Share-sale proceeds cannot be taxed as unexplained income without specific adverse material rebutting documentary proof of genuine transactions.

Share-sale proceeds supported by contract notes, demat records, bank statements and broker documentation could not be treated as unexplained income under section 68 where the revenue produced no specific adverse material linking the assessee or broker to price rigging or accommodation entries. General investigation reports and suspicion were insufficient to displace primary evidence, so the section 68 addition was deleted. The consequential addition under section 69C, being a notional commission on the same transaction, also failed once the principal addition fell and no independent basis for expenditure was shown. The additions for unexplained share-sale income and unexplained expenditure were therefore set aside in favour of the assessee.

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Issues: (i) Whether the addition made by treating the sale consideration from sale of shares as unexplained cash credit under section 68 was sustainable; (ii) whether the consequential addition for unexplained expenditure under section 69C could survive.

Issue (i): Whether the addition made by treating the sale consideration from sale of shares as unexplained cash credit under section 68 was sustainable.

Analysis: The assessee produced contract notes, demat account details, bank statements and other documentary evidence to show purchase, holding and sale of shares through banking channels and through a registered broker. No adverse material specific to the assessee, his broker, or the transaction was brought on record, nor was any independent investigation conducted to connect the assessee with alleged price rigging or accommodation entry activity. In the absence of cogent evidence rebutting the assessee's documentary proof, the sale proceeds could not be brought to tax as unexplained income merely on the basis of general investigation reports or human probability.

Conclusion: The addition under section 68 was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether the consequential addition for unexplained expenditure under section 69C could survive.

Analysis: The addition under section 69C was made as a percentage commission on the same transaction. Once the principal addition treating the share sale proceeds as unexplained income was deleted, the foundation for the alleged commission expenditure also failed. No independent basis for the expenditure addition was established.

Conclusion: The addition under section 69C could not survive and was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded, and the additions made on account of alleged unexplained share-sale income and consequential unexplained expenditure were set aside.

Ratio Decidendi: Where an assessee supports share transactions with primary documentary evidence and the revenue brings no specific adverse material linking the assessee or broker to manipulation or bogus accommodation entries, the transaction cannot be treated as unexplained income merely on suspicion or general investigation findings.

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