Tribunal overturns disallowance of derivative loss, citing legal precedent and evidence.

The Tribunal allowed the appeal, deleting the disallowance of the loss on derivative transactions. The Tribunal found the disallowance unjustified and confirmed the genuineness of the claimed loss, following legal propositions established by the Co-ordinate Bench of the Tribunal and the evidence on record.

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Issues:
Disallowed claim on derivative transactions

Analysis:
The appeal was against the order of the Commissioner of Income Tax (Appeals) relating to Assessment Year 2008-09. The Assessing Officer disallowed the claim on derivative transactions, suspecting manipulation due to Client Code Modification (CCM) by the broker. The Assessing Officer sought verification from the stock exchange, which confirmed modifications. The assessee provided contract notes, banking channel payments, and confirmations to establish transaction genuineness. The Assessing Officer applied the theory of human probabilities, citing Supreme Court decisions. The First Appellate Authority upheld the disallowance, emphasizing improbability of human error in all transactions and dismissed the assessee's contentions based on Supreme Court rulings. The Tribunal analyzed a similar case where modifications were permitted by the stock exchange and confirmed genuine transactions based on supporting evidence. The Tribunal emphasized that the order should not be based on surmise and conjecture, citing Supreme Court precedents and directed deletion of the disallowance.

In conclusion, the Tribunal allowed the appeal, deleting the disallowance of the loss on derivative transactions, following the legal propositions established by the Co-ordinate Bench of the Tribunal and the evidence on record. The Tribunal found the disallowance unjustified and confirmed the genuineness of the claimed loss.

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