Assessee invested Rs. 150 crores in a mutual fund scheme of the company JM Balanced Fund. Assessee received a dividend of Rs. 29.92 crores and redeemed units at Rs. 77.24 crores, resulting in a short-term capital loss of Rs. 72.75 crores. Assessee adjusted the short-term capital loss against the long-term capital gain. Assessing Officer disallowed short-term capital loss on the ground that JM Balanced Fund had manipulated accounting methodology so as to artificially inflate distributable surplus and the same was done to enable investors to receive tax-free dividends and simultaneously generate fictitious short-term capital losses for set-off against taxable capital gains. CIT(A) allowed the claim of the assessee. On appeal, the Tribunal held that transactions of purchase and redemption were supported by unimpeachable documentary evidence, including mutual fund folio statements and bank statements and had been duly recorded in regular books of account. Computation of short-term capital loss had been carried out strictly in accordance with section 48, wherein the cost of acquisition and expenses on transfer were deducted from the full value of consideration. Assessee had itself disallowed, under section 94(7), loss to the extent of the dividend component, thereby adhering to statutory disallowance mechanism. There was no SEBI enquiry, and none of the statements of employees of JMBalanced Fund specifically alleged that any manipulation was undertaken with intent to confer a tax benefit upon the assessee. Moreover, the fund was an open-ended, SEBI-approved mutual fund scheme, and there was no material brought on record to suggest that SEBI had suspended, penalised, or debarred this scheme during or after the relevant period. Accordingly the b short-term capital loss could not be disallowed merely on suspicion or on generalised allegations. Since investments were genuine, made through proper banking channels, duly reflected in books, and supported by contemporaneous documentation, the short-term capital loss claimed by the assessee was allowed. Order of CIT A) affirmed. Referred, Goldian International Ltd v. DCIT (ITA No. 3218/Mum/ of 2023 dt-5-4-2024) (AY. 2016-17)