Section 143(1) intimation is not an assessment and no question of change of opinion

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6758 OF 2004

DEPUTY COMMISSIONER OF INCOME TAX & ANOTHER

VERSUS

ZUARI ESTATE DEVELOPMENT & INVESTMENT COMPANY LIMITED

O R D E R

The admitted facts are that the income tax return filed by the respondent-assessee for the assessment year 1991-92 was accepted under Section 143(1) of the Income Tax Act. After sometime, the assessing officer came to know that there was a sale agreement dated 19.06.1984 entered into between the respondent and Bank of Maharashtra to sell a building for Rs. 85,40,800 on the condition that the sale would be completed only after the five years of the agreement but before expiration of sixth year at the option of the purchaser and the purchaser can rescind the same at certain consideration. After the Bank had paid to the assessee company on 20^th June, 1984 the sum of Rs.84,47,111/-, being 90% of the consideration agreed upon, the Assessee put and handed over possession in part performance of the Agreement of Sale to the Bank on 20^th June, 1984 itself. By letter dated 12^th June, 1990, in terms of clause 5 of the Agreement of sale dated 19.6.1984, the Bank called upon the assessee to complete the transactions and convey the property to the Bank by 18^th June 1990. By a letter dated 16^th June, 1993, the Assessee confirmed that the assessee company had put the premises in possession of the Bank and that the assessee company would take all necessary steps for transfer of the said premises on or before 30^th September, 1993. Even after the said date the Assessee was unable to complete the transaction on the pretext that certain dispute had arisen owing to which the assessee did not complete the transaction. The Assessee’s accounts for the year 1991, had disclosed the amount of Rs.84,47,112/- by it as a current liability under the heading “Advance against deferred sale of building”. In the course of assessment proceedings for the assessment year 1994-95, the Assessing Officer 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. On this basis, notice dated 04.12.1996 under Section 143 read with Section 147 of the Income Tax Act was served upon the assessee on the ground that the assessee had escaped tax chargeable on its income in the assessment year 1991-1992. Challenging the validity of this notice, the respondent preferred writ petition in the High Court of Bombay. The High Court has allowed the writ petition vide the impugned orders which are subject matter of challenge in the present appeal.

After going through the detailed order passed by the High Court, we find that the main issue which is involved in this case is not at all addressed by the High Court. A contention was taken by the appellant-Department to the effect that since the assessee’s return was accepted under Section 143(1) of the Income Tax Act, there was no question of “change of opinion” inasmuch as while accepting the return under the aforesaid provision no opinion was formed and therefore, on this basis, the notice issued was valid.