Ntpc Ltd v. Dcit & Others

THE HIGH COURT OF DELHI AT NEW DELHI %Judgment delivered on: 10.01.2013 +W.P.(C) 14562/2006 NTPC LTD versus ... Petitioner DCIT & OTHERS ... Respondents Advocates who appeared in this case:For the Petitioner:Mr S. E. Dastur, Sr Advocate withMr Muralidhar, Ms Bindu Saxena, Ms AparajitaSwarup, Ms Neha Khattar and Mr K. K. PatraFor the Respondents :Ms Prem Lata Bansal, Sr Advocate withMr Ruchir Bhatia CORAM:-HON’BLE MR JUSTICE BADAR DURREZ AHMEDHON’BLE MS JUSTICE VEENA BIRBAL JUDGMENT BADAR DURREZ AHMED, J 1.By way of this writ petition, the National Thermal PowerCorporation Limited (NTPC Limited), a public sector undertaking, isseeking the quashing of a notice dated 03.02.2006 issued by therespondent No.1 (Deputy Commissioner of Income Tax, New Delhi)issued purportedly under Section 148 of the Income Tax Act, 1961(hereinafter referred to as ‘the said Act’), whereby the said respondentNo.1 has indicated that he has reason to believe that the petitioner’s income chargeable to tax for the assessment year 2000-01 has escapedassessment within the meaning of the said Section 148 and, therefore, therespondent No. 1 proposes to re-assess the income for the said assessmentyear. By virtue of the said notice, as is the requirement under law, thepetitioner was required to deliver a return in the prescribed form for thesaid assessment year within thirty days of the service of the notice. Thesaid notice was accompanied by a copy of the purported reasons for re-opening of the case. 2.The reasons are in respect of several assessment years, namely,1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04. However, we are,in this petition, concerned only with the assessment year 2000-01. Tworeasons have been set out in the said document. Reason one pertains tothe non-eligibility of deduction under Section 80IA in respect of the steamturbine of the combined cycle gas power stations belonging to thepetitioner.The second reason pertains to the taxability of income taxrecoverable by NTPC from the State Electricity Boards’. We shall dealwith these purported reasons in greater detail later.For the present, itwould be necessary to set out in brief the challenge of the petitioner to the impugned notice dated 03.02.2006. According to the petitioner, the noticeis barred by limitation inasmuch as it has been issued beyond four yearsfrom the end of the relevant assessment year. In the present case, 2000-01is the relevant assessment year.Therefore, the four-year period wouldhave ended on 31.03.2005. The notice which is impugned in this petitionhas been issued on 03.02.2006. This is clearly beyond the period of fouryears. The only way in which this notice can be saved is if the factualposition falls within the parameters specified under the proviso to Section147 of the said Act. 3.It was contended on behalf of the petitioner that before the provisoto Section 147 of the said Act can be invoked by the revenue, it has to beshown that there is an escapement of income chargeable to tax from theassessment done under Section 143(3) of the said Act and that this hasbeen occasioned by reason of failure on the part of the assessee to make areturn under Section 139 or in response to a notice under Section 142(1)or Section 148 or a failure on the part of the assessee to disclose fully andtruly all material facts necessary for his assessment for that assessmentyear. In the present case, the question of non-filing of a return does not arise and, therefore, the only two things that need to be seen are whetherany income chargeable to tax has escaped assessment and whether this hasbeen occasioned by the failure on the part of the assessee to disclose fullyand truly all material facts necessary for assessment in respect of theassessment year 2000-01. arise and, therefore, the only two things that need to be seen are whetherany income chargeable to tax has escaped assessment and whether this hasbeen occasioned by the failure on the part of the assessee to disclose fullyand truly all material facts necessary for assessment in respect of theassessment year 2000-01. 4.According to the learned counsel for the petitioner, neither of thesetwo conditions have been satisfied. In other words, there is no incomechargeable to tax which has escaped assessment nor has there been anyfailure on the part of the assessee to disclose fully and truly all materialfacts necessary for the assessment. 5.It has also been contended that for these reasons the proviso toSection 147 of the said Act is not triggered and, therefore, the impugnednotice dated 03.02.2006, having been issued beyond the period of fouryears from the end of the relevant assessment year, is clearly time barredand, therefore, ought to be quashed as also all proceedings pursuantthereto. 6.We shall now set out the sequence of events. On 27.11.1998, thepetitioner filed its income tax return with the respondent No.1 for the assessment year 1998-99. In the assessment order pertaining to the year1998-99, the entire manner of functioning of the gas turbine unit and thesteam turbine unit at the four different projects of the petitioner at Anta, Auraiya, Kawas and Dadri were discussed. The assessee had been asked to explain as to how the fuel cost in the steam unit was shown as zero bythe petitioner.By a letter dated 10.01.2001, the petitioner replied asunder:- “CONSUMPTION OF FUEL IN GAS POWER STATION NTPC has set up Gas Power Station at Anta, Auraiya,Kawas, Dadri, Jhanor Gandhar and Faridabad as combinedcycle gas power stations. These stations have number of gasturbines, which independently generate power, by separatelyfeeding fuel in the form of natural gas/HSD or Naptha. Thenatural gas after