Contemporaneous documentary evidence can defeat charges of accommodation entries where no year specific linkage exists.

Article examines an ITAT-Chandigarh appeal where additions treating long-term capital gains and sale proceeds as unexplained income and denying exemption were reversed because the department failed to produce year-specific material linking the assessee to accommodation-entry providers. The author emphasizes that contemporaneous documentary proof (allotment advices, demat statements, contract notes, STT and banking traces) supported genuineness, while reliance on statements, seizure material from unrelated searches and extrapolation from prior years was insufficient. Applying the preponderance of probabilities and the principle that each assessment year must stand on its own evidence, the additions were not sustained.

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Issues: Whether additions treating exempt long-term capital gains and sale proceeds as unexplained income under Section 68 and making consequential addition under Section 69C, and denial of exemption under Section 10(38) on the ground that the share transactions were sham/accommodation entries, were justified for the assessment years in question.

Analysis: The appeals were decided on whether tangible, specific material for the year under appeal linked the assessee's transactions to accommodation entry providers and supported a finding of sham transactions. Documentary evidence relied on by the assessees included allotment advices, demat statements, contract notes, stock-exchange sale through recognized brokers, STT payment and banking channel payments. The departmental case primarily rested on statements and seizure material from searches conducted in unrelated persons' cases and extrapolation of findings from earlier assessment years; no direct transactional link for the year under appeal was established between the assessee and the alleged entry providers. Coordinate Bench decisions on similar facts (including the assessee's own earlier matters) held that suspicion or past findings alone are insufficient and that each assessment year must be decided on its own evidence. Applying the preponderance of probabilities, the contemporaneous documentary material and the absence of specific corroborative evidence for the year under appeal led to reversal of the additions.

Conclusion: The additions under Section 68 and Section 69C and denial of exemption under Section 10(38) are not sustained for the years under appeal; the appeals are allowed in favour of the assessee.

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