Reassessment beyond four years needs specific failure to disclose, while captive power valuation follows outside purchase rate under section 80-IA.

Reassessment beyond four years is invalid unless the recorded reasons specifically allege the assessee's failure to disclose fully and truly all material facts; where the original assessment already examined the relevant books and production details, reopening lacks jurisdiction and is quashed. For section 80-IA, captive power transferred to the manufacturing division may be valued at the rate the assessee would have paid for equivalent electricity from an outside source, rather than a regulated sale price to an electricity board; the deduction was computed on that basis and upheld.

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Issues: (i) Whether the notice issued under section 148 of the Income-tax Act, 1961 was valid when the reassessment was initiated beyond four years from the end of the relevant assessment year. (ii) Whether, for computing deduction under section 80-IA of the Income-tax Act, 1961, the value of captive power transfer had to be taken at the rate at which the assessee would have purchased electricity from an outside source.

Issue (i): Whether the notice issued under section 148 of the Income-tax Act, 1961 was valid when the reassessment was initiated beyond four years from the end of the relevant assessment year.

Analysis: The original assessment had been completed after examination of the assessee's separate books, profit and loss account, balance sheet, production details and other material relating to the power undertaking. The reassessment reasons did not record any specific failure by the assessee to disclose fully and truly all material facts necessary for assessment. In a case where notice is issued beyond four years, the statutory condition of such failure must be clearly satisfied. As the relevant facts had already been furnished and considered in the original assessment, the jurisdictional requirement for reopening was not met.

Conclusion: The reassessment notice under section 148 was invalid and was quashed in favour of the assessee.

Issue (ii): Whether, for computing deduction under section 80-IA of the Income-tax Act, 1961, the value of captive power transfer had to be taken at the rate at which the assessee would have purchased electricity from an outside source.

Analysis: The dispute concerned valuation of power generated by a captive power unit and used by the assessee's manufacturing division. The Tribunal followed the earlier coordinate bench view that the price realized from regulated sale to an electricity board does not necessarily represent market value for section 80-IA purposes. For captive consumption, the appropriate benchmark is the price the assessee would have incurred to procure equivalent power from an external source in ordinary market conditions. Applying that principle, the assessee's adopted rate was accepted.

Conclusion: The captive power was correctly valued on the basis of the outside purchase rate, and the deduction computed on that basis was upheld in favour of the assessee.

Final Conclusion: The revenue appeals failed, the jurisdictional challenge to reopening succeeded, and the assessee also succeeded on the valuation method for section 80-IA deduction, save for one cross objection that was rendered infructuous.

Ratio Decidendi: A reassessment notice issued beyond four years is invalid unless the recorded reasons specifically allege failure by the assessee to disclose fully and truly all material facts, and for section 80-IA captive power transfers the relevant value is the market-equivalent purchase price in ordinary conditions, not a regulated sale price to the electricity board.

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