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TMI Blog2003 (7) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... e right, title and interest of the petitioner in the said office premises and car parking spaces for a consideration, which was to be calculated at the rate of Rs. 1,600 per square foot for the office premises and at Rs. 80,000 for each of the car parking spaces. Under clause 2 of the agreement, the consideration was to be discharged in the following manner: Rs. 2,00,000 as earnest money before the execution of the agreement and the balance to be paid at the time of the execution of final document of sale and transfer of the property by the petitioner. It was also provided that if the petitioner puts the bank in possession of the premises before the execution of the final document of sale and transfer, then the bank was to pay to the petitioner 95 per cent, of the total consideration as reduced by Rs. 2,00,000 and the balance of 5 per cent, on the execution of the final document of sale. Clause 3 of the agreement provided that from the date the bank was put in possession of the premises, the bank would be liable to pay the maintenance charges, municipal taxes, cesses and all other outgoings in respect thereof. Clause 5 provided that the sale of the premises would be completed only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or before September 30, 1997. It is the case of the petitioner that in view of the uncertainties prevailing and the fact that the transfer of premises had not been completed, the petitioner in the accounts of the year 1991 had disclosed the amount of Rs. 84,47,111 received by it as a current liability under the heading "Advance against deferred sale of building". Note No. 2 of the notes of accounts forming part of the balance-sheet as on March 31, 1991, reads as under: "The company has entered into an agreement for sale of the above buildings vide agreement dated June 19,1984, which, inter alia, provides that the sale of the said buildings shall be completed only after the period of expiration of five years from the date of the agreement but before the expiration of sixth year at the option of the purchasers to complete the transaction or to rescind the same for a sum of Rs. 85,40,800 plus reimbursement of non-refundable deposits, transfer fees, etc. A sum of Rs. 84,47,111 (being 95 per cent, of consideration agreed upon Rs. 81,13,760 deposits Rs. 1,27,831 and transfer fees Rs. 2,05,520) received from the purchasers have been shown under the head 'Current liabilities' and poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of letter dated November 5,1996. It is the case of the petitioner that respondent No. 1 thereafter completed the assessment for the assessment year 1994-95 by an order, dated December 4, 1996, under section 143(3) and assessed the petitioner to the income returned. It is the case of the petitioner that, therefore, they were shocked and surprised to receive on December 12, 1996 a notice under section 148 dated December 4, 1996, by which respondent No. 1 had recorded that he had reason to believe that the petitioner's income chargeable to tax for the assessment year 1991-92 had escaped assessment and, therefore, proposed to reassess the income for the assessment year 1991-92 and called upon the petitioner to furnish within 30 days from the date of service of the notice a return in the prescribed form. The petitioner by letter, dated January 3, 1997, had called on respondent No. 1 to furnish the reasons recorded by him prior to the issue of the impugned notice dated December 4,1996. The petitioner contends that till date the petitioner has not received any reply to the said notice. The petitioner thereafter filed the present petition on January 13,1997. The petition came up for admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out. It is sought to be pointed out that in view of the proceedings which are pending in the suit filed by the Bank of Maharashtra, the office premises have not been conveyed or transferred to the Bank of Maharashtra. In the prayer clauses in the petition an additional prayer clause (c)(i) has been added to prohibit the respondents, etc., from in any manner taking steps or proceedings pursuant to or in implementation of the impugned demand notices, dated December 6, 1999, March 5, 2003, and summons, dated March 27, 2003. At the hearing of the petition on behalf of respondent No. 1 learned counsel has raised a preliminary objection as to the maintainability of the petition. It is firstly contended that the petitioner has an efficacious alternate remedy available to show cause to the Assessing Officer, as well as an appeal and also a second appeal against the assessment order and in the light of that this court should not exercise its extraordinary jurisdiction. It is also submitted that in the present case, the petitioner has also filed an appeal against the assessment order passed by the Assessing Officer on January 28, 1999, which is pending before the Income-tax Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e where all the questions raised by the appellant could be examined in detail. The High Court also held that the matter as to the exact scope and ambit of the two letters were awaiting decision at the appellate Stage before the income-tax authorities and in that view of the matter, it did not think fit to give