Section 68 addition for alleged penny stock gains fails where primary records support genuine share transactions and no contrary material exists.

An addition under section 68 for alleged bogus short-term capital gains from penny stock sales was found unsustainable where the assessee produced bank statements, contract notes, demat records, trade summaries and ledger accounts showing purchase and sale through the stock exchange. The Revenue brought no specific material to show that the assessee was involved in rigging the scrip or that the supporting documents were fabricated; general allegations and reliance on surrounding circumstances and human probability were insufficient. The addition was therefore deleted. Delay in filing the appeal was condoned on the basis of the affidavit filed and the absence of any contrary material from the Revenue.

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Issues: Whether the addition made under section 68 on account of alleged bogus short-term capital gain from sale of penny stock shares was sustainable.

Analysis: The delay in filing the appeal was condoned on the basis of the affidavit and absence of any contrary material from the Revenue. On merits, the assessee produced bank statements, contract notes, demat records, trade summaries, ledger accounts and other supporting documents to show purchase and sale through the stock exchange. No material was brought by the Revenue to show that the assessee had any role in rigging the scrip or that the documents were fabricated. The addition was made only on the basis of general allegations regarding penny stock manipulation and by relying on surrounding circumstances and human probability, without any specific adverse finding against the assessee. The facts were found to be covered by the cited jurisdictional precedents.

Conclusion: The addition under section 68 was held unsustainable and was directed to be deleted.

Ratio Decidendi: An addition on account of alleged bogus share gains cannot be sustained under section 68 where the assessee substantiates the transactions with primary documentary evidence and the Revenue brings no specific material to discredit the assessee or link him to any manipulation of the scrip.

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