TaxTMI 
TaxTMI 
2011 (9) TMI 225
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....r the assessment was completed under section 143(3) of the Act on 31st August 2007 again determining the total income at Rs. Nil. Subsequently the assessment was reopened under section 147 after seeking approval of the Additional CIT and a notice under section 148 was issued to the assessee and served on it on 17th September 2009. The reasons recorded under section 148(2) for reopening the assessment are reproduced in paragraph 2 of the assessment order and are not reproduced here for the sake of brevity. In the course of the reassessment proceedings the Assessing Officer took the view that the assessee had wrongly adjusted the speculation loss of Rs. 3,88,489/- on account of Futures & Options (F&O for short) transactions against the short ....
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....section 143(3), the Assessing Officer had issued a letter dated 28th February 2007 to the assessee, a copy of which is at pages 3 and 4 of the paper book. In item number 13 of this letter the Assessing Officer asked the assessee to furnish its explanation as to how the loss in F&O transactions was set off against the short term capital gains, which according to the Assessing Officer was not allowable as per the relevant provisions of the Act. The assessee would appear to have relied on proviso (b) to section 43(5) and contended that the loss arose on account of hedging transactions and therefore cannot be considered as speculation loss. In the assessment order passed on 31st August 2007 under section 143(3), the Assessing Officer allowed th....
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....at the loss in F&O transaction suffered by the assessee was allowed to be set off against the short term capital gains. 5. Section 43(5) defines "speculative transaction". There is a proviso which contains four clauses. Under clause (b), a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations shall not be deemed to be a speculative transaction. In other words, a hedging transaction was not treated as a speculative transaction. Clause (d) of the proviso was introduced by the Finance Act, 2005, with effect from 01.04.2006, i.e. from the assessment year 2006-07. This clause provided that an eligible transaction in respect of....
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....bove clause, a hedging transaction as defined in clause (b) of the proviso continues to be treated as a regular transaction or in other words as a non-speculative transaction. It is true that recognition was accorded to National Stock Exchange only from 25th January 2006 and all transactions in derivatives carried out prior to the said date should be treated as speculative transactions. It is also true that in the assessee's case all the transactions in F&O were prior to the said date. But unless there is some tangible material to doubt the character of the transactions which were accepted as hedging transactions, carried out by the assessee in F&O, the reopening of the assessment cannot be sustained. The Notification of the CBDT according ....