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2006 (7) TMI 147 - HC - Income TaxAssessee purchased units of mutual funds on February 9, 2001, and sold them on February 11, 2001. Although it received the declared dividend of Rs. 43,54,838 yet he suffered an overall loss. The assessee adjusted its short-term capital loss against long-term capital gains and the return was accepted by the Assessing Officer under section 143(3) – CIT u/s 263, revised the assessment on the ground that the assessee had resorted to a colourable device to evade tax, knowing fully well that it was going to incur a loss on sale of the mutual funds. In her decision dated. March 15, 2005, the Commissioner described the transaction of the assessee as "dividend stripping", - disallowance of a loss under section 94(7) of the Act in respect of such a transaction was effective only from the assessment year 2002-03, while we are concerned with the assessment year 2001-02. There was, therefore, a gap in the law which appears to have been exploited by the assessee. The Legislature appears to have recognised the lacuna and taken steps to rectify it. But that does not mean that the decision of the Assessing Officer based on the law as it was can be said to be erroneous – since is nobody's case that the sale and purchase of the mutual funds was not at the market price, revenue appeal is dismissed
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