F.I. Rebello, J.
1. The petitioner-company carries on business of hiring of plant and machinery. The petitioner had by an agreement, dated June 28, 1982, entered into with Prerna Premises Private Limited, agreed to purchase three office premises, being office premises Nos. 22, 22A and 23 in Maker Chambers III, at Nariman Point, Bombay-400 021, as well as four open car parking spaces, being car parking spaces Nos. 17 to 20, for a total cost of Rs. 28,66,634. It is the case of the petitioner that it subsequently became a member of the Maker Chambers III Premises Co-operative Society Limited. By an agreement, dated June 19,1984, entered into between the petitioner and the Bank of Maharashtra, the petitioner agreed to sell and the bank agreed to purchase from the petitioner all the 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 after the expiry of five years from the date of the agreement but before the expiry of the sixth year from the date of the agreement, time being the essence of the contract. The agreement further provided that the bank would have an option either to complete the transaction or rescind the same and, in the event the bank rescinded the agreement, the petitioner would refund the entire amount that may have been paid by the bank to the petitioner within one year of the rescission on return of possession of the premises by the bank. It was further agreed that the parties would sign such papers and documents as were necessary for completion of the sale on payment of the full purchase price payable by the bank to the petitioner. By clause 9 of the agreement, the bank had agreed that once the bank was put in possession of the premises, they would not sell, transfer, assign, let out or give on leave and licence basis or in any other manner part-with possession of the premises or any portion or portions thereof to anyone else pending completion of the sale. After the bank had paid to the petitioner, on June 20,1984, the sum of Rs. 84,47,111, being 95 per cent, of the consideration agreed upon, the petitioner put and handed over possession in part performance of the agreement of sale to the bank on June 20,1984, itself.
2. By letter of June 12, 1990, in terms of clause 5 of the agreement of sale, dated June 19,1984, the bank called upon the petitioner to complete the transaction and convey the property to the bank by June 18, 1990. It is the case of the petitioner that certain disputes had arisen owing to which the petitioner did not complete the transactions. By letter of June 16, 1993, the petitioner confirmed that the petitioner had put the premises in possession of the bank and that the petitioner would take all necessary steps for transfer of the said premises on or before September 30, 1993. It is the case of the petitioner that even thereafter, the petitioner was unable to complete the transactions and there were demands by the bank on the petitioner to complete the transaction. The rest of the averments regarding the dispute between the bank and the petitioner need not be adverted to. Suffice it to say that the petitioner had also recorded, confirmed and assured the bank that it would take all steps for transfer of the property along with the share certificates 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 possession of the buildings was given to the purchasers on June 20, 1984, and they have-agreed to reimburse the company the outgoings of the said building. The purchasers, though have exercised the option to purchase the same, the execution of the sale and conveyance is not completed pending negotiations with the purchasers and hence no adjustments in this regard have been made in the books of account of the company.'
3. The petitioner filed its return of income for the assessment year 1991-92 on December 31, 1991. Along with the return, the profit and loss account as well as the balance-sheet were also enclosed. The notes on accounts referred to earlier, according to the petitioner, made a full and true disclosure of all the relevant facts. It is the case of the petitioner that till date it has not received any intimation or assessment order from respondent No. 1 in respect of the return of income filed for the assessment year 1991-92. It is the case of the petitioner that thereafter it filed its return for the assessment years 1992-93, 1993-94 and 1994-95, wherein a similar note appeared in the accounts of the respective years.
4. In the course of the assessment proceedings for the assessment year 1994-95, respondent No. 1 raised a query as to why the capital gains arising on the sale of the premises should not be taxed in the assessment year 1991-92. The petitioner in reply to the query filed a detailed letter, dated October 18,1996, wherein the relevant facts were set out exhaustively. It was also pointed out that the amendments brought about in section 2(47) by the insertion of sub-clauses (v) and (vi) were applicable only to transactions entered into after the assessment year 1988-89. The petitioner also pointed out that possession of the premises had been handed over prior to April 1, 1987, the amendment brought about in the definition in section 2(47), therefore, could not be applicable for the assessment year 1991-92. It was also pointed out that the mere exercise of the option by the bank would not result in a transfer as the expression is understood in section 2(47) of the Act. In these circumstances, the petitioner called upon respondent No. 1 to drop the proceedings. It is the case of the petitioner that respondent No. 1 had fixed a hearing on October 29, 1996. The petitioner appeared before the Commissioner and as desired furnished details under cover 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.
