TMI Blog2019 (2) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment appears entirely untenable in the facts and the context of the case. As pointed out on behalf of the assessee, we notice that the assessee has both earned income as well loss on sale of mutual funds. The loss transaction from sale of mutual funds thus cannot be given a differential treatment and singled out from other transactions similarly placed. The AO has not assigned and reasons for do so. It is clearly an unjust act in the circumstances. The belief for escapement of income is thus a pretense and is not sustainable in law. As advert to the second ground for alleged escapement of income i.e. the future contracts of derivative nature in stock market are alleged to be of speculative nature allegation has been made after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee against the order of the Commissioner of Income Tax (Appeals)-II, Baroda ('CIT(A)' in short), dated 06.12.2013 arising in the assessment order dated 25.06.2010 passed by the Assessing Officer (AO) under 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the process, the assessee has earned income to the tune of ₹ 11,92,648/- and also incurred losses amounting to ₹ 4,43,934/-. The assessee has disclosed the profit as well as the loss from sale of mutual funds under the head '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing any fresh material on record. 8. We have carefully considered the rival submissions. The assessee has challenged the premise of action taken by the AO. The AO, in essence, has alleged that notice issued under s.148 of the Act is without 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 ₹ 9,32,692/-. Assessment u/s. 143(3) of the I.T.Act was completed on 10.12.2007 assessing the total income at ₹ 11,26,430/-. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be set off against any other income except from speculation income. In view of the above facts and provisions of the Act, the loss of ₹ 13,08,578/- charged to the profit and loss account was required to be disallowed and added to the total income. This resulted into under assessment of ₹ 13,08,578/-with short levy of tax at ₹ 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 fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the original assessment was not without any basis. The decision of the co-ordinate bench of Tribunal in R.B.K. Securities (supra) supports the action of the AO in holding the derivative loss to be a business loss. The AO while recording reasons under s.148(2) of the Act has not 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 pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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