mixing with the air is burnt in the gascombustionchambertoproducegasesataveryhightemperature. These gases are used to run gas turbines forgeneration of electricity. The Gas Turbine exhaust hot air gases,which otherwise have no commercial value, are then releasedinto atmosphere. With the advancement in technology the wasteheat recovery boilers have been invented to utilize such hotexhaust gases. The exhaust hot gases from gas turbine are routedthrough the waste heat recovery boilers to utilize it in heatingwater and producing steam. The steam produced in waste heatrecovery boilers is then run to generate electricity in the steamturbine attached separately with such boilers. The steam turbinecan only be run from hot gases released from the gas turbine. Incase of any failure of the steam turbine the hot gases being released after generation of power in gas turbine has to bedischarged in the atmosphere since it has no other commercialvalue. All gas turbine and steam turbines separately generateelectricity and have separate control system, separate turbines,separate gas combustion chambers for gas turbines and boilerfor steam turbine for generation. As explained above the steam turbine does not consumeany fuel except waste hot gases of gas turbine. In view, thereof,no fuel cost has been indicated in steam turbines.” Thereafter, the petitioner furnished another letter dated 27.02.2001 indicating the working of the steam turbine at the gas power station. The said working was described as under:- “WORKING OF STEAM TURBINE AT GAS POWER STATION NTPC has set up Gas Power Station at Anta, Auraiya,Kawas, Dadri, Jhanor Gandhar and Faridabad. These powerstation have two distinct types of prime movers gas Turbinesand Steam Turbines. The fuel (Natural Gas/KSD/Naptha) isburnt in the combustion chamber of Gas Turbine and theproduct of combustion (hot gases) is expanded in Gas Turbine.The mechanical power thus developed drives an electricgenerator for generating electricity. Thereafter, the petitioner furnished another letter dated 27.02.2001 indicating the working of the steam turbine at the gas power station. The said working was described as under:- “WORKING OF STEAM TURBINE AT GAS POWER STATION NTPC has set up Gas Power Station at Anta, Auraiya,Kawas, Dadri, Jhanor Gandhar and Faridabad. These powerstation have two distinct types of prime movers gas Turbinesand Steam Turbines. The fuel (Natural Gas/KSD/Naptha) isburnt in the combustion chamber of Gas Turbine and theproduct of combustion (hot gases) is expanded in Gas Turbine.The mechanical power thus developed drives an electricgenerator for generating electricity. Hot gases are exhausted after their expansion in the gasturbines. As the exhausted gases are no longer required they areknown as waste hot gases and are let out in the atmosphere.These waste hot gases do not have any combustion properties.With the availability of technology, steam turbines are installedat a massive cost, which is higher than the cost of the normalgas turbine. These waste hot gases are routed through the wasteheat recovery boilers for generation of power. These waste exhaust hot gases from gas turbines can also be let out to theatmosphere directly through a by pass stack. If waste hot gasesare exhausted directly to the atmosphere the residual heatcontained in it is totally lost. However, when it is passedthrough a Waste Heat Recovery Boiler, it is possible to partlyreclaim the residual heat for generation of power. No fuel is required to be used for generation of power bythe waste heat recovery boiler (WHRB).In other words, thesteam turbine uses only the waste exhausted heat of such gasesin WHRB for generation of power. You have desired us to furnish quantity and cost ofexhausted hot gases used in waste heat recovery boiler. On thispoint we wish to submit that it is not possible to work out actualquantity of exhaust hot gases consumed in WHRB. Dependingon grid conditions flow of gases in the waste heat recoveryboiler varies from time to time on continuous basis. At times onaccount of technical reasons the gas station is run in an opencycle and therefore waste hot gases are being discharged intoatmosphere. In view of above the flow of waste hot gases in waste heatrecovery boilers is neither practicable nor being measured onactual basis. We reiterate that since no fuel is being consumed inwaste heat recovery boiler there is no fuel cost that can beallocated to generation of power by steam turbine. It may be mentioned here that the waste hot gas is not acommercial commodity and is not brought to the market for saleand purchase. It is not capable to being transported to a distantplace because it would lose it potential heat. Moreover, becauseof huge requirement of compressor power for transportation andcapital cost of equipment like compressor, piping, etc., it isuneconomical to transport the gases even to a nearby location asthese waste hot gas is of very low pressure and density. In view of the above, it is submitted that waste hot gasesare not marketable nor are being sold or bought in the market.They have not market value at all.” 7.From the above, it is clear that the petitioner had made it known to the respondent No.1 that the gas turbine exhausts hot air gases, whichotherwise have no commercial value and would normally be released into the atmosphere.However, with the advancement of technology, wasteheat recovery boilers have been invented to utilize such hot exhaust gases,which, in turn, run the steam turbines to generate additional electricity. Ithas been clearly pointed out by the petitioner that the power stations of thepetitioner have two distinct types of prime movers, gas turbines and