Fresh demand notice on reduced appellate assessment is valid; limitation runs from the revised demand, not the original notice.

Section 29 of the Income-tax Act, 1922 was construed to allow a fresh notice of demand whenever tax became due under an appellate order altering the assessment. Where the assessee's liability was reduced in appeal, the earlier demand notice ceased to reflect the correct liability and a revised notice could validly issue on the altered assessment. Limitation for recovery under section 46(7) was therefore computed from the later demand notice, not from the original notice issued on the higher assessment. The recovery objection based on time-bar was rejected.

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Issues: Whether a fresh notice of demand could validly be issued after the assessee's tax liability was reduced in appeal, and whether limitation under section 46(7) of the Income-tax Act, 1922 was to be computed from the first notice of demand or the later notice issued after appellate reduction.

Analysis: Section 29 of the Income-tax Act, 1922 was construed as authorising a notice of demand whenever tax became due in consequence of any order passed under or in pursuance of the Act, not merely on an original assessment order. A notice issued on an earlier and higher assessment ceased to be appropriate once the assessment was reduced in appeal, and a further reduction in second appeal likewise created a fresh and altered liability requiring a fresh demand notice. Section 46(7) was therefore applied with reference to the demand notice issued on the altered liability, and not to the original notice.

Conclusion: The fresh notice of demand was held to be permissible, limitation was not computed from the first notice of demand, and the objection that the recovery proceedings were time-barred was rejected.

Ratio