Documentary proof of share transactions prevailed over penny stock allegations, and the section 68 addition was deleted.

Documentary evidence can sustain exemption on long-term capital gains where shares are shown to have been acquired, held and sold through recognised market channels. The assessee produced a gift deed, demat statements, contract notes, stock exchange transaction details, STT payment proof and bank records, while the Revenue relied mainly on a general report on penny stock operators without specific material linking the assessee to manipulation or a sham transaction. Generalised third-party material, without independent corroboration, could not displace the assessee's documents. As the Revenue failed to rebut the evidence, denial of exemption and addition under section 68 were not sustainable; the addition was deleted.

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Issues: Whether the assessee's claim of exemption on long-term capital gain from sale of shares could be denied and the sale consideration treated as unexplained cash credit, where documentary evidence supported the acquisition, holding and sale of shares through recognised channels.

Analysis: The assessee produced gift deed, demat statements, contract notes, stock exchange transaction details, STT payment evidence and bank records showing acquisition, holding and sale of shares through regular market channels. The addition was based principally on a general investigation report regarding penny stock operators, without any specific material linking the assessee to manipulation, accommodation entry or a pre-arranged sham transaction. Generalised third-party material, in the absence of independent corroboration, could not displace the documentary evidence furnished by the assessee. The fact that the shares were sold through a recognised exchange after more than twelve months and that the sale price was not at the peak market price also supported the genuineness of the transaction.

Conclusion: The assessee had discharged the primary onus and the Revenue failed to rebut the evidence; therefore, the denial of exemption and the addition under section 68 could not be sustained, and the addition was deleted.

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