Documentary evidence defeated alleged bogus long-term capital gains claim where suspicion and general investigation material were insufficient.

Long-term capital gains exemption on share sale was sustained where the assessee proved purchase through banking channels, demat records, contract notes, bank statements and sale through a recognised stock exchange. The Revenue relied mainly on general investigation material, alleged penny stock manipulation and price rise, but produced no direct evidence linking the assessee to any entry operator, broker misconduct or sham arrangement, and no independent enquiry rebutted the documentary trail. On these facts, the addition for alleged bogus capital gains and unexplained expenditure did not survive, and the deletion of the addition was upheld.

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Issues: Whether the deletion of addition made on account of alleged bogus long-term capital gains and unexplained expenditure in share transactions was justified.

Analysis: The Revenue challenged the relief granted by the first appellate authority in respect of the assessee's claim of exemption on sale of shares. The record showed that the shares were acquired through banking channels, reflected in the demat account, held for the requisite period, sold through a recognised stock exchange, and supported by contract notes and bank statements. The addition was founded mainly on general investigation material, alleged penny stock manipulation, and suspicion arising from the rise in share price. No direct material connected the assessee with any entry operator, broker misconduct, or sham arrangement, and no independent enquiry rebutting the documentary evidence was brought on record. The appellate authority's view was consistent with prior decisions on the same scrip and similar facts, where the claim was accepted in the absence of cogent contrary evidence.

Conclusion: The deletion of the addition was upheld and the Revenue's challenge failed.

Final Conclusion: The assessee's claim of exempt long-term capital gains remained accepted, and the additions made by the Assessing Officer did not survive.

Ratio Decidendi: A claim of long-term capital gains cannot be rejected merely on suspicion or general investigation reports when the assessee's transaction is supported by primary documentary evidence and the Revenue fails to adduce cogent material showing the transaction to be sham.

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