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A fine judgment is rendered by the Delhi Tribunal in 80ITR (Trib) 436 holding as genuine a loss incurred in business due to oral cancellation of orders. In a landmark observation it holds good a principle fact that in the business transactions it is not necessary that all the transactions should be proved by documentary evidence.

The AO in this case alleged that the assessee has created documentary evidence in pre- planned manner for creating business loss to offset the short-term capital gain. According to the Assessing Officer, Income-tax liability is ascertained on the basis of the material available on record, surrounding circumstances, human conduct and preponderance of the probabilities and in such clandestine operations and transactions, it was impossible to have direct evidence or demonstrative proof of every move.

If as per the Assessing Officer the pattern and language of the orders/correspondence between the assessee and these parties are similar is no ground to reject their explanation as per the ITAT.

It further held that the reasons given by the Assessing Officer are merely a presumption which could not reject the explanation of the assessee that he has suffered genuine business loss. The assessee furnished a copy of the invoices and ledger account in support of the above explanation. Therefore, the documentary evidence which have not been rebutted by the Assessing Officer could not have been disbelieved by the Assessing Officer on irrelevant reasons.

This case argued is of much significance today as a defense to prove the Bona fides of the explanation made in the faceless assessment world.

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