5. 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 admission before this court on January 27,1997, on which date, the learned Bench granted rule. However, this court permitted respondent No. 1 to proceed with the assessment but further ordered that the demand, if any, on the basis of such assessment, could be raised only after obtaining an order of this court. The petitioner filed a return of income pursuant to notice, dated February 12, 1997. The petitioner declared Rs. 9,110 in the return as filed. By letter, dated May 12, 1997, respondent No. 1 forwarded a copy of the reasons recorded by him prior to the issuance of notice under section 148. Respondent No. 1 thereafter completed the assessment under section 143(3) read with section 147 by an order dated January 28, 1999. Respondent No. 1 held that on construction of the relevant clauses of the agreement, it was clear that clause 5 was inserted only with a view to avoiding payment of capital gains tax immediately. Respondent No. 1 took the view that till the period the Bank of Maharashtra exercised the option of purchase, the agreement was a leave and licence agreement between the petitioner and the Bank of Maharashtra. He also came to the conclusion that the sale price was fixed not on the rates prevailing on June 19, 1994, but the price which was estimated to be the prevailing price in 1989-90 when the buyer exercised the option. Respondent No. 1 held that the contract to sell the property became effective from June 12, 1990, that is, the date on which the bank exercised its option to purchase the property. Respondent No. 1 also held that the petitioner allowed the buyer to retain the property in part performance from June 12, 1990, and hence the transfer took place in terms of section 2(47)(v) and on that date capital gains were chargeable.
6. The petitioner filed an appeal to the Commissioner of Income-tax (Appeals), on April 19,1999. That appeal was dismissed by order dated August 21, 2000. The petitioner has preferred an appeal against the order of the Commissioner of Income-tax, dated August 21, 2000. Respondent No. 1 thereafter forwarded a demand to respondent No. 3 for recovery of the amount and issued a notice on March 5, 2003. It is the case of the petitioner that it has duly replied to the notice dated March 5, 2003, and the summons dated March 27, 2003. Certain disputes that arose between the Bank of Maharashtra and the petitioner have also been set 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.
7. 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 Tribunal. It is, therefore, submitted that this court should not exercise its extraordinary jurisdiction on the facts and circumstances of the case. Reliance has been placed firstly on the judgment of the Division Bench of the Rajasthan High Court in Rajan Products v. Union of India . In that case the court held that an assessee has an alternative remedy of filing appeal before the appropriate authority provided under the Income-tax Act, 1961, and no cause of action had arisen for the assessee for filing a writ petition. It is in those circumstances that the High Court declined to exercise its extraordinary jurisdiction. Next reliance is placed in the judgment of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 , to contend that when a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the noticee is to file the return and, if he so desires, to seek reasons for issuing the notices. In that case on receiving the notices under section 148, the appellant filed the returns. The appellant also received notices under section 143(2) calling for further information on certain points in connection with the returns. Thereupon the appellant filed writ petitions challenging the notices. The High Court dismissed the writ petitions holding that the petitions were premature and the appellant could raise its objections to the notices by filing reply to the notices before the Assessing Officer.
8. On the other hand, on behalf of the petitioners their learned counsel contends that this court has admitted the petition and once it has admitted the petition, the issue of jurisdiction is alive for consideration by this court and in these circumstances, the mere fact that the respondents were permitted to carry on the assessment proceedings should not result in this court declining to exercise its extraordinary jurisdiction. All these objections were available at the time the petition was filed. This court despite the efficacious alternate remedy available, admitted the petition. Once that be the case the petition shall be disposed of on the merits. Our attention is invited to the judgment of the apex court in the case of Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case the High Court had dismissed the petition on the ground that the petitioner had an alternative remedy available under the statute 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.
9. 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 demand on the basis of such assessment only after obtaining an order from the court, to dismiss the petition on that count after six years. In other words, though the petitioner was directed to go before the Assessment Officer, yet this court retained the jurisdiction to decide the issue as to whether it was open to the assessing authority to issue the notices. In our opinion, on the facts of the present case, the fact that the petition was entertained even though the petitioner had an efficacious alternative remedy, it would be too late in the day, to tell the petitioner to proceed with the appeal before the Income-tax Appellate Tribunal as the authorities have already held against the petitioner if we find that the notices issued are without jurisdiction. The preliminary objection raised by counsel for the respondents has to be rejected.
