Share transaction genuineness accepted where documentary trail was intact and penny-stock allegations lacked supporting material.

Where an assessee substantiates share purchases and sales through invoices, bank statements, demat records, contract notes, and broker ledgers, a mere investigation report branding the scrip as a penny stock is insufficient to treat long-term capital gains as bogus. In the absence of any independent enquiry, adverse finding against the assessee, or material showing participation in price rigging or accommodation entries, the share-sale proceeds could not be taxed as unexplained income. The consequential commission addition under section 69C also failed because it depended entirely on the disallowed capital gain addition. The ratio affirms that documentary evidence must be dislodged by cogent contrary material.

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Issues: (i) Whether the addition made by treating the long-term capital gain on sale of shares as bogus and taxing the sale consideration as unexplained income was sustainable; (ii) Whether the consequential addition towards commission expenditure as unexplained under section 69C was sustainable.

Issue (i): Whether the addition made by treating the long-term capital gain on sale of shares as bogus and taxing the sale consideration as unexplained income was sustainable.

Analysis: The assessee furnished purchase invoice, bank statement, demat statement, contract notes, broker ledger, and bank credits showing purchase and sale of shares through banking channels and through a demat account. The material on record showed that the assessee was a regular investor and that the impugned shares formed only a small part of her overall investments. The addition was made mainly on the basis of an investigation report describing the scrip as a penny stock, but no specific adverse finding was recorded against the assessee, no independent enquiry disproving the documentary trail was carried out, and no material was brought to show that the assessee participated in price rigging or any accommodation-entry arrangement. On similar facts, the jurisdictional precedents relied upon supported acceptance of the share transactions as genuine where the documentary evidence was not dislodged.

Conclusion: The addition treating the share-sale proceeds as unexplained income was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the consequential addition towards commission expenditure as unexplained under section 69C was sustainable.

Analysis: The commission addition was purely consequential to the disallowance of the long-term capital gain claim. Once the principal addition treating the share transaction as bogus was not sustained, the basis for estimating commission also ceased to exist.

Conclusion: The commission addition was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The assessee succeeded on both the principal and consequential additions, and the assessment additions were set aside in full.

Ratio Decidendi: Where an assessee substantiates purchase and sale of shares through contemporaneous documentary evidence, demat entries, and banking records, a mere investigation report or generalized penny-stock allegation is insufficient to sustain an addition unless the revenue brings cogent material linking the assessee to the alleged accommodation-entry or price-rigging arrangement.

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