Penny stock capital gains and human probabilities test led to treatment of share profits as unexplained income.

Alleged long-term capital gain from share transactions was treated as non-genuine and taxed as unexplained income under section 68 where investigation material, abnormal price rise in the scrip, and surrounding circumstances outweighed demat statements, contract notes, and account records. The Tribunal applied the settled human probabilities test and held that penny stock dealings with unusual price movements may be disregarded as sham transactions despite documentary support. The addition under section 68 was therefore upheld in favour of the Revenue.

---

---

Issues: Whether the alleged long-term capital gain arising from the share transactions was genuine or liable to be treated as unexplained income under section 68.

Analysis: The assessee produced demat statements, contract notes, and account statements, but the addition was made on the basis of investigation findings, abnormal price appreciation in the scrip, and the surrounding circumstances of the transactions. The Tribunal relied on the settled principle that apparent transactions may be examined on the touchstone of human probabilities and that penny stock dealings accompanied by unusual price movements and supporting investigation material can be held to be non-genuine.

Conclusion: The alleged long-term capital gain was held to be bogus and the addition under section 68 was upheld in favour of the Revenue.

---