10. Coming to the merits of the matter, on behalf of the petitioner, it is submitted that the reopening for the reasons recorded are erroneous and bad in law. It is firstly contended that for re-opening an assessment, the Assessing Officer must have valid 'reasons to believe', which reasons must have a rational and direct nexus and be intelligible and acceptable in law and not amount to a change of opinion. Reliance for that is placed on the judgment of the apex court in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . Reliance is also placed on the judgment of the apex court in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . It is then submitted that it is the duty of the assessee only to disclose primary facts and not inferences and for that purpose reliance is placed on the judgment of CIT v. Mangilal Dhanraj : [1985]155ITR71(Bom) of this court and the case of Chemicals and Fibres of India Ltd. v. M. K. N. Pillai : [1984]146ITR280(Bom) again of this court. It is then submitted that under the scheme of the Act for there to be a valid re-opening, information must come from extraneous source. Otherwise, irrespective of whether an assessment is made or not, it would mean that where a return has been processed under section 143(2) and found by the then officer not to have understated any income on the basis of the very same documents, reassessment under section 147 can be made on the same grounds that the assessee had understated the income. This would render the limitation contemplated by the Act under section 143(2) totally 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]225ITR447(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) summary assessment made under section 143(l)(a) on the petitioner but no section 143(2) notice issued as the then Assessing Officer was of the opinion that the assessee has not understated its income on examination of the return of income, and (b) no summary assessment under section 143(l)(a), but the Assessing Officer still not exercising his rights under section 143(2) and thus, obviously satisfied that in the return of income that there was no understatement of income. In either case it is contended that the exercise in 1996 was an attempt to invoke the jurisdiction based on the same documents from the return of income clearly discloses change of opinion on the same facts and must be held to be contrary to law. Reference is placed on the Central Board of Direct Taxes circular, which has been considered in the judgment of the Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 .
11. It is then submitted that the reasoning of the officer that sub-clause (v) of section 2(47) would apply is erroneous for the following reasons : (1) in respect of premises of a co-operative society represented by shares of the society sub-clause (v) has no application and for there to be a valid transfer there must be a transfer of shares of a society and thereafter sub-clause (vi) of section 2(47) would apply. Reliance is placed on the circular explaining the provision at the time of introduction of sub-clauses (v) and (vi) issued by the Central Board of Direct Taxes ; (2) when the officer himself accepts in the reasons for re-opening that the agreement to sell coupled with possession as contemplated in section 53A is done in 1984 when sub-clause (v) was not on the statute, the question of that sub-section applying does not arise; (3) option exercised by the purchaser is merely to complete formalities to sell, it does not amount to an agreement to sell for the following reasons, namely, that for a valid agreement under section 53A it must be signed by the transferor, it should be a contract for consideration, should be in writing and the transferor should deliver possession subsequent to the agreement for sale. Reliance for that is placed on the judgment of the Division Bench of this court in Chaturbhuj Dwarkadas Kapadia v. CIT : [2003]260ITR491(Bom) and also of the apex court in Mool Chand Bakhru v. Rohan : [2002]1SCR702 . It is then submitted that it is 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]2SCR186 . 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 sale. Prior to the amendment in section 2(47)(v) in respect of immovable property, an agreement to sell coupled with possession without execution of a conveyance did not amount to a transfer under the Income-tax Act rendering income chargeable to tax under the head 'Capital gains'. Reliance is placed on the judgment of Alapati Venkataramiah v. CIT : [1965]57ITR185(SC) and India Finance and Construction Co. Pvt Ltd. v. B. N. Panda, Deputy CIT : [1993]200ITR710(Bom) .
12. On the other hand, on behalf of the respondent Revenue, it is contended that the present case is not a case of issuing of notice after scrutiny assessment under section 143(3), but non-scrutiny assessment under section 143(1) and as such the extended period of limitation is available under section 149 of the Income-tax Act and, in any case, it has been exercised within 4 years from the end of the relevant assessment year, that is, within four years from 1991-92. It is then submitted that the petitioner has not disclosed any jurisdictional error committed by the Assessing Officer while issuing the impugned notice and as such the challenge for quashing the impugned notice does not survive. Learned counsel then points out that in view of the amendment to section 2(47) of the Income-tax Act, introducing clause (v) any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a contract under section 53A of the Transfer of Property Act and in view of option exercised by the Bank of Maharashtra by letter dated June 12, 1990, exercising their option to complete the sale in respect of the said premises in pursuance of clause (5) of the agreement dated June 19, 1984, and in the light of the admitted position by the petitioner by letter dated June 16, 1993, confirming to take steps before September 30, 1983, the transaction is deemed to have been completed on exercise of option by the bank under sub-clause (v) to section 2(47) of the Income-tax Act. It is, therefore, submitted that the Assessing Officer was justified in reassessing the income of the assessee by issuing notice under section 147 read with section 149(1) and hence the impugned notice is valid. The next submission is that the assessee had filed returns for the assessment year 1991-92 which was processed as non-scrutiny assessment under section 143(1) of the Income-tax Act. The 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 scope of reassessment has been widened and the only restriction put in the amended section is 'reason to believe' by the Assessing Officer, who can exercise the powers to reopen assessment within four years. Dealing with the amendments as carried out, it is submitted that the petitioner is seeking to convert the present petition into an appeal, requiring this court to go into the merits of the case, which is not permissible except by second appeal under section 260A of the Income-tax Act, only on substantial question of law, which the petitioner has done.
