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TMI Blog2019 (2) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... der s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act) concerning assessment year 2005-06. 2. As per its grounds of appeal, the assessee has challenged the action of the AO in exercising powers under s. 147 of the Act alleging non-fulfilment of conditions stipulated to invoke jurisdiction under s.147 of the Act. The assessee has also challenged the additions /disallowances on merits. 3. When the matter was called for hearing, the learned AR for the assessee submitted that he does not intend to challenge the order of the authorities below on merits and seeks to primarily restrict its plea on invalid exercise of powers by AO vested under s.147 of the Act. 4. Adverting to the reasons recorded under s.148(2) of the Act, the learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'business income' and the relevant facts in this regard were disclosed before the AO by way of return of income as well as in the course of the scrutiny assessment. It was contended that the AO has subjectively picked up the loss from sale of mutual funds for differential treatment as capital loss whereas the income arising from sale of mutual funds have been readily accepted as 'business income' as offered by the assessee. The AO as per the reasons recorded thus seeks to change the character of income without any sound basis and on a mere change of opinion which is not permissible in law. 6. As regards the second objection, the learned AR submitted that the derivative transactions were treated as business loss and were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout jurisdiction and thus reassessment proceedings are vitiated in law. As the issue hinges around the validity of action under s.147 of the Act, it will be apt to reproduce the reasons recorded under s.148(2) of the Act for invoking jurisdiction under s.147 of the Act: "In this case, the assessee filed return of income on 31.08.2005 declaring total income at Rs. 9,32,692/-. Assessment u/s. 143(3) of the I.T.Act was completed on 10.12.2007 assessing the total income at Rs. 11,26,430/-. As per Section 29 of the I.T.Act, 1961, the income under section 28 of the I.T.Act shall be computed by allowing deduction of expenses as provided in Section 30 to Section 43D of the Act. Expenditure of a capital nature is not admissible as deduction. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esulted into under assessment of Rs. 13,08,578/-with short levy of tax at Rs. 6,36,859/-. I have, therefore, reason to believe that income chargeable to tax has escaped assessment for the Assessment Year 2005-06. Issued notice u/s.148 of the I.T.Act, 1961 for the Asst. Year 2005-06." 9. Two allegations are borne out from the reasons recorded towards alleged escapement of income; firstly, the AO has alleged that loss arising from switch over / sale of mutual funds ought to be regarded as 'capital loss' instead of 'business loss' and therefore is not entitled to be set off against the business income of the assessee. The action of the AO in formation of such belief after the completion of the assessment appears entirely unt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out the circumstances for the change in the stand originally taken at the time of original assessment. Needless to say, the AO is not entitled to exercise power under s.147 of the Act to reopen the completed assessment in a cursory manner. The objectivity in the foundation for formation of belief towards escapement of income must exist. The AO is expected to spell the process by which he entertained the belief for alleged escapement of income. In the present case, the reasons recorded are ostensibly abstract without reference to any material. The assessee in the instant case having disclosed the relevant facts at the time of the original assessment has thus discharged its primary onus. Consequently, the onus was shifted on the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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