Partial appellate relief does not cancel the original demand notice where assessment survives on reduced tax liability.

The appellate order was only partly allowed and set aside the addition of Rs. 50,000, so the original assessment and demand continued to operate to the extent finally upheld. A demand notice remains effective for tax ultimately found payable, and recovery may proceed on the reduced liability without issuing a fresh notice where the earlier assessment is not wholly displaced. Section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 supports continuation of recovery proceedings on the revised amount. On that basis, the demand notice and the order rejecting relief under section 264 were valid.

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Issues: Whether the demand notice and the order refusing relief under section 264 were invalid because the appellate order had set aside only the addition of Rs. 50,000 and interest under section 220(2) could be charged only from the later rectification order.

Analysis: The appellate order did not wipe out the entire assessment; it interfered only with the addition of Rs. 50,000 and treated the appeal as partly allowed. The original assessment and demand therefore continued to operate to the extent finally upheld. A demand notice remains effective for the tax ultimately found payable, and where liability is reduced in appeal or remand, the earlier demand can be continued without serving a fresh notice. Section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 also supports continuation of recovery proceedings on the reduced amount without a new demand notice. On these facts, the demand notice and the order rejecting the petitioner's request were justified.

Conclusion: The demand notice and the order under section 264 were valid, and the challenge failed.

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