Genuine share-trading loss allowed where exchange-based transactions and banking trails outweighed unconnected penny stock allegations.

Share-trading loss was held genuine where transactions were executed through the stock exchange, payments were routed through banking channels, and neither the assessee nor its broker appeared in the investigation material. The Tribunal found no basis to infer participation in a colourable penny stock scheme merely because other market operators were alleged to have manipulated prices elsewhere. As the facts were materially different from cases involving off-market dealings or broker admissions, the loss was treated as arising in the regular course of business and was allowable for set-off against business income.

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Issues: Whether the loss claimed on share trading transactions was liable to be disallowed as arising from non-genuine and fictitious penny stock dealings, and whether such loss was eligible for set-off against business income.

Analysis: The assessee was an active stock-market trader with substantial turnover, and the disputed transactions were carried out through the stock exchange with payments made through banking channels. The assessee's name and its broker's name did not appear in the investigation reports relied upon by the revenue. The Tribunal held that the surrounding circumstances did not justify a finding that the assessee had participated in any rigging or colourable scheme merely because some market operators were alleged to have manipulated share prices elsewhere. The factual matrix was found materially different from cases involving off-market transactions or broker admissions of manipulation, and the loss was considered to have arisen in the regular course of business.

Conclusion: The loss was held to be genuine and allowable for set-off against regular business profit, and no interference with the appellate relief was warranted.

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