Fresh demand notice required after appellate reduction of tax liability; recovery on the old certificate is not justified.

Where an appellate authority reduces the assessed income and corresponding tax liability, recovery cannot continue on the basis of the original demand notice and certificate. A demand founded on the earlier assessment ceases to match the modified liability, and the revenue must issue a fresh notice of demand reflecting the appellate order and the time allowed for payment. Without that fresh demand, the assessee cannot be treated as a defaulter, and coercive recovery on the old certificate is not justified. The HC therefore treated the recovery proceedings as illegal and granted writ relief.

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Issues: Whether, after the Appellate Assistant Commissioner reduces the assessed income and tax payable, the revenue can proceed to recover the amount on the basis of the original demand notice and certificate without issuing a fresh notice of demand.

Analysis: A demand notice issued on the basis of an original assessment ceases to be appropriate when the assessment is materially altered in appeal. Recovery proceedings under the income-tax law must follow a valid demand issued in consequence of the appellate order fixing the reduced tax liability and the time for payment. In the absence of such a fresh notice, the assessee cannot be treated as a defaulter, and coercive recovery on the strength of the earlier certificate is not warranted.

Conclusion: The recovery proceedings were illegal and the assessee was entitled to the writ relief sought.

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