steamturbines. The fuel which could be naptha, natual gas or HSD is burnt inthe combustion chamber of the gas turbine and the product of combustion – hot gases, generates mechanical power which drives the electric 7.From the above, it is clear that the petitioner had made it known to the respondent No.1 that the gas turbine exhausts hot air gases, whichotherwise have no commercial value and would normally be released into the atmosphere.However, with the advancement of technology, wasteheat recovery boilers have been invented to utilize such hot exhaust gases,which, in turn, run the steam turbines to generate additional electricity. Ithas been clearly pointed out by the petitioner that the power stations of thepetitioner have two distinct types of prime movers, gas turbines and steamturbines. The fuel which could be naptha, natual gas or HSD is burnt inthe combustion chamber of the gas turbine and the product of combustion – hot gases, generates mechanical power which drives the electric generator for generating electricity. These hot gases are exhausted aftertheir expansion in the gas turbines, as they are no longer required in thegas turbine unit.However, because of the technology of waste heatrecovery boilers, the exhaust gases from the gas turbine unit are utilizedby the steam turbine unit for further generation of electricity.In this manner, through the use of the waste heat recovery boiler, it is possible topartly reclaim the residual heat for generation of additional power. Thesteam turbine uses only the waste exhaust heat of such gases generated inthe gas turbine unit through the technology of waste heat recovery boiler. One of the contentions of the petitioner was that the fuel cost of the steamturbine unit was zero.We shall deal with this aspect of the mattersubsequently. For the present, it is clear that the waste hot gases producedin the gas turbine unit in the course of generating electricity are re-utilizedthrough the waste heat recovery boiler for driving the steam turbinewhich, in turn, generates additional electricity.The entire process ofgeneration of electricity was clearly set out by the petitioner before therespondent No.1 in respect of the assessment year 1998-99. 8.We may also point out that in the course of finalizing the assessment for the assessment year 1998-99, the respondent No.1 wrote aletter to the petitioner to clarify, inter alia, the following:- “1.Income-tax recoverable from customers- On page 157 ofthe Return of Income, it is stated (point no. 13) that as perTariff Notification issued by the Govt, of India. The Incidenceof Income tax on the Income from generation of electricity isrecoverable from customers. For the A.Y. 1998-99, this amount is Rs. 86081 lacs. This has not been taken as part of income or aspart of sales of electricity. Why?” The said letter was replied to by the petitioner on 05.03.2001, whereinthey enclosed a detailed note regarding the impact of income tax liabilityof NTPC with regard to generation of income. 9.On 29.11.2000, the petitioner filed its original return for theassessment year 2000-01. We may point out that being aggrieved by theassessment order in respect of the assessment year 1998-99 dated22.03.2001, the petitioner preferred an appeal being Appeal No. 2/2001-02 before the Commissioner of Income Tax (Appeals) sometime in April,2001. During the pendency of the appeal for the assessment year 1998-99, the assessment in respect of the assessment year 2000-01 wascompleted under Section 143(3) on 27.02.2002, whereby the respondentNo.1 followed the orders in respect of the assessment year 1998-99 and1999-2000 and the deduction under Section 80IA was re-worked bytaking a part of the fuel cost against the profits of the steam undertaking.The respondent No.1 also noted that the income tax liability on generationhad to be grossed up on account of the State Electricity Boards’ liability tobear the tax. 10.On 28.02.202, the Commissioner of Income Tax dismissed theappeal in respect of the assessment year 1998-99. Being aggrieved by theorder passed by the Commissioner of Income Tax (Appeals) in respect ofthe assessment year 1998-99, the petitioner preferred an appeal before theIncome Tax Appellate Tribunal (ITAT) being ITA 1377/Del/2002,sometime in April, 2002. A similar appeal was also filed by the petitionerbefore the ITAT in respect of the assessment year 1999-2000 being ITANo. 2188/Del/2002. We may also point out that by virtue of the minutesof meeting held on 13.09.2002, the Committee on Disputes had permittedthe petitioner to pursue the appeals before the Tribunal. On 26.05.2004,the Income Tax Appellate Tribunal decided the appeals in favour of thepetitioner and held that there was no basis to apportion the cost of fuel tothe steam turbine undertakings. In the said order, the ITAT noted that itwas the case of the Assessing Officer that the profits of each unit had tobe determined independently as if such units were the only source ofincome of the assessee/ petitioner. The Tribunal observed that there wasno dispute to such a submission and that, according to it, profits of the gasunit as well as the steam unit must be determined independently as thesole source of income of the assessee and consequently, the expenditure incurred for the generation of electricity by the gas unit cannot be shiftedto any other unit, even by the logic of the Assessing Officer. The Tribunalfurther held that for similar reasons, profit of the steam unit had to bedetermined independently on the basis of the expenditure incurred by suchunit. Since the steam unit had not incurred any expenditure for acquiringthe hot gas, the question of reducing the profits of such unit by anynotional figure did not arise. Consequently, the Tribunal accepted thepleas of the petitioner and rejected those of the revenue. 