The main legal point established in the judgment is that the Assessing Officer cannot reopen an assessment based on a mere change of opinion, and there must be tangible material to conclude that the income chargeable to tax has escaped assessment.

Akil Abdul Hamid Kureshi, J.

1. Petitioner has challenged a notice dated 25.03.2015 issued by the respondent Assessing Officer to reopen the petitioner's assessment for the assessment year 2010-11.

2. Brief facts are as under:

3. Petitioner is an individual and is engaged in the business of sale and purchase of land. For the assessment year 2010-11, the petitioner filed the return of income showing total income of Rs. 1.41 crores (rounded off) on 15.10.2010. Such return was taken in scrutiny. The Assessing Officer passed order of assessment under section 143(3) of the Act on 18.01.2013 accepting the petitioner's declaration of total income. To reopen such scrutiny assessment, the Assessing Officer issued impugned notice. For issuing such notice, he has recorded following reasons:

"In this case the assessee filed the return of income on 15.10.2010 showing total income at Rs. 1,41,95,110/-. An order u/s. 143(3) of the IT Act passed on 18.01.2013 determining total income at Rs. 1,41,95,110/-.

Subsequently, on verification of details it is noticed that the assessee has claimed deduction u/s. 54EC of the IT Act at Rs. 1,00,00,000/- for investment made in Bonds of Rural Electrification Board. The deduction was claimed against long term capital gain arising on sale of plots for Rs. 1,67,48,181/-. The assessee has shown the sale of various plots and worked out long term capital gain on such sale treating the plots sold as capital assets.

However, on verification of details filed during the course of assessment proceedings it is noticed that infact the assessee is engaged in the business of real estate. Further scrutiny of accounts also shows that the land sold by the assessee is part of closing stock and therefore the same has to be treated as business income. The maintenance of accounts also shows that the assessee is doing the business of purchase and sale of land. Therefore the net result of sale/purchase of land requires to be taxed as business income as against offered by the assessee, as long term capital gain. The deduction claimed by the assessee u/s. 54EC is also not allowable as the income is to be treated as business income. The total sale value of land sold is Rs. 1,67,48,181/- and the post of acquisition of such land was Rs. 7,83,848/-. Therefore the net consideration of Rs. 1,59,64,333/- is taxable as business income in the hands of the assessee. Since the same has been taxed as long term capital gain and the assessee has been allowed deduction u/s. 54EC which is not allowable on such income, there is under assessment of income to that extent.

I have, therefore, reasons to believe that income chargeable to tax has escaped assessment within the meaning of sec. 147 of the I.T. Act, 1961."

4. Upon receipt of reasons recorded by the Assessing Officer, the petitioner raised objections under a communication dated 07.05.2015. Such objections were followed by further objections dated 30.07.2015. These objections were however rejected by the Assessing Officer by an order dated 19.02.2016. At that stage, the petitioner filed the present petition.

5. Learned counsel Shri R.K. Patel for the petitioner drawing our attention to the materials on record contended that in the reasons recorded, the sole ground pressed in service by the Assessing Officer pertains to the assessee's claim of deduction under section 54EC of the Act on having made investment of Rs. 1 crore in the Rural Electrification Bond. According to the Assessing Officer, the proceeds of Rs. 1.67 crores arising out of the sale of the plot was business income and not capital gain and therefore no deduction under section 54EC could have been claimed. Counsel pointed out that this issue was minutely examined by the Assessing Officer in the original assessment proceedings. Any attempt on his part to revisit the claim would be based on mere change of opinion.

6. On the other hand, learned counsel Shri Desai for the department opposed the petition contending that the Assessing O