Section 68 and tainted scrips: general allegations alone cannot justify unexplained cash credit additions without taxpayer-specific evidence.

Sale consideration from share transfers cannot be treated as unexplained cash credit merely because the scrip was alleged to be manipulated or tainted. Where the revenue relies on general findings about a penny stock or rigged price movement, it must still produce cogent material linking the particular taxpayer to accommodation entries, synchronized trading, or bogus transactions. In the absence of any direct connection between the taxpayer and the alleged sham operation, the mere characterisation of the scrip as tainted is insufficient to sustain an addition under section 68, and the addition is liable to be deleted.

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Issues: Whether the sale consideration received on transfer of shares could be assessed as unexplained cash credit under section 68 of the Income-tax Act, 1961 merely because the scrip was alleged to be a tainted or manipulated scrip, without any material connecting the assessee to the alleged accommodation entries or synchronized trading.

Analysis: The assessee was a Mauritius tax resident and a registered Foreign Portfolio Investor. The addition was founded mainly on the SEBI order, search findings in the case of the Kushal group, and the general allegation that the share price of the scrip had been rigged. However, the assessee's name did not figure in the SEBI material or the search statement, and the material relied upon by the Assessing Officer did not contain any direct link between the assessee and the alleged sham transactions. The transaction represented only a small part of the assessee's investment activity. The absence of factual material connecting the assessee with the alleged synchronized operation meant that the mere characterisation of the scrip as a penny stock or tainted stock was insufficient to justify an addition under section 68.

Conclusion: The addition under section 68 was not sustainable and was deleted in favour of the assessee.

Ratio Decidendi: Section 68 cannot be invoked solely on the basis of general findings about a scrip's manipulation unless there is cogent material linking the particular assessee to the alleged accommodation entries or bogus transactions.

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