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2015 (10) TMI 2048 - AT - Income TaxReopening of assessment - Loss from transactions of mutual fund units - whether a business loss which is allowed to be reduced from other business income and not capital loss - Held that:- The AO has power to reopen provided there is tangible material to come to the conclusion that there is escapement of income from assessment and reasons must have a link with the formation of the belief. In the case in hand, the original assessment was done on the basis of material produced by the assessee before the AO. No new material or information has come into the knowledge of the AO. The view taken by the AO was one of the possible views treating the income/loss on mutual funds as business loss. Such a treatment was given by the AO in the case of assessee in earlier assessment years also. No further evidence or new information has come to the knowledge of the AO for change of his opinion in this respect. Hence, the reopening on the ground that the loss from mutual funds was to be assessed as capital loss was nothing but a change of opinion that too based on surmises and conjunctures and not based on any particular material fact or circumstance which can be considered to be a deciding factor for such a treatment. Second reason regarding the applicability of amended section 94(7) is concerned, we find that the amendment brought by the said section was applicable from the assessment year 2005-06. Even the condition imposed in the said amendment is that if the assessee buys or acquires any securities or units within a period of three months prior to the record date of dividend and sells or transfers such units within a period of nine months after such date, then the loss is to be disallowed. However, we find that during the year under consideration the assessee had not sold or transferred the securities/mutual funds. The loss arrived at by the assessee was on account of diminution in the value of the stock as compared to the market value. The units were lying in the stock of the assessee at the close of the financial year. Under such circumstances, the provisions of section 94(7) were not attracted in this case. So far as the forming of reasons as to the applicability of section 94(7) for the year under consideration is concerned, the same was erroneous as the amended provisions are not applicable for the year under consideration and the reasons of the AO to believe that the income of the assessee has escaped assessment because of the applicability of section 94(7) are fallacious and are not valid and the reopening on the basis of said belief is bad in law. - Decided in favour of assessee.
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