessee to an accommodation entry racket, together with the failure to allow cross-examination of relied-upon statements, meant the section 68 addition for unexplained cash credit was unsustainable and was deleted. As the notional commission addition under section 69C was only consequential to that principal disallowance and lacked independent evidence, it was also deleted. The ITAT Jaipur therefore upheld the relief granted to the assessee.

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Issues: (i) Whether the addition made on account of unexplained cash credit in respect of long-term capital gains from share transactions was justified. (ii) Whether the consequential addition of notional commission expenses under section 69C was justified.

Issue (i): Whether the addition made on account of unexplained cash credit in respect of long-term capital gains from share transactions was justified.

Analysis: The assessee produced purchase bills, bank statements showing payment through banking channel, demat records, allotment arising from amalgamation, and sale through recognised stock exchange at prevailing market price. The Assessing Officer relied mainly on investigation reports and third-party statements, but no material linked the assessee to any accommodation entry racket and no corroborative evidence showed that unaccounted money had been routed back to the assessee. The statements used against the assessee were also not subjected to cross-examination, which vitiated reliance on them. The addition was therefore based on suspicion and surmises rather than tangible evidence.

Conclusion: The addition under section 68 was unsustainable and was deleted in favour of the assessee.

Issue (ii): Whether the consequential addition of notional commission expenses under section 69C was justified.

Analysis: The commission addition was made only as an offshoot of the disallowance of the capital gains claim. Once the principal addition treating the share transaction as bogus failed, there remained no basis to presume payment of commission to brokers or intermediaries. No independent evidence supported the alleged commission expenditure.

Conclusion: The addition under section 69C was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The revenue's appeal failed in entirety, and the relief granted by the first appellate authority was upheld.

Ratio Decidendi: Share transactions supported by banking records, demat evidence, and stock exchange sale particulars cannot be treated as bogus merely on the basis of uncorroborated third-party statements or suspicion, and consequential additions must fall where the foundation addition is deleted.

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