11.We are not so much concerned about the merits of the decision butwith the fact that the entire process of production of electricity by both thegas turbine and the steam turbine were examined threadbare at all stages –before the Assessing Officer, The Commissioner of Income Tax (Appeals)and the Income Tax Appellate Tribunal. The petitioner had clearly set outand explained the method of electricity generation by both the units and itis the Tribunal which held that it should not be regarded as an integratedunit but as two separate and independent units. This was also the standtaken by the Assessing Officer with regard to the nature of the two unitsbeing independent and not integrated. 12.Thereafter, on 23.09.2004, the respondent No.1 forwarded a letterto the Commissioner of Income Tax (Appeals) along with a copy of thepurported inspection report which had been allegedly carried out on02.09.2004 and to consider the same in the pending appeals of thepetitioner for the assessment years 2000-01, 2001-02, 2002-03 and 2003-04. In this inspection report, it has been stated that the contention of theassessee (NTPC), that it has two separate units for generating electricity,cannot be accepted to be correct as the waste heat utilization plant isbasically a dependent unit of the first plant, that is, the gas turbine plantand is completely dependent on its working. As per the report, “by nostretch of imagination, can it be inferred that these are two different unitsas the second unit i.e. the waste heat utilization plant is totally dependenton the first unit.” It was further stated in the said report that the secondplant cannot be said to be an identifiable undertaking separate and distinctfrom the existing business.The report, therefore, concluded by notingthat it would not be correct to say that the assessee has two different unitsfor generation of electricity and, therefore, the assessee is not right in claiming deduction under Section 80IA on two different profits byshowing two different P & L Accounts of these units. claiming deduction under Section 80IA on two different profits byshowing two different P & L Accounts of these units. 13.The petitioner sent a response on 27.04.2005 to the inspectionreport and stated that there are no fresh facts in the report and that, in anyevent, the ITAT’s order was applicable. The petitioner also submitted that mere dependence of one unit on the other did not mean that the steamundertaking was not an industrial undertaking for the purpose of Section80IA of the said Act. 14.In the meanwhile, on 20.10.2004, the respondent No.1 applied tothe Committee on Disputes for permission to file an appeal from theTribunal’s said order to this Court under Section 260A of the said Act.During the pendency of the application for permission to file an appeal,therespondentNo.1filedanappealbeforethisCourtbeingITA 756/2004.However, by an order dated 03.12.2004, this Courtdisposed of that appeal on the ground that since the High PoweredCommittee on Disputes had not granted permission till then, this Courtwas not inclined to entertain the petition at that stage.This Court,however, directed that it would be open to the revenue to apply for re- filing of the appeal after the clearance is given by the High PoweredCommittee in favour of the revenue.The clearance was not given inasmuch as, on 08.06.2005, the Committee on Disputes rejected theapplication of the revenue.The relevant portion of the minutes of the meeting pertaining to the petitioner are as under:- “Meeting of the Committee on Disputes was held at 1030 hours on08.05.2005intheCommitteeRoom,CabinetSecretariat,Rashtrapati Bhavan, New Delhi.The items considered and theminutes thereon are as under:- The Committee heard the parties in detail w.r.t. the orders of theCIT (A), agenda note submitted by CBDT and the orders dated26.05.2004 of the Delhi Bench of IT AT.The Committee notedthat the contention of the D/o revenue is that the assessee has notdebited the fuel cost utilized for generation of power in the units underreference and further that AO has appropriately calculated the fuel costinvolved and debited it to the P&L A/c and reduced the deduction u/s 801and 80-1 A. The Committee expressed the view that the ITAT has veryappropriately observed that if the assessee had not set up the steam units in their projects, such hot gas would have to be exposed to the openatmosphere and also that there is no evidence that such hot gas can besold in the open market. Advanced technological innovations haveprevented such hot gas going to waste, which can be utilized forgeneration of electricity. Since there is no evidence of any market forsale of such waste hot gas, the Committee did not find any merit in thecontentions of the CBDT. The Committee accordingly decided not toaccept the request of CBDT for giving clearance for filing an appeal inHigh Court against the orders of the ITAT.” 15.From the above extract, it is apparent that the Committee onDisputes had agreed with the view taken by the Tribunal that if thepetitioner had not setup the steam units in their projects, such hot gaseswould have to be released to the open atmosphere and secondly that therewas no evidence that the hot gases could be sold in the open market.Since there was no evidence of any market for the sale of such hot gases,the Committee on Disputes did not find any merit in the contentions of therevenue.It is on this basis that the permission to file an appeal wasrejected and clearance was not given. The matter, therefore, rested there. 