Genuine share transactions defeated unexplained cash credit and commission additions; capital gains exemption was allowed.

Share sale proceeds could not be treated as unexplained cash credit where the purchases were made through banking channels, the shares were dematerialised, the sale occurred through the stock exchange, and the proceeds were received by bank transfer; a general investigation report without defect in the documentary record was insufficient to displace the transactions. On that basis, the addition under section 68 failed and the exemption under section 10(38) was allowed. As the share transactions were accepted as genuine, there was no basis for estimating commission as unexplained expenditure under section 69C, so that addition also failed.

---

---

Issues: (i) whether the sale consideration from transfer of shares could be assessed as unexplained cash credit under section 68 and the exemption claimed under section 10(38) could be denied, and (ii) whether the estimated commission addition as unexplained expenditure under section 69C was sustainable.

Issue (i): whether the sale consideration from transfer of shares could be assessed as unexplained cash credit under section 68 and the exemption claimed under section 10(38) could be denied.

Analysis: The share purchases had been made in an earlier year through banking channels, the shares were dematerialised, and the sale took place through the stock exchange with sale proceeds received through banking channels. The assessment record did not reveal any defect in the documentary evidence or any material showing that the assessee was connected with alleged price rigging or manipulated transactions. The generalized investigation report, by itself, was held insufficient to displace the proved share transactions or to treat the sale proceeds as unexplained cash credit.

Conclusion: The addition under section 68 was not sustainable, and the exemption under section 10(38) was allowable in favour of the assessee.

Issue (ii): whether the estimated commission addition as unexplained expenditure under section 69C was sustainable.

Analysis: Once the share transactions were accepted as genuine and the sale proceeds were held not to be unexplained, the premise for estimating commission expenditure for obtaining bogus capital gains disappeared. No independent material supported the estimation.

Conclusion: The addition under section 69C was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The share sale transactions were accepted as genuine, the assessed sale proceeds were directed to be deleted from taxation as unexplained cash credit, the claimed capital gains exemption was allowed, and the ancillary commission addition also failed.

---