Exempt long-term capital gain on shares cannot be disallowed on suspicion alone without specific contrary evidence.

Exempt long-term capital gain on sale of shares was held not bogus where the assessee showed purchase through banking channels, demat entries and sale through the stock exchange. The addition based on investigation reports, third-party statements and general suspicion of penny-stock manipulation failed because no specific adverse material rebutted the assessee's documents or established collusion or routing of unaccounted money. Mere reliance on surrounding circumstances, generalised findings or human probability was insufficient to disallow the claim without reliable contrary evidence. The exemption was therefore allowed.

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Issues: Whether the assessee's claim of exemption for long-term capital gain on sale of shares was bogus and liable to be disallowed as unexplained income.

Analysis: The shares were acquired through banking channels, reflected in the demat account, supported by documentary material, and subsequently sold through the stock exchange. The addition was founded on investigation reports, third-party statements, and surrounding circumstances suggesting penny-stock manipulation. However, no specific adverse material was brought to contradict the assessee's own documents or to establish collusion or routing of unaccounted money by the assessee. In such matters, the claim cannot be rejected merely on suspicion, generalised investigation findings, or human probability without reliable contrary evidence.

Conclusion: The disallowance of exempt long-term capital gain was not sustainable and the assessee's claim was allowed.

Ratio Decidendi: A claim of exempt capital gain cannot be treated as bogus merely on the basis of general investigation findings or human probability when the assessee's documentary evidence of purchase, holding, and sale remains unrebutted by specific contrary material.

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