Share transaction genuineness upheld where documentary evidence and banking records rebutted penny stock allegations and unexplained credit additions.

Long-term capital gain from share sales was accepted as genuine where the assessee supported the transactions with contract notes, demat statements, bank statements and broker ledgers showing purchases and sales through recognised stock exchange channels. The Revenue relied on investigation reports and broad allegations of penny stock manipulation, but did not produce specific material linking the assessee's transactions to cash recycling or examine alleged entry providers on oath in relation to those transactions. On these facts, the primary onus was held to have been discharged and the documentary evidence was not rebutted by cogent contrary material, so the additions under section 68 and section 69C as unexplained cash credit and commission expenditure were deleted.

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Issues: Whether the assessee's long-term capital gain from sale of shares was genuine and whether the additions under section 68 and section 69C of the Income-tax Act, 1961 were justified.

Analysis: The assessee produced contract notes, demat statements, bank statements, broker ledger and other supporting material to show purchase and sale of shares through recognized stock exchange channels. The Assessing Officer relied mainly on investigation reports and general allegations regarding penny stock manipulation, but did not bring specific adverse material linking the assessee's particular transactions to any cash recycling, nor did the assessment record show effective independent enquiry or examination of the alleged entry providers on oath in relation to these transactions. The evidence on record showed payment through banking channels, dematerialization of shares, stock exchange-based sale and no defect in the primary documents. On these facts, the appellate finding that the primary onus stood discharged and that the Revenue had not rebutted the documentary evidence with cogent contrary material was upheld.

Conclusion: The additions treating the share transaction as unexplained cash credit and commission expenditure were not sustainable, and the deletion of the additions was upheld in favour of the assessee.

Ratio Decidendi: Where an assessee substantiates share transactions with primary documentary evidence and the Revenue fails to adduce specific contrary material linking those transactions to a bogus accommodation entry, additions cannot be sustained merely on general allegations or investigation reports.

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