13. In the light of the above, it will have to be decided whether before the Assessing Officer there was material to hold that he had reason to believe, while issuing to the petitioner the notice dated December 4, 1996. In the instant case there is no dispute that the petitioner is sought to be assessed for capital gains on the ground that there was an agreement of sale entered into by the petitioner and-the Bank of Maharashtra. The agreement of sale was not falling within the ambit of section 2(47) of the Income-tax Act when entered into. Section 2(47) of the Income-tax Act came to be amended by the Finance Act, 1987, with effect from April 1, 1988. Two sub-clauses were added, namely, (v) and (vi) of which sub-clause (v) reads as under :
'(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882).'
14. The position before the amendment is as can be seen from the judgment of the apex court in the case of Alapati Venkataramiah v. CIT : [1965]57ITR185(SC) . In that case an agreement was entered into on March 17,1948, with one V to sell all assets for a consideration. On March 17, 1948, the appellant handed over possession of the land and buildings and machinery to the company. On March 20,1948, the company credited the sum of Rs. 2 lakhs in its accounts in favour of the appellant and the appellant also made appropriate entries in his own account books. The sale deed in respect of the land was executed in favour of the company on November 22, 1948. The agreement was approved by the board of directors of the company only on March 16, 1949, and by the shareholders of the company at a general meeting on April 10,1949. The question was whether capital 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]200ITR710(Bom) . 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]260ITR491(Bom) 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 order to attract section 53A, the following conditions need to be fulfilled : (1) there should be a contract for consideration ; (2) it should be in writing ; (3) it should be signed by the transferor; (4) it should pertain to transfer of immovable property ; (5) the transferee should have taken possession of the property ; and (6) the transferee should be ready and willing to perform his part of the contract. In Mool Chand Bakhru v. Rohan : [2002]1SCR702 the apex court was considering Whether certain letters exchanged between the parties would amount to an agreement to sell. In that case there was an oral agreement to sell, by exchange of letter by the appellant one M to B. The apex court noted that that could not be termed as an agreement to sell. At the most it was an admission of an oral agreement to sell and not a written agreement. The apex court went further to hold that under section 53A of the Transfer of Property Act, the emphasis is not on a written agreement only. In addition, the emphasis is on the terms of the agreement as well which can be ascertained with reasonable certainty from the written document. The apex court on the facts of that case held that there was no meeting of minds. Admission made by M of an oral agreement to sell did not spell out the other essential terms of the agreement to sell such as the time-frame within which the sale deed was to be executed and as to who would pay the registration charges, etc. Considering that the apex court held that the letters written by M cannot be taken to be an agreement to sell within the meaning of section 53A spelling out the terms of an agreement for sale.
15. Having seen what is required under section 53A of the Transfer of Property Act, let us now examine whether there was material before the Assessing Officer for 'reasons to believe' that the income chargeable with tax has escaped assessment for any assessment year. The question then is what is the meaning of the expression 'reason to believe'. It is no doubt true as is pointed out by the Revenue relying on the judgment of Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) that there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at the stage of issuing of notice. In Dr. Amin's Pathology Laboratory v. P.N. Prasad, Joint CIT : [2001]252ITR673(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]130ITR1(SC) , 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. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on the facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) was a case of reopening of assessment of the assessment years 1971-72, 1972-73 and 1973-74 under section 148 of the Income-tax Act. Two grounds were mentioned for reopening the assessments for the assessment years 1971-72 and 1973-74. One of the grounds raised was that in the regular assessments, the Income-tax Officer had wrongly allowed excess deduction of pro rated home office expenses and service charges and that the deduction which was permissible could only be allowed to the extent mentioned in letters dated May 4, 1973, and November 6, 1974, of the Government of India, Department of Economic Affairs, to the appellant. Dealing with these letters, the apex court held that the embargo so placed by these two letters had nothing to do with the amount of disallowances under the Income-tax Act. The court further proceeded to hold that, that could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under section 147(a) or section 147(b) of the Act on the ground that it would be 'in consequence of information'. In CIT v. Mangilal Dhanraj : [1985]155ITR71(Bom) a Division Bench of this court noted that what is the duty of the assessee was to disclose relevant facts. In that case the facts had been disclosed and in those circumstances, the court interfered with the notice issued. In Andhra Bank Ltd. v. CIT : [1997]225ITR447(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 statement of account. A Full Bench of the Delhi High Court considering section 147 after its amendment in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1, after reviewing several judgments, considered the circular issued by the Central Board of Direct Taxes, wherein it was set out that the mere change of opinion cannot form the basis of re-opening a completed assessment. Another Division Bench of the Delhi High Court in the case of United Electrical Co. P. Ltd. v. CIT [2002] 258 ITR 317 observed that when a challenge is made to an action under section 147, what the court is required to examine is whether some material exists on record for the Assessing Officer to form the requisite belief and the reasons for the belief have a rational nexus or a relevant bearing to the formation of such belief and are not extraneous or irrelevant for the purpose of that section.