expression to any opinion as to the scope of the two letters as that would seriously prejudice either the appellant or the Revenue and, accordingly, dismissed the petition and directed the Income-tax Officer to make inquiry whether the deductions which had been allowed and which were in excess of the limit fixed by the two letters were legal or not. The apex court held on the facts of that case that the High Court erred in not exercising jurisdiction when the facts were all there and law clear on the subject and, accordingly, set aside the order and allowed the appeal as filed by the assessee, the appellant before it. Considering the arguments advanced, in our opinion, it would be inappropriate at this stage after having admitted the petition and further having passed earlier a conditional order directing the Assessment Officer to proceed with the assessment but to make a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaningless. Reliance for the proposition that only extraneous information can be relied upon is placed on the judgment of the Andhra Bank Ltd. v. CIT [1997] 225 ITR 447 (SC). It is then submitted that the position of law pre-1988 and post-1988 is the same qua the fact that there cannot be a change in the opinion on the same facts irrespective of whether an assessment is made under section 143(1) or otherwise. Reliance for that is placed on the judgment of the Full Bench of the Delhi High Court in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1. Reliance is also placed on the judgment of United Electrical Co. P. Ltd. v. CIT [2002] 258 ITR 317 of the Delhi High Court. It is also submitted that the word "notice" which also means information, intelligence, as referred to in Webster's Dictionary and Random's House, also shows that the position post-1988 is pari materia with the old provision of law. The position of the petitioner's return for the assessment year 1991-92 as stated by the respondents in their affidavit-in-reply clearly shows that they were processed in accordance with law and, therefore, there are only two possibilities following from the respondents, assertions, (a) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inconceivable to contemplate that having accepted that there was an agreement for sale coupled with possession in 1984, in respect of the same premises and in respect of the same parties and under the same agreement there could be a fresh agreement to sell coupled with possession in 1991. The reasons itself would show the errors in the officer's reasoning. It is further submitted that section 53A applies where possession already exists in a character other than under the agreement to sell which changes the character and therefore possession must always follow an agreement or change character post agreement. Reliance is placed in the judgment of Sardar Govindrao Mahadik v. Devi Sahai [1982] 1 SCC 237. It is then submitted that letter of June 12,1990, by the Bank of Maharashtra can never amount to an agreement to sell as an agreement by its nature contemplates two parties and shows a meeting of mind for example as to who has to bear the stamp duty, etc. Lastly, it is submitted that as per the recorded reasons the exercise of option by the Bank of Maharashtra does not amount to an agreement to sell as it is a mere letter calling upon the petitioners to complete the formalities of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer was justified in issuing notice under section 147 on the ground that income chargeable to tax escaped assessment under Explanation 2 to section 147, as the assessee had understated the income of Rs. 84,47,111, as current liability, though the transaction in respect of sale of the said premises had been completed on exercising the option by the bank by letter dated June 12, 1990, in pursuance of clause (5) of the agreement, dated June 9, 1984. It is then submitted that by virtue of the amendment to section 2(47) introducing clause (v) with effect from April 1, 1988, transactions under section 53A of the Transfer of Property Act, have been included in the definition "transfer" in relation to capital assets, which has taken place in the present case on June 12, 1990, by exercise of option by the bank which is clearly falling in the assessment year 1991-92. The impugned notice, it is therefore contended, having been issued within four years from the relevant assessment year, was valid in law. Section 147, it is then submitted, as it stood earlier has undergone a radical change after introduction of changes in section 147 with effect from April 1, 1989, whereby the sco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains arose from the sale in the previous year ending March 31, 1948, relevant to the assessment year 1948-49. The apex court held in that case that before section 12B of the Indian Income-tax Act, 1922, could be attracted, title must pass by any of the modes mentioned in section 12B, that is, sale, exchange or transfer. "Transfer" therein meant effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property. A similar view was taken by a Division Bench of this court in India Finance and Construction Co. Pvt. Ltd. v. B.N. Panda, Deputy CIT [1993] 200 ITR 710. In that case agreements were dated April 3, 1967, and April 1, 1982. After the amendment, agreements in the nature of section 53A of the Transfer of Property Act, 1882, can now