Unexplained investment rejected where demat, bank and contract notes proved purchases and banking-channel payments, appeal allowed.

Addition of Rs. 42,60,406 treated as unexplained investment under section 69 was held unsustainable where the assessee produced demat records, bank statements and broker contract notes showing purchases and payments through banking channels and part funding by sale of other shares; the revenue failed to produce cogent contrary material or make further inquiries and relied on suspicion from the scrip's nature and investigatory leads without specific findings negativing the documentary evidence, consequently the appeal was allowed in favour of the assessee.

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Issues: Whether the addition of Rs. 42,60,406/- as unexplained investment under section 69 of the Income-tax Act, 1961 for purchase of shares of a penny stock can be upheld where the assessee produced demat records, bank statements and contract notes showing purchases through recognised brokers.

Analysis: The reopening of assessment was on the basis of information about trading in a penny scrip and the AO made addition under section 69 treating the investment as unexplained. The assessee furnished demat account statements, bank statements, purchase contract notes and written submissions before the authorities showing acquisition through recognised brokers and payments through the banking channel, including partial funding by sale of other shares. No adverse material or cogent evidence was produced by the revenue to contradict these documents. Once the assessee discharged the primary onus by producing documentary evidence of source and banking channel payments, the revenue was required to bring specific contrary evidence or make further inquiries before sustaining an addition as unexplained investment. The lower authorities relied on suspicion arising from the nature of the scrip and investigatory information without recording specific findings negativing the documentary evidence.

Conclusion: The addition of Rs. 42,60,406/- under section 69 is not sustainable; the assessee's explanation supported by demat records, bank statements and contract notes satisfactorily explains the investment and the appeal is allowed in favour of the assessee.

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