16.It is then that on 03.02.2006, the impugned notice was issued to thepetitioner accompanied by the purported reasons for issuing the same. 15.From the above extract, it is apparent that the Committee onDisputes had agreed with the view taken by the Tribunal that if thepetitioner had not setup the steam units in their projects, such hot gaseswould have to be released to the open atmosphere and secondly that therewas no evidence that the hot gases could be sold in the open market.Since there was no evidence of any market for the sale of such hot gases,the Committee on Disputes did not find any merit in the contentions of therevenue.It is on this basis that the permission to file an appeal wasrejected and clearance was not given. The matter, therefore, rested there. 16.It is then that on 03.02.2006, the impugned notice was issued to thepetitioner accompanied by the purported reasons for issuing the same. 17.The petitioner objected to the impugned notice as also the reasonsby virtue of his letter dated 12.06.2006. The objections were rejected bythe respondent No.1 by an order dated 16.06.2006. Thereafter, inter alia,the present writ petition was filed by the petitioner, whereon, this Court,on 18.09.2006, issued notice to the respondents and directed that tillfurther orders, the assessment order be not passed. The writ petition wasultimately admitted for hearing on 17.05.2007 when Rule DB was issuedand it was directed that no final order shall be passed by the AssessingOfficer till the disposal of the writ petition. 18.The learned counsel for the petitioner submitted that both thereasons for re-opening the assessment in respect of the assessment year2000-01 are non-existent.First of all, we shall record his submissionswith regard to the first reason.The learned counsel for the petitionersubmitted that the petitioner had setup gas and steam undertakings from01.08.1990 onwards. In the assessment proceedings for the assessmentyear 1998-99, which we have dealt with in detail above, the AssessingOfficer had, after a detailed discussion, granted deduction under Section80IA in respect of the separate profits of the gas and steam undertakings,though on the basis that they were integrated, he adjusted the quantum of deduction.It was further submitted that this was also followed by theAssessing Officer in respect of the assessment year 1999-2000 and theassessment year 2000-01.The Tribunal reversed the findings of theAssessing Officer in respect of the assessment years 1998-99 and 1999-2000 and this, according to the learned counsel for the petitioner, hadbecome final as the Committee on Disputes did not permit the departmentto file an appeal against the order passed by the Tribunal. Insofar as theassessment year 2000-01 is concerned, the Commissioner of Income Tax(Appeals) followed the Tribunal’s order and reversed the findings of theAssessing Officer. According to the learned counsel for the petitioner thishas also become final as the department had not filed any appeal. 19.It is contended that the Assessing Officer is now seeking to re-openthe assessment for the assessment year 2000-01 on the ground that thesteam undertaking is not a separate undertaking.But, according to thelearned counsel, being aware of the existence of the two undertakings, theAssessing Officer had drawn the inference in the course of the regularassessment that the claim for deduction from the profits of the steamundertakings should be reduced on account of his understanding that the fuel cost could not have been zero. However, the Assessing Officer nowseeks to draw the inference that the two undertakings should be treated asone. It was contended that this clearly constituted an entire shift in thestand of the Assessing Officer from the stand taken by him in the courseof the original assessment proceedings. fuel cost could not have been zero. However, the Assessing Officer nowseeks to draw the inference that the two undertakings should be treated asone. It was contended that this clearly constituted an entire shift in thestand of the Assessing Officer from the stand taken by him in the courseof the original assessment proceedings. 20.The learned counsel for the petitioner submitted that, in any event,the impugned notice was bad in law as there was no failure on the part ofthe petitioner to disclose fully and truly all material facts.It wascontended that the reason for re-opening, as mentioned in the purportedreasons, is that the combined cycle gas power stations are integratedundertakings and the steam turbine unit is completely dependent on thegas turbine unit. It was contended that these were the very same findingsgiven by the Assessing Officer in the course of the regular assessmentproceedings for the assessment year 1998-99 and which were followed inrespect of the assessment year 2000-01.This was the very basis forcurtailing the Section 80IA deduction eligible on the steam undertaking.It was also contended that the so-called reasons places reliance on the saidinspection report but the Commissioner of Income Tax (Appeals), inrespect of the assessment year 2000-01, held that there is nothing new in the inspection report which differentiates the case from the assessmentyears 1998-99 and 1999-2000. Paragraph 3.11 of the order dated04.05.2006 passed by the Commissioner of Income Tax (Appeals) in respect of the assessment year 2000-01 is as under:- “3.11I have gone through the facts of the case, thesubmission made by the appellant and the decision of The ITAT,Delhi Bench in the case of the appellant for A.Y. 1998-99 &1999-2000. It is an admitted fact that the facts of the case underappeal are same as for A.Y. 1998-99 & 1999-2000 for which ITAThas decided the issue. I have also considered