Exchange-recorded F&O trades cannot be treated as bogus loss claims without cogent evidence of fabrication.

F&O loss could not be disallowed merely on suspicion that the trades were fictitious or created to generate artificial loss. The transactions were executed through the exchange platform, carried system-generated time stamps and transaction numbers, and reflected payment of taxes, charges and statutory levies; no adverse finding by the exchange showed the trades to be fraudulent. As the record did not contain cogent material disproving genuineness, reliance on extrapolation from a different period was insufficient. The disallowance was therefore unsustainable and was deleted.

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Issues: Whether the disallowance of F&O loss on the footing that the trades were fictitious and undertaken to generate artificial loss could be sustained.

Analysis: The assessee's transactions were executed through the exchange trading platform and bore transaction time and numbers generated by the system. The materials on record showed that the trades were routed through the regulated exchange mechanism, with applicable taxes, transaction charges and statutory levies paid, and the record did not disclose any adverse finding by the exchange treating the trades as fraudulent. The disallowance rested on suspicion and extrapolation from a different period rather than on concrete evidence disproving the genuineness of the assessee's own transactions. In such circumstances, the allegation that the loss was artificial was not supported by cogent material.

Conclusion: The disallowance of the F&O loss was unsustainable and was deleted in favour of the assessee.

Ratio Decidendi: A trading loss cannot be disallowed merely on suspicion or general allegations when the exchange-recorded transactions and surrounding materials do not establish that the trades were bogus.

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