16. Therefore, having considered the law as it stands, the question now would be whether, on the facts of this case, the Assessing Officer was right in issuing the notice, which is impugned. The reasons for reassessment are as under :
'It is noticed from Schedule 'D' forming notes annexed to and part of the balance-sheet as at March 31, 1994, enumerating significant accounting policies that as per note 2 the assessee entered into an agreement to sell a building dated June 19, 1984, to the Bank of Maharashtra for Rs. 85,40,800 on the condition that the sale will be completed only after the fifth year of the agreement but before the expiration of the sixth year at the option of the purchasers and the purchaser can rescind the same at certain consideration. The assessee has received 95 per cent, of the consideration and also has given possession of the property to the purchasers. During the course of the assessment proceedings for the assessment year 1994-95 it was gathered that the purchaser has on June 12, 1990, i.e., before the expiry of the sixth year of the original agreement has exercised the option given in that agreement to purchase the property and requested the assessee to complete the formalities of conveying the property to them before June 18,1990. However, the conveyance is not yet drawn and the assessee has also not offered the capital gains on sale of the building in any assessment year. In my opinion the provisions of sub-clause (v) in the definition of transfer under section 2(47) 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.'
17. 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 the consideration and had also given possession of the property to the purchaser. During the course of the assessment proceedings for the assessment year 1994-95 it was gathered that the purchaser had on June 12,1990, that is, before the expiry of the sixth year of the agreement exercised the option to complete the conveyance of the property to it before June 18,1990. The reason then shows that no conveyance was drawn up and the assessee has also not offered the capital gains on sale of the building in any assessment year. The Assessing Officer then proceeded that in his opinion the provisions of sub-clause (v) in the definition of transfer under section 2(47) are clearly applicable in the assessee's case. Therefore, what the respondent Assessing Officer proceeded was based on the agreement of June 19, 1984, and the fact that the purchaser had on June 12, 1990, exercised his option to purchase and to complete the formalities of conveyance.
18. Two things emerge from this, firstly, based on this material, could it be said that any prudent or reasonable person, reasonably instructed in law, could have come to the conclusion that an agreement as contemplated by section 53A of the Transfer of Property Act had been entered into for the assessment year 1991-92 and secondly, whether, even if an agreement had been entered into, the predicates of section 2(47) as noted by this court in the judgment in the case of Chaturbhuj Dwarkadas Kapadia v. CIT : [2003]260ITR491(Bom) were met In the first instance there is no dispute that the only agreement between the parties is an agreement of 1984. In the agreement under clause (5) the conveyance was agreed to be completed after the expiry of the fifth year and before the expiry of the sixth year from the date of the agreement. At the relevant time, considering the clause in the agreement, to take possession by paying 95 per cent, of the consideration, the Bank of Maharashtra paid to the petitioners 95 per cent, of the consideration and the petitioners also put the Bank of Maharashtra in possession. It is pursuant to this agreement of 1984 that the Bank of Maharashtra continued to be in possession. Clause 5 by itself gave an exercise of option to the purchaser to call on the petitioner to specifically perform the contract cannot by any stretch of imagination be said to mean and include that a contract -had come into existence on the 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]260ITR491(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 assessment year 1990-91, which had escaped assessment.
19. In our opinion, therefore, the entire exercise of jurisdiction by the Assessing Officer is without jurisdiction. Once that be the case, the notice issued will have to be quashed. It is true that in the meantime orders have been passed including in the appeal but, in our opinion, those orders will have to be set aside, as being orders without jurisdiction.
20. In the light of that rule is made absolute in terms of prayer clauses (a) and (b) as also prayer clause (c)(i). In the circumstances of the case there shall be no order as to costs.