Natural justice and documentary evidence defeated a section 68 addition in a share transaction capital gains dispute.

Document discusses the evidentiary requirements for sustaining an addition under section 68 in a long-term capital gain share transaction case. The assessee produced purchase and sale documents, banking records, demat evidence and contract notes, showing acquisition and sale through recorded channels, while the Revenue relied on investigation material alleging penny stock manipulation. Because the assessee was not supplied the statements or material used against her and was denied cross-examination, the assessment was found inconsistent with natural justice. The addition was deleted and the long-term capital gain claim was accepted.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961, in respect of long-term capital gain from share transactions could be sustained when the assessee had produced purchase and sale documents, banking records and demat evidence, and whether denial of the material relied upon and cross-examination vitiated the assessment.

Analysis: The assessee established purchase of shares through a registered broker, payment through banking channels, receipt of shares in demat account, and subsequent sale through recorded contract notes with payment of statutory levies. The Revenue relied on investigation material and statements alleging penny stock manipulation, but the assessee was not furnished the relied-upon statements or material and was denied cross-examination of the persons whose statements were used against her. The evidentiary burden discharged by the assessee was not rebutted by independent material demonstrating her involvement in any manipulation, and the assessment was therefore found to be inconsistent with the principles of natural justice and with the documentary record.

Conclusion: The addition under section 68 was deleted and the assessee's claim was accepted.

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