Court quashes assessment notice based on impermissible change of opinion. Assessing Officer's decision upheld.

The court quashed the notice for reopening the assessment, as it was based on a change of opinion, which is impermissible. The Assessing Officer had already considered and accepted the income as capital gain during the original assessment. The court concluded that the reasons for reopening the assessment were not justified, and the petition was allowed, leading to the quashing of the notice.

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Issues Involved:
1. Validity of the notice for reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Whether the income from the sale of land should be treated as capital gain or business income.
3. Whether the reopening of the assessment is based on a change of opinion.
4. Compliance with Section 45(2) of the Income Tax Act, 1961.
5. Entitlement to deductions under Sections 54EC and 54G of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the Notice for Reopening the Assessment:
The petitioner challenged the notice dated 25.3.2013 issued by the Assessing Officer for reopening the assessment for the Assessment Year 2008-09. The original assessment was framed under Section 143(3) of the Income Tax Act, 1961. The notice was issued within four years from the end of the relevant assessment year. The reasons recorded for reopening were based on the conversion of factory land into stock-in-trade and the subsequent sale of plots, which the Assessing Officer believed should be treated as business income rather than capital gain.

2. Treatment of Income from Sale of Land:
The petitioner argued that the land was held as a capital asset and later converted into stock-in-trade on 10.4.2006. The profit on the difference between the fair market value on the date of conversion and the cost of acquisition was treated as capital gain under Section 45(2) of the Act. The Assessing Officer, during the original assessment, had considered this and treated the surplus as capital gain. The petitioner contended that any attempt to treat this income as business income was incorrect and unsupported by Section 45(2) of the Act.

3. Reopening Based on Change of Opinion:
The petitioner contended that the reopening of the assessment was based on a change of opinion, which is not permissible. The original assessment had thoroughly scrutinized the issue of whether the income should be treated as capital gain or business income. The Assessing Officer had raised specific queries, and the petitioner had provided detailed responses. The Assessing Officer had accepted the petitioner's claim of treating the income as capital gain and had only disallowed the deduction under Section 54G. The court agreed with the petitioner, stating that the reopening was indeed based on a change of opinion, which is not allowed.

4. Compliance with Section 45(2):
The petitioner argued that under Section 45(2) of the Act, the income up to the point of conversion should be treated as long-term capital gain. This section provides that the capital gain arising from the conversion of a capital asset into stock-in-trade is chargeable in the year the stock-in-trade is sold. The court noted that the Assessing Officer had considered this during the original assessment and had accepted the petitioner's claim of capital gain. Therefore, the reopening on this ground was not justified.

5. Deductions under Sections 54EC and 54G:
The petitioner had claimed deductions under Sections 54EC and 54G of the Act. The original assessment had disallowed the deduction under Section 54G on the grounds that the land was not used for the purpose of an industrial undertaking and that the petitioner had not acquired new machinery, plant, etc., within the specified period. The court noted that the issue of treating the income as capital gain was thoroughly examined during the original assessment, and the reopening on this ground was not permissible.

Conclusion:
The court quashed the impugned notice dated 25.3.2013, allowing the petition on the grounds that the reopening of the assessment was based on a change of opinion, which is not permissible. The court also noted that the Assessing Officer had thoroughly scrutinized the issue during the original assessment and had accepted the petitioner's claim of treating the income as capital gain. The petition was allowed, and the notice for reopening the assessment was quashed.

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