the decision of DelhiHigh Court of not entertaining the appeal filed by the Income TaxDepartment, as the approval was not granted by the Committee ondisputes. The Inspection Report of Addl CIT, Range 13, New Delhidated 23[rd]September 2004 and the reply filed by the appellant dated27[th]April 2005 were also considered. Para 3.7 on page 9 of thisorder details the contents of a brief provided by the AO given asannexure‘A’toletterF.No.CIT/Delhi-v/2004-05/646dated20.10.2004. This letter was addressed to the COD in order to obtainit’s approval to file an appeal before the high court. This brief hasdiscussed all the points that were mentioned in the inspectionsreport mentioned above. However the COD did not accord approvalto the AO for filing an appeal against the order of the ITAT. Ihave found that the facts of the case as mentioned in theinspection report were also before the COD when they withheld theapproval for further appeal. There is nothing new whichdifferentiates the facts of the case as such.” 21.Thus, according to the learned counsel for the petitioner, thedepartment had accepted the finding of the Commissioner of Income Tax(Appeals) as it had not filed any appeal before the Tribunal. Having done so, there was no occasion for the department to have issued the impugnednotice dated 03.02.2006. 22.The learned counsel for the petitioner referred to the decisions of this Court in the case ofSarthak Securities Co. Pvt. Ltd. v. Income Tax Officer: [2010] 329 ITR 110 (Delhi) andCommissioner of Income Tax v. Simbhaoli Sugar Mills Limited: [2011] 333 ITR 470 (Delhi) in supportof his contention that the recorded reasons must state what material theassessee had failed to disclose and if there was no failure to disclose thematerial facts, re-opening was not justified at all. 21.Thus, according to the learned counsel for the petitioner, thedepartment had accepted the finding of the Commissioner of Income Tax(Appeals) as it had not filed any appeal before the Tribunal. Having done so, there was no occasion for the department to have issued the impugnednotice dated 03.02.2006. 22.The learned counsel for the petitioner referred to the decisions of this Court in the case ofSarthak Securities Co. Pvt. Ltd. v. Income Tax Officer: [2010] 329 ITR 110 (Delhi) andCommissioner of Income Tax v. Simbhaoli Sugar Mills Limited: [2011] 333 ITR 470 (Delhi) in supportof his contention that the recorded reasons must state what material theassessee had failed to disclose and if there was no failure to disclose thematerial facts, re-opening was not justified at all. 23.The learned counsel for the petitioner also submitted that this was acase of change of opinion which was also not a permissible ground for re-opening an assessment already completed under Section 143(3) of the saidAct.It was contended that in the course of the regular assessmentproceedings for the assessment years 1998-99 to 2000-01, the AssessingOfficer had taken the view that the undertakings, though separate, were integrated and that the expenses should be apportioned to the steamundertaking so as to reduce the Section 80IA deduction. In contrast, it hasnow been suggested by the Assessing Officer on the very same basis that the undertakings are integrated to allow deduction under Section 80IA byclubbing the profits of steam and gas undertakings.This was clearly,according to the learned counsel for the petitioner, a case of change ofopinion which is impermissible in law.He placed reliance on thefollowing decisions:- (i)CIT v. Kelvinator of India Ltd.: [2002] 256 ITR 1 (Del)(FB);(FB); (ii)CIT v. Kelvinator of India Limited: [2010] 320 ITR 561(SC); and(SC); and (iii)Ritu Investments Private Limited v. DCIT: (2011) 51 DTR(Del) 162(Del) 162 24.The next point urged by the learned counsel for the petitioner wasthat the Section 80IA deduction cannot be withdrawn mid-term inasmuchas it is only the first year of the deduction which is relevant. Once it isallowed in the first year, the subsequent years cannot be interfered with.As such, there is no escapement of income from assessment. It wascontended by the learned counsel for the petitioner that the steamundertaking is setup from 01.08.1990 onwards and in the earlier years,deduction for the steam undertaking had been allowed to the assessee and, therefore, could not be withdrawn for the subsequent years. Reliance wasplaced on the following decisions:- (i)CIT v. Modi Industries Ltd: [2010] 48 DTR 364 (Del); (ii)Saurashtra Cement & Chemical Industries Ltd. v. CIT:[1980] 123 ITR 669 (Guj);[1980] 123 ITR 669 (Guj); (iii)CIT v. Paul Brothers: [1995] 216 ITR 548 (Bom); and (iv)CIT v. Bhilai Engineering Corporation Pvt. Ltd: [1982] 133ITR 687 (M.P) 25.Lastly, it was contended by the learned counsel for the petitioner that the sanction required for issuance of a notice under Section 147/148of the said Act after the period of four years was granted by theCommissioner of Income Tax in a mechanical fashion and withoutapplication of mind. The sanction was, according to the learned counsel,given in a proforma with the words “I am satisfied”. It was contendedthat this was not sufficient to show application of mind on the part of theCommissioner of Income Tax. Reliance was placed onThe Central India Electric Supply Co. Ltd v. ITO: [2011] 333 ITR 237 (Del) andChhugamal Rajpal. v. S. P. Chaliha and Ors. (SC): [1971] 79 ITR 603(SC). (iv)CIT v. Bhilai Engineering Corporation Pvt. Ltd: [1982] 133ITR 687 (M.P) 25.Lastly, it was contended by the learned counsel for the petitioner that the sanction required for issuance of a notice under Section 147/148of the said Act after the period of four years was granted by theCommissioner of Income Tax in a mechanical fashion and withoutapplication of mind. The sanction was, according to the learned counsel,given in a proforma with the words “I am satisfied”. It was contendedthat this was not sufficient to show application of mind on the part of theCommissioner of Income Tax. Reliance was placed onThe Central India Electric Supply Co. Ltd v. ITO: [2011] 333 ITR 237 (Del) andChhugamal Rajpal. v. S. P. Chaliha and Ors. (SC): [1971] 79 ITR 603(SC). 