Genuineness of claimed expenditure must be independently examined before allowing set-off against capital gains on share transfer.

A claimed selling expenditure set off against long-term capital gains on transfer of shares requires independent verification of its genuineness on the assessee's own facts. Reliance only on the recipient entities being tax assessed, payments moving through banking channels, or absence of incriminating material in their search proceedings is insufficient where the Revenue has highlighted suspicious circumstances. The Tribunal held that the appellate authority had not made a fresh, independent appraisal of the payment and the cancellation arrangement. The matter was therefore remanded to the appellate authority for reconsideration, and the earlier deletion of the disallowance did not attain finality.

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Issues: Whether the deletion of the disallowance of Rs. 7,84,00,000 claimed as selling expenditure while computing long-term capital gains on transfer of shares was sustainable, or whether the matter required fresh examination of the genuineness of the claim.

Analysis: The appellate order had accepted the assessee's explanation mainly on the basis that the recipient entities were tax assessed, the amounts were routed through banking channels, and no incriminating material emerged in search and post-search proceedings in their cases. The Tribunal held that this approach did not amount to an independent examination of the assessee's own claim in the light of the suspicious circumstances highlighted by the Revenue. The genuineness of the payment and the character of the cancellation arrangement required a fresh, independent appraisal on the facts and circumstances of the case.

Conclusion: The deletion was not finally upheld and the issue was remanded to the appellate authority for fresh adjudication.

Final Conclusion: The Revenue succeeded to the extent that the matter was sent back for reconsideration and the earlier relief in favour of the assessee did not attain finality.

Ratio Decidendi: Where the genuineness of a claimed expenditure is in doubt, reliance only on allied proceedings involving the recipient parties is insufficient and the claim must be independently examined on its own facts before allowing deduction.

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