Share transaction genuineness sustained as documentary evidence defeated bogus capital gain and commission additions.

Document analyses an ITAT Delhi ruling on whether share-sale long-term capital gain from Yamini Investment Company Ltd. was a genuine investment transaction or a sham accommodation entry. The Tribunal accepted the assessee's documentary trail, including allotment records, share certificates, demat entries, broker ledgers, STT evidence and bank credits, and found no direct or indirect evidence of cash exchange, collusion, price rigging or entry operations. It held that additions under section 68 could not rest on suspicion or human probability alone. As the primary bogus-gain allegation failed, the consequential commission addition under section 69C also lacked an evidentiary basis and was deleted.

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Issues: (i) Whether the long-term capital gain arising from the sale of shares of Yamini Investment Company Ltd. was a genuine transaction or a sham accommodation entry liable to addition under section 68. (ii) Whether the consequential addition for alleged commission expenditure under section 69C was sustainable.

Issue (i): Whether the long-term capital gain arising from the sale of shares of Yamini Investment Company Ltd. was a genuine transaction or a sham accommodation entry liable to addition under section 68.

Analysis: The assessee produced the allotment letter, share certificates, bank proof of purchase, amalgamation order, demat statements, sale invoices, broker ledgers, STT records and bank credit entries to support the purchase and sale of shares. The Tribunal noted that the Assessing Officer did not bring any direct or indirect evidence of cash exchange, collusion, entry operation, price rigging or any other material connecting the assessee with the alleged penny-stock manipulation. It held that the addition was made on suspicion, assumptions and surrounding circumstances without independent enquiry or corroboration, and that documentary evidence could not be discarded merely on the basis of human probability in the absence of contrary material.

Conclusion: The long-term capital gain was held to be genuine and the addition under section 68 was deleted in favour of the assessee.

Issue (ii): Whether the consequential addition for alleged commission expenditure under section 69C was sustainable.

Analysis: The alleged commission addition was founded only on the premise that the capital gain was bogus. Once the primary addition treating the share sale transaction as sham was rejected, the basis for estimating unexplained commission expenditure also disappeared. No independent evidence was brought on record to show actual payment of commission or any unexplained expenditure by the assessee.

Conclusion: The addition under section 69C was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded in full and the additions arising from the alleged bogus long-term capital gain and supposed commission payment did not survive.

Ratio Decidendi: Where an assessee produces credible documentary evidence of purchase, holding and sale of shares through banking channels and recognised market intermediaries, additions under sections 68 and 69C cannot be sustained on mere suspicion, penny-stock allegations or human probability without independent corroborative evidence linking the assessee to an accommodation entry racket.

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