26.Mrs. Prem Lata Bansal, the learned senior counsel appearing onbehalf of the revenue, submitted that this was a case in which the provisoto Section 147 was attracted. She submitted that insofar as the assessmentorder 1998-99 is concerned, the Assessing Officer had considered thequestion of the two units, namely, the gas turbine unit and the steamturbine unit not from the standpoint of whether they were integrated orthey were separate units, but only in the context of the fuel cost argument.The learned senior counsel submitted that the examination was notwhether the units by themselves or as a whole were entitled to deductionunder Section 80IA or not but from the angle of what would be the fuelcost of the steam unit, insofar as the hot waste gases were concerned. Itwas only the question of allocation of fuel cost which was considered bythe Assessing Officer and the question of units being separate orintegrated was not specifically examined by the Assessing Officer.Therefore, there is no question of there being any change of opinion. Shealsosubmittedthattheimpugnednoticedated03.02.2006wasnecessitated because of the inspection report of September, 2004.According to her, the said inspection report brought out fresh factualmaterial to indicate that the gas turbine unit and the steam turbine unit were an integrated whole industrial undertaking and were not separateindustrial undertakings or units. According to her, the inspection reportthrew light on the question as to whether the steam unit was merely anexpansion of the gas unit or was an altogether separate unit. According toher, the report clearly indicated that the steam unit was entirely dependenton the gas unit and was, therefore, integrated with the gas unit and did nothave an independent existence. According to her, this fact was not knownto the Assessing Officer when he concluded the assessments for theassessment year 1998-99 or even for the assessment year 2000-01. Shesubmitted that this was also not disclosed by the petitioner and, therefore,there was failure on the part of the petitioner to fully and truly disclose thematerial facts. As such, one of the conditions of the proviso to Section147 got triggered. She submitted that the Commissioner of Income Tax(Appeals)’ order in respect of the relevant assessment year as also theIncome Tax Appellate Tribunal’s orders in respect of the assessment years1998-99 and 1999-2000 were before the inspection of September, 2004.Moreover, insofar as the opinion of the Committee on Disputes isconcerned, the issue before it was only with regard to the allocation offuel cost between the two units. She submitted that the issue whether the two units were separate or integrated was not before the Committee onDisputes and, therefore, it would be wrong to say that the latter issue hadattained finality. According to her, the only issue that had attained finalitywas with regard to the allocation of fuel cost and not the question ofwhether the two units were separate or integrated. She also referred to theassessment order as well as the order of the Commissioner of Income Tax(Appeals) for the assessment year 2004-05, copies of which were handedover to us in the course of arguments, to submit that in the earlier roundthe issue was with regard to fuel cost, whereas in the assessment year2004-05, the issue was whether the two units were independent or oneintegrated unit. She also referred to the Committee on Disputes’ opinionpertaining to the assessment year 2004-05 which granted permission forappeal to the Income Tax Appellate Tribunal.Therefore, according toher, it was an entirely new issue which had not been examined in theearlier round of assessment and, therefore, there was no question ofchange of opinion.She also submitted that the fresh examination wasnecessitated because of the new facts which were revealed in theinspection report of September, 2004 which ought to have been brought tothe notice and disclosed by the petitioner at the time of the original assessmentbutthepetitionerhadfailedtodisclosethesame.Consequently, she submitted that the ingredients of the proviso to Section147 of the said Act were clearly satisfied and, therefore, the impugnednotice dated 03.02.2006 was not without jurisdiction and was also withintime. 27.She also submitted that the other condition of income havingescaped assessment has also been satisfied in the present case and sheplaced reliance on Explanation 2(c)(i), (iii) and (iv). She also submittedthat Explanation 1 to Section 147 also made it clear that mere productionof books of accounts etc. did not necessarily mean that there wasdisclosure on the part of the assessee. She reiterated that it was only oninspection that it was found that the steam unit and the gas unit were anintegrated whole. 