Section 68 addition deleted where long-held shares, bank trail and financials supported genuine capital gains

Addition under section 68 on alleged penny-stock sale proceeds was deleted because the investment trail, bank records and company financials supported genuineness, and the share price rise was gradual over nearly ten years rather than a sudden spike typical of bogus long-term capital gain schemes. Mere Mauritius residence and treaty exemption did not establish an accommodation entry or cash-routing device, and no reliable material linked the assessee to price manipulation. Suspicion alone was insufficient to treat the transaction as unexplained income, so the addition was not sustainable.

---

---

Issues: Whether the addition made under section 68 on sale proceeds of shares could be sustained as unexplained income on the allegation that the scrip was a penny stock and the transaction was a bogus long-term capital gain arrangement.

Analysis: The assessee had held the shares for nearly ten years, the increase in price was found to be gradual and not the kind of sudden spike ordinarily associated with penny stock cases, and the transaction record, bank trail, and company financials supported the genuineness of the investment. The mere fact that the assessee was a Mauritius resident claiming treaty exemption did not by itself establish any accommodation entry or bogus device. No reliable material was shown to connect the assessee with any price manipulation or cash routing, and the allegation of unexplained investment could not rest only on suspicion.

Conclusion: The addition under section 68 was not sustainable and was directed to be deleted. The issue was decided in favour of the assessee.

---