Bogus long-term capital gain claims need cogent evidence linking the assessee to manipulation, not mere suspicion or human probabilities.

Bogus long-term capital gain claims cannot be rejected on suspicion or human probabilities alone where the assessee produces documentary proof of share purchase, dematerialisation, exchange-based sale, banking-channel payments and transaction records. The Revenue must bring cogent material linking the assessee to price rigging, accommodation entries, an entry operator or an exit provider, and must displace the assessee's evidence with specific rebuttal. In the absence of direct material implicating the assessee or its broker, addition under section 68 and denial of exemption under section 10(38) are unsustainable.

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Issues: Whether the addition made under section 68 by treating the sale proceeds of shares as unexplained income and denying exemption on long-term capital gain under section 10(38) was justified.

Analysis: The assessee produced documentary evidence of share purchase, dematerialisation, online stock exchange sale, banking-channel payments, and related transaction records. The tax authorities relied principally on investigation material, SEBI proceedings, and the doctrine of human probabilities to characterise the scrip as a penny stock. However, there was no direct material linking the assessee to any price rigging, accommodation entry, entry operator, or exit provider, and the material relied upon did not specifically implicate the assessee or its broker. In the absence of cogent evidence rebutting the assessee's evidence, the adverse inference could not be sustained.

Conclusion: The addition under section 68 and the denial of exemption under section 10(38) were unsustainable, and the assessee succeeded.

Final Conclusion: The impugned assessment and appellate orders were set aside and the assessee's claim was accepted.

Ratio Decidendi: A claim of bogus long-term capital gain cannot be rejected merely on suspicion or human probabilities unless the Revenue produces cogent material linking the assessee to manipulative or accommodation-entry activity and disproves the documentary evidence of the transaction.

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