28.She also submitted that at the time of issuance of a notice underSection 147/148 of the said Act, only a prima facie view has to be takenand it is obviously not a final view. The final view would only emergewhen the assessment order is passed. Therefore, she submitted that therewas no cause for any interference with the notice under Section 148 which is impugned in the present petition. She referred toRaymond WoollenMills Ltd v. ITO & Ors.: [1999] 236 ITR 34 (SC), wherein it wasobserved that it is only to be seen whether there was, prima facie, somematerial on the basis of which the department could re-open a case. TheSupreme Court further observed that sufficiency or correctness of thematerial is not a thing to be considered at that stage. She then referred toEss Ess Kay Engineering Co. P. Ltd v. Commissioner of Income Tax:(2001) 247 ITR 818 (SC), wherein the Supreme Court observed that theIncome Tax Officer is not precluded from re-opening of the assessment ofan earlier year on the basis of his findings of fact made in respect of freshmaterials in the course of assessment of the next assessment year. Thelearned senior counsel then referred toDiwakar Engineers Ltd v. IncomeTax Officer: [2010] 329 ITR 28 (Del), wherein it was observed that at thestage of issuing notice under Section 148 it was not necessary that thematerials must be extensive and detailed. The court also felt that one ofthe methods by which materials could come into the possession of theAssessing Officer was by the assessment proceedings in subsequentassessment years. A reference was also made to Phool Chand Bajrang Lal & Anr. v. ITO & Anr.: [1993] 203 ITR 456 (SC), wherein the Supreme Court observed as under:- Lal & Anr. v. ITO & Anr.: [1993] 203 ITR 456 (SC), wherein the Supreme Court observed as under:- “Acquiring fresh information, specific in nature and reliable incharacter, relating to the concluded assessment which goes toexpose the falsity of the statement made by the assessee at thetime of original assessment is different from drawing a freshinference from the some facts and material which was availablewhich the Income Tax Officer at the time of originalassessment proceedings. The two situations are distinct anddifferent. Thus, where the transaction itself on the basis ofsubsequent information, is found to be a bogus transaction, themere disclosure of that transaction at the time of originalassessment proceedings, cannot be said to be disclosure of the“true” and “full” facts in the case and the Income Tax Officerwould have the jurisdiction to reopen the concluded assessmentin such a case.” 29.Mrs. Bansal also placed reliance onRakesh Agarwal v. ACIT: [1996] 221 ITR 492 (Del) to submit that embedded material may not be considered as disclosure. In the said decision, this Court had come to theconclusion that mere filing of documents in that case cannot be deemed tobe a disclosure of all the material facts particularly on the ground thatwhat might have been discovered by the Assessing Officer cannot beconstrued as a disclosure in terms of Section 147 of the said Act.Mrs Bansal also referred to a decision of this Court in the case of Consolidated Photo and Finvest Ltd v. ACIT: [2006] 281 ITR 394 (Del), wherein this Court observed as under:- “The principle that a mere change of opinion cannot be a basisfor reopening computed assessments would be applicable onlyto situations where the assessing officer has applied his mindand taken a conscious decision on a particular matter in issue. Itwill have no application where the order of assessment does notaddress itself to the aspect which is the basis for reopening ofthe assessment, as is the position in the present case. It is in thatview inconsequential whether or not the material necessary fortaking a decision was available to the assessing officer eithergenerally or in the form of a reply to the questionnaire servedupon the assessed. What is important is whether the assessingofficer had based on the material available to him taken a view.If he had not done so, the proposed reopening cannot beassailed on the ground that the same is based only on a changeof opinion.” The decision inHonda Siel Power Products Ltd v. DCIT: [2012] 340 ITR 53 was also referred to by Mrs Bansal to explain what is the meaning of the expression “disclose fully and truly all material facts” appearing inSection 147 of the said Act.In that decision, this Court observed asunder:- “12. The law postulates a duty on every assessee to disclosefully and truly all material facts for its assessment. Thedisclosure must be full and true. Material facts are those factswhich if taken into accounts they would have an adverse affecton assessee by the higher assessment of income than the oneactually made. They should be proximate and not have any remote bearing on the assessment. Omission to disclose may bedeliberate or inadvertent. This is not relevant, provided there isomission or failure on the part of assessee. The latter confersjurisdiction to reopen assessment.” 30.Mrs Bansal submitted that the question of change of opinion wouldarise only when the Assessing Officer had formed an opinion and wasnow trying to alter that opinion. She placed reliance on Dalmia Cement “12. The law postulates a duty on every assessee to disclosefully and truly all material facts for its assessment. Thedisclosure must be full and true. Material facts are those factswhich if taken into accounts they would have an adverse affecton assessee by the higher assessment of income than the oneactually made. They should be proximate and not have any remote bearing on the assessment. Omission to disclose may bedeliberate or inadvertent. This is not relevant, provided there isomission or failure on the part of assessee. The latter confersjurisdiction to reopen assessment.” 30.Mrs Bansal submitted that the question of change of opinion wouldarise only when the Assessing Officer had formed an opinion and wasnow trying to alter that opinion. She placed reliance on Dalmia Cement Pvt. Ltd v. CIT: WP(C) 6205/2010 decided on 26.09.2011 by a DivisionBench of the Delhi High Court. The learned counsel also placed relianceon the decision