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2022 (12) TMI 868 - AT - Income TaxDisallowances of bogus trading loss in penny stock as well as commission expenses - whether the script Regency Trust Ltd is penny stock and appearing in the investigation report carried out by Kolkata investigation wing? - HELD THAT:- The trading loss generated by the assessee cannot be held as bogus only on the basis of the modus operandi, generalisation, and preponderance of human probabilities. In order to hold, the income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. The case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. Whether a person who genuinely involved in the trading of scrip of certain company and in the process incurred loss can be disallowed under provision of the Act in a situation where it is established that the share price of the company was rigged up to extend the benefit to certain parties? - Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before me, sometime we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of Regency Trust Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. Respectfully following the judgment of Smt. Krishna Devi [2021 (1) TMI 1008 - DELHI HIGH COURT] hold that the trading loss incurred by the assessee cannot be held bogus merely on the basis of some modus operandi unearthed in case of third party/parties unless some cogent materials are brought against particular assessee on record. Therefore, no reason to disturb the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of Revenue’s appeal are dismissed.
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