Fresh assessment on appellate remand does not erase properly admitted material or require a new notice where explanation was already given.

A fresh assessment made after appellate remand under the Income-tax Act does not wipe out the entire earlier record. Properly admitted material already on record may still be relied upon, while only material specifically found inadmissible must be excluded unless otherwise proved. A prior notice issued in the original proceedings remains effective where the assessee has already been put on notice and had an opportunity to explain the relevant facts; a fresh notice is not mandatory merely because the assessment is redone. The stated reference was answered against the assessee on the substantive questions, and the third question was held not to arise.

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Issues: (i) Whether, after the Appellate Assistant Commissioner set aside the original assessment and directed a fresh assessment, the Income-tax Officer was bound to start de novo from the stage of filing of the return and treat the earlier properly admitted material as nonexistent. (ii) Whether the earlier notice issued in the first assessment proceedings became inoperative so that a fresh notice and fresh explanation were of the mandatory procedure on remand.

Issue (i): Whether, after the Appellate Assistant Commissioner set aside the original assessment and directed a fresh assessment, the Income-tax Officer was bound to start de novo from the stage of filing of the return and treat the earlier properly admitted material as nonexistent.

Analysis: The direction under section 31(3)(b) required the Income-tax Officer to make a fresh assessment in accordance with the appellate directions, but it did not efface the entire record. Material which had been properly admitted and had not been held inadmissible could still be used in the fresh assessment. Only the material specifically found inadmissible could not be relied upon without further proof.

Conclusion: The answer was in the negative. The Income-tax Officer was not required to ignore all earlier material, and he could rely on properly admitted evidence in the fresh assessment.

Issue (ii): Whether the earlier notice issued in the first assessment proceedings became inoperative so that a fresh notice and fresh explanation were mandatory on remand.

Analysis: The assessee had already been put on notice regarding the relevant enquiry and had in fact offered an explanation. The appellate direction did not impose a new statutory duty to issue another notice merely because a fresh assessment was to be made. So long as the assessee had an opportunity to explain and no refusal to consider any explanation was shown, the prior notice continued to serve its purpose.

Conclusion: The answer was in the negative. The earlier notice did not become inoperative and a fresh notice was not mandatory.

Final Conclusion: The reference was answered against the assessee on the substantive questions referred. The third question was held not to arise from the appellate order, and the assessment stood affirmed with costs to the Department.

Ratio Decidendi: A fresh assessment made pursuant to an appellate remand under the Income-tax Act does not wipe out properly admitted material already on record, and prior notice remains effective where the assessee has already had an opportunity to explain the relevant facts.

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