Section 68 addition fails where no credit entry or verified share transaction exists in the assessee's books or Demat records.

Section 68 could not be invoked where no sum was found credited in the assessee's books and no corresponding share purchase, sale, or capital gain entry appeared in the Demat records or return. The alleged long-term capital gains from shares were unsupported by verified transaction material and rested mainly on Investigation Wing information, not on an actual credit entry in the assessee's books. As the statutory precondition for section 68 was absent, the addition was unsustainable and was deleted.

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Issues: Whether addition under section 68 of the Income-tax Act, 1961, could be sustained on the basis of alleged bogus long-term capital gains from shares of Twenty First Century India Limited when no such transaction or credit entry was found in the assessee's books or Demat records.

Analysis: The assessee denied having entered into the alleged share transactions. The record showed that the Demat accounts did not reflect any purchase or sale of the script, and no corresponding capital gain was declared in the return or found in the books of account. The addition was made substantially on the basis of information from the Investigation Wing and not on verified material establishing an actual transaction or a credit entry in the assessee's books. Since section 68 applies only where a sum is found credited in the books of the assessee and the assessee fails to explain the nature and source thereof, the essential precondition for invoking that provision was absent.

Conclusion: The addition under section 68 was held to be unsustainable and was deleted for both assessment years, resulting in relief to the assessee.

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