Reassessment based on borrowed satisfaction and genuine share trade evidence led to deletion of unexplained credit and commission additions.

Reassessment beyond four years based only on Investigation Wing material and without independent enquiry was invalid because the reasons showed borrowed satisfaction, no tangible material, and no specific failure to disclose primary facts; the reassessment orders were quashed. Additions treating share sale proceeds as unexplained credits and related commission as unexplained expenditure were also unsustainable because the assessees produced contract notes, demat and bank records, broker ledgers and STT evidence, the transactions were accepted as genuine, and taxing the same sale consideration again would result in double addition; the section 68 and 69C additions were deleted.

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Issues: (i) Whether reassessment initiated beyond four years, on the basis of Investigation Wing information and without independent enquiry, was valid; (ii) whether the additions treating share sale proceeds as unexplained credits and the related commission as unexplained expenditure were sustainable.

Issue (i): Whether reassessment initiated beyond four years, on the basis of Investigation Wing information and without independent enquiry, was valid.

Analysis: The original assessments had been completed under section 143(3) of the Income-tax Act, 1961 after examination of the relevant facts. The reasons recorded for reopening were founded on general Investigation Wing material relating to penny stock scripts, without specific material linking the assessees to any accommodation entry or showing any independent application of mind. In the cases where reopening was beyond four years, the reasons also failed to identify any specific primary fact that had not been fully and truly disclosed by the assessees. The reopening was thus held to rest on borrowed satisfaction, lacking tangible material and the necessary live link with alleged escapement of income.

Conclusion: The reassessment proceedings were invalid and the consequent reassessment orders were quashed, in favour of the assessees.

Issue (ii): Whether the additions treating share sale proceeds as unexplained credits and the related commission as unexplained expenditure were sustainable.

Analysis: The assessees had furnished contract notes, demat statements, bank records, broker ledgers, STT evidence and other contemporaneous documents to support the share transactions. The Tribunal found that the sale proceeds had already been taken into account in the declared capital gains or losses, and therefore taxing the entire sale consideration again would amount to double addition. It also found that the Revenue had not produced any specific material showing the assessees as beneficiaries of the alleged penny stock scheme, and no defect was established in the documentary evidence. Once the share transactions were accepted as genuine, the consequential commission additions could not survive.

Conclusion: The additions under sections 68 and 69C were deleted, in favour of the assessees.

Final Conclusion: All the connected appeals were allowed, with both the reassessment jurisdiction and the substantive additions set aside.

Ratio Decidendi: Reassessment cannot be sustained on general investigative allegations without independent application of mind, specific material linking the assessee to escapement of income, and compliance with the statutory preconditions where reopening is beyond four years; once genuine share transactions are supported by primary evidence, the same sale proceeds cannot again be brought to tax as unexplained credits and no consequential commission addition can survive.

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