2026 (4) TMI 108 - AT - Income Tax

Unexplained share sale additions fail where banking, demat and stock exchange records support genuineness without assessee-specific evidence.

Additions under section 68 for share sale proceeds were unsustainable because the transactions were supported by banking records, long holding, stock ... Unexplained cash credit u/s 68 - Genuineness of share transactions - Consequential unexplained expenditure - allegation of sham accommodation-entry transaction - holding of shares was more than three years HELD THAT: - The Tribunal found that the assessee had acquired the shares through cheque payment, held them for more than three years, and sold them through the stock exchange. It further found that the AO had brought no material on record to connect the assessee with any alleged tainted parties or entry operators, and that the assessee's name did not figure in the SEBI orders. Tribunal accepted the reliance placed on Sujit Madan [2025 (1) TMI 1287 - ITAT DELHI] where the same scrip had been examined and treated as genuine. On that basis, the addition u/s 68 could not survive, and the commission addition under section 69C, being consequential to the alleged accommodation entry, also failed. [Paras 8] The Revenue's challenge to the deletion of the additions under sections 68 and 69C was rejected. Final Conclusion: The Tribunal dismissed the Revenue's appeal and affirmed the order deleting the additions under sections 68 and 69C. It held that, in the absence of material linking the assessee to any accommodation-entry arrangement, the share transactions could not be treated as non-genuine. Issues: (i) whether the addition made under section 68 of the Income-tax Act, 1961 on account of sale proceeds of shares was sustainable in the facts of the case; (ii) whether the consequential addition under section 69C of the Income-tax Act, 1961 towards commission expenditure was sustainable.Issue (i): whether the addition made under section 68 of the Income-tax Act, 1961 on account of sale proceeds of shares was sustainable in the facts of the case.Analysis: The transaction was supported by purchase through banking channels, holding of shares for more than three years, sale through a recognised stock exchange, and demat records. The Revenue relied principally on a general investigation report regarding manipulation in the scrip, but brought no material to connect the assessee with any entry operator, tainted party, or rigging activity. The assessee's name did not figure in the adverse material, and no independent enquiry or contrary evidence was shown to discredit the documentary trail.Conclusion: The addition under section 68 was not sustainable and was rightly deleted.Issue (ii): whether the consequential addition under section 69C of the Income-tax Act, 1961 towards commission expenditure was sustainable.Analysis: The commission addition was made only as a consequence of the alleged accommodation-entry addition under section 68. Once the underlying addition was found unsustainable, the basis for treating any commission as unexplained expenditure also disappeared.Conclusion: The addition under section 69C was not sustainable and was rightly deleted.Final Conclusion: The Revenue failed to establish that the share transactions were non-genuine or that the assessee had obtained accommodation entries, and both additions were deleted.Ratio Decidendi: A general investigation report, any assessee-specific link or independent corroborative evidence, is insufficient to sustain additions for unexplained share sale proceeds or consequential commission where the transaction is supported by banking, demat, and stock exchange records.