be assessed for capital gains. A Division Bench of this court in Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491 was considering when section 53A would be attracted consequent to a transaction which had come into force after April 1, 1988, that is, after amendment to section 2(47). The learned Division Bench noted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int CIT [2001] 252 ITR 673 (Bom) was a case where the original assessment was made under section 143(3) and reassessment after four years. The court observed that there should have been failure to disclose material facts necessary for assessment and mere production of balance-sheet or account books would not amount to disclosure of material facts necessary for assessment. No doubt this was relied upon by the Revenue to point out that merely because of the note which was there before the Assessing Officer as disclosed by the petitioner for the assessment year 1990-91, would not amount to disclosure of material facts necessary for assessment. However, what is material to note is the further observation that "reason to believe" has to be a reason of a prudent person. That reason should be fair and not necessarily due to failure of the assessee to disclose fully or partially some material facts relevant for assessment. In Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1, the apex court was considering the words "reason to believe" as then appearing in the Income-tax Act. The apex court held that the belief entertained by the Income-tax Officer must not be arbitrary or irrational. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the court interfered with the notice issued. In Andhra Bank Ltd. v. CIT [1997] 225 ITR 447 (SC) in the matter of assessment year 1958-59 the method of accounting was accepted by the Income-tax Officer. In the matter of assessment for the years 1960-61, 1961-62 and 1962-63, the apex court noted that for exercise of jurisdiction under section 147(b) could only be, when information came from an extraneous source and in that case there was no information available for the Assessing Officer on the basis of which he could reopen the assessment. This was a case of mere change in opinion and, therefore, the assessments had not been validly reopened under section 147(b) of the Income-tax Act, 1961. It is no doubt true that on behalf of the Revenue it was pointed out that section 147 after its amendment has undergone a radical departure from the section as it stood before its amendment. Even if that be so, in our opinion, in so far as the facts of the present case are concerned, we need not go into that aspect, even assuming that the Income-tax Officer could have relied on the letter which he proposed to rely apart from the note, which was forming a part of the balance-sheet and the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are clearly applicable in the assessee's case as the transaction falls within the situation contemplated by section 53A of the Transfer of Property Act, 1882, and has to be treated as transfer on the date of which the bank exercised its option to buy the building, i.e., on June 12, 1990, falling within the assessment year 1991-92. Since the assessee has not offered any capital gains for taxation during the assessment year 1991-92, income to that extent has escaped assessment. Issue notice under section 148 read with section 147 of the Act." From the above what can be seen is that the Assessing Officer has first noticed Schedule "D" forming notes annexed to and part of the balance-sheet as on March 31, 1994. The said notes can be seen from other documents on record and they appear in the balance sheet for the year 1991-92. That note showed an agreement to sell a building dated June 19 1984, for a consideration and on a condition that the sale would be completed only after the fifth year of the agreement and before the expiry of the sixth year at the option of the purchasers and the purchaser can rescind the same on certain consideration. The assessee had received 95 per cent, of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date the Bank of Maharashtra issued notice to the petitioner for specific performance of the contract. For a transaction to amount to transfer within the meaning of section 2(47), the minimum requirements were that there had to be agreement between the parties, signed by the parties, it should be in writing, it should pertain to transfer of property, the transferee should have taken possession of the property, etc. In the instant case none of the requirements as set out in Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491 (Bom) have been satisfied. Therefore, it cannot be said that in 1991-92 an agreement to sell had come into effect/existence. The Assessing Officer could have issued the notice if there was prima facie such material before him to hold that an agreement as contemplated by section 53A had come into existence for the assessment year 1991-92. There was, prima facie, no material at all before the Assessing Officer. It is true that if there was material, this court ordinarily would not exercise jurisdiction. However, in the instant case there was no material for the Assessing Officer to have reason to believe that the agreement to sell had been entered into in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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