Documented share-sale proceeds cannot be treated as unexplained income on suspicion alone without specific evidence of sham transaction.

Documented share transactions supported by demat records, stock exchange sale, banking-channel receipts and purchase-sale papers could not be rejected as unexplained cash credit merely on suspicion, an investigation report, alleged abnormal price movement, or a general penny-stock theory without specific adverse material linking the assessee to an accommodation-entry scheme. On that basis, the section 68 addition was deleted and the long-term capital gain claim was accepted for the appeal. The consequential commission addition under section 69C also failed because it was purely derivative of the disallowed gain and was unsupported by independent evidence of actual payment or arrangement.

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Issues: (i) Whether the addition under section 68 on account of the alleged sale proceeds of shares as unexplained cash credit, with denial of exemption claimed on long-term capital gain, was sustainable. (ii) Whether the consequential addition under section 69C towards alleged commission for arranging the impugned share transaction was sustainable.

Issue (i): Whether the addition under section 68 on account of the alleged sale proceeds of shares as unexplained cash credit, with denial of exemption claimed on long-term capital gain, was sustainable.

Analysis: The shares were shown to have been acquired, held in demat form, and sold through the stock exchange with banking-channel payments, and the assessee placed documentary material in support of the purchase and sale. The addition was founded substantially on the investigation report, the alleged abnormal movement in share price, and a general penny-stock modus operandi, without any fresh and specific material linking the assessee to an accommodation-entry scheme. The reasoning adopted was that suspicion, however strong, cannot replace legal evidence, and that a general report or borrowed findings are insufficient where the transaction is otherwise supported by primary documents and no concrete adverse material is brought against the assessee.

Conclusion: The addition under section 68 was not sustainable and was deleted, and the long-term capital gain claim was accepted for the purpose of the appeal.

Issue (ii): Whether the consequential addition under section 69C towards alleged commission for arranging the impugned share transaction was sustainable.

Analysis: The commission addition was purely consequential to the disallowance of the alleged long-term capital gain and was not supported by independent material showing actual payment or a proved arrangement by the assessee. Once the principal addition was found unsustainable, the basis for the estimated commission also fell away.

Conclusion: The addition under section 69C was not sustainable and was deleted.

Final Conclusion: The appeal succeeded on the substantive additions, and the assessment was reduced by deleting both the alleged unexplained cash credit and the consequential commission addition.

Ratio Decidendi: An addition treating duly documented share-sale proceeds as unexplained income cannot be sustained merely on suspicion, general investigation material, or abnormal price movement, unless the Revenue brings specific, cogent evidence linking the assessee to an accommodation-entry or sham transaction.

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