Long term capital gains genuineness and burden of proof - addition deleted after assessee proved transaction

On additions alleged as bogus long-term capital gains, the tribunal found the assessee had discharged the initial onus by establishing identity, creditworthiness and genuineness; consequently the revenue bore the evidential burden to prove otherwise and failed. The tribunal accepted the transaction's genuineness and directed deletion of the addition, allowing the assessee's appeal. The decision rests on the principle that an appellant's stated facts stand unless convincingly disproved and cites higher-court precedent supporting that evidential allocation and deletion on merits.

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Issues: (i) Whether the addition of long-term capital gain (LTCG) treated as unexplained cash credit and added under section 68 of the Income-tax Act, 1961 is sustainable; (ii) Whether the addition of commission/expenditure of 3% of LTCG under section 69C of the Income-tax Act, 1961 is sustainable.

Issue (i): Whether the LTCG claimed as exempt under section 10(38) can be treated as bogus and added as income under section 68 when the assessee has produced contract notes, demat statements, bank statements, broker ledgers and evidence of STT and sale through a recognized stock exchange.

Analysis: The assessee produced documentary evidence showing purchase, dematerialization, sale through a recognized stock exchange, receipt of sale consideration through banking channels and payment of STT. Investigative reports and general statements relied upon by the revenue were not shown to specifically implicate the assessee nor were they placed and confronted during assessment. Coordinate and higher judicial precedents were applied holding that where the assessee discharges initial onus by producing relevant documents, the revenue must bring cogent contrary evidence to sustain additions. The assessment order did not produce specific evidence disproving identity, creditworthiness or genuineness of transactions and relied on general investigations and market trends. The tribunal's prior decision on the same scrip and authorities cited were taken into account.

Conclusion: The addition of LTCG under section 68 is deleted and the claim of exemption under section 10(38) is accepted in favour of the assessee.

Issue (ii): Whether the addition of commission payable at 3% of the LTCG under section 69C is tenable where the primary addition treating LTCG as unexplained has been challenged and documentary evidence of transactions is on record.

Analysis: The commission addition was consequential to the primary finding treating LTCG as bogus. The Assessing Officer did not produce evidence to establish that the assessee had incurred undisclosed expenditure not recorded in books. Jurisprudence requires tangible material to trigger section 69C; in absence of such material and where the primary addition is unsustainable, the consequential commission addition cannot stand.

Conclusion: The addition of Rs. 65,075 under section 69C is deleted in favour of the assessee.

Final Conclusion: On the facts and authorities cited, the assessee discharged initial evidentiary onus and the revenue failed to produce cogent contrary material; both the additions under sections 68 and 69C are deleted and the appeal is allowed.

Ratio Decidendi: Where an assessee establishes identity, creditworthiness and genuineness of share transactions by documentary evidence showing purchase, dematerialization, sale on a recognized exchange and receipt of sale proceeds through banking channels with STT paid, the revenue must produce specific and cogent evidence to disprove those facts before treating LTCG as unexplained cash credit under section 68 or making consequential additions under section 69C.

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