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TMI Blog2011 (9) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... the original assessment - The mere fact that the transactions were not delivery based, does not amount to tangible material because even during the original assessment proceedings it was known to the Assessing Officer that these transactions were not delivery based - Unless there is tangible material to show that the character of the F&O transactions is not that of hedging transactions, the reopening of the assessment cannot be sustained. Till such tangible material is available to the Assessing Officer, the reopening is vulnerable to the challenge of being a mere review of the earlier assessment - Therefore, the notice under section 148 has been issued on a mere change of opinion - The reassessment is therefore invalid. - 5356 (MUM.) OF 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore did not permit the same to be adjusted against the short term capital gains or the share trading income. These were separately brought to tax without being reduced by the speculation loss. The taxable income was thus determined at Rs. 2,99,830/-. 3. The assessee filed an appeal before the CIT(A) and challenged the jurisdiction of the Assessing Officer to reopen the assessment. He also questioned the assessment on merits and submitted that the F O loss of Rs. 3,88,489/- cannot be treated as speculation loss as the said loss arose on account of hedging transactions which fell under proviso (b) to sub-section (5) of section 43 of the Act, under which hedging transactions cannot be deemed to be speculative transactions. The CIT(A) di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rified and kept on record". In the reasons recorded for reopening the assessment, the Assessing Officer has referred to a Notification No:2/2006 issued by the CBDT on 25th January 2006, notifying, inter alia, the National Stock Exchange of India as a recognized Stock Exchange for the purpose of section 43(5) with effect from 25th January 2006. Relying on the Notification, the Assessing Officer has expressed a view in the reasons recorded that a F O transaction carried out in National Stock Exchange on or after 25th January 2006 shall not be deemed to be a speculative transaction. According to the Assessing Officer, in view of the amendment to the section which was prospective in nature, all F O transactions carried out prior to 25th January ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction. There is an Explanation below the proviso, which was also simultaneously inserted by the Finance Act, 2005. This Explanation defined an "eligible transaction" and a "recognized stock exchange". The question before me is whether the reasons recorded by the Assessing Officer under section 148(2) could have led him to the reasonable belief that income chargeable to tax had escaped assessment for the assessment year 2005-06. I have already referred to the assessee's contention that the question whether the loss in F O transactions could be set off against the short term capital gains was examined by the Assessing Officer by raising a specific query and it was only on being satisfied by the assessee's reply that it could be set off, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Futures Options transactions are not delivery based and therefore they are covered by the definition of a "speculative transaction" under section 43(5) of the Act. But the Assessing Officer himself has accepted these transactions to be non-speculative in nature and as being hedging transaction within the meaning of clause (b) of the proviso while completing the original assessment. In fact he has raised a specific query on this aspect, which was answered by the assessee and such explanation was accepted by the Assessing Officer in the original assessment proceedings. Tangible material is required to show that this is not a case of a change of opinion on the part of the Assessing Officer. The mere fact that the transactions were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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