Valid reassessment and genuine share transaction proved by records led to deletion of unexplained money addition.

Reassessment under section 148 was treated as valid because it was initiated in accordance with procedure, and the objection that it amounted only to a fishing or verification exercise was rejected. On the merits, share sale proceeds were not treated as unexplained money where purchase and transfer were supported by cheque payment and records, the shares were sold before suspension of the scrip, and there was no material proving price manipulation or a sham transaction. The denial of long-term capital gains exemption and the addition under section 69A were therefore set aside, while the reassessment challenge failed.

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Issues: (i) Whether the reassessment initiated under section 148 of the Income-tax Act, 1961 was invalid as a mere verification exercise. (ii) Whether the addition made by treating the share sale proceeds as unexplained money and denying exemption on long-term capital gains was sustainable.

Issue (i): Whether the reassessment initiated under section 148 of the Income-tax Act, 1961 was invalid as a mere verification exercise.

Analysis: The reassessment was found to have been initiated in accordance with procedure, and the objection that it was only for fishing and roving inquiry was not accepted.

Conclusion: The reopening under section 148 was held to be valid and this ground was dismissed.

Issue (ii): Whether the addition made by treating the share sale proceeds as unexplained money and denying exemption on long-term capital gains was sustainable.

Analysis: The share purchase was supported by payment through cheque and record of transfer, the shares were sold before suspension of the scrip, and no material was brought to establish manipulation of the price or the assessee's involvement in any sham transaction. On these facts, the claim of exemption on the share sale was accepted and the addition under section 69A could not be sustained.

Conclusion: The denial of exemption under section 10(38) and the addition under section 69A were set aside in favour of the assessee.

Final Conclusion: The reassessment challenge failed, but the addition on merits was deleted, resulting in partial relief to the assessee.

Ratio Decidendi: Where a share transaction is supported by documentary evidence and there is no proven material showing price manipulation or sham dealings, the resulting gain cannot be treated as unexplained money merely because the scrip later became controversial; reassessment under section 148 is separate and may still be sustained if initiated in accordance with law.

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