Unshared and untested third-party statement cannot sustain section 68 addition where share transactions are fully documented.

Addition under section 68 for share sale proceeds could not be sustained where the assessee supported the transactions with demat records, broker ledger, bank statements, contract notes, purchase invoices, share certificates and evidence of securities transaction tax. The alleged adverse third-party statement was not supplied to the assessee, no cross-examination was allowed, and the statement was later retracted, so its evidentiary value was weak. In the absence of material linking the assessee or broker to price rigging or bogus entries, the onus on the assessee was treated as discharged. The exemption claim for long-term capital gain could therefore not be denied.

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Issues: Whether the addition made under section 68 on account of sale proceeds of shares and the denial of exemption of Long-Term Capital Gain were justified when the assessee had furnished documentary evidence of purchase and sale, the adverse statement of the third party was neither supplied nor tested by cross-examination, and the statement stood retracted.

Analysis: The assessee produced demat records, broker ledger, bank statements, contract notes, purchase invoices, share certificates and proof of securities transaction tax, all of which supported the genuineness of the share transactions and showed routing of consideration through banking channels. No material was brought on record to connect the assessee or the broker with price rigging or any bogus entry. The addition rested on the statement of a third party recorded during search, but the assessee was not furnished a copy of that statement and was denied an opportunity to cross-examine the maker. The subsequent retraction further weakened the evidentiary value of that statement. In these circumstances, the onus cast on the assessee stood discharged and the foundation for treating the transaction as bogus failed.

Conclusion: The addition under section 68 was not sustainable and the claim of exemption on the Long-Term Capital Gain could not be denied. The issue was decided in favour of the assessee.

Ratio Decidendi: Where an assessee substantiates a share transaction through contemporaneous banking and market-linked documents, an addition based solely on an unshared and untested third-party statement cannot be sustained, particularly when the statement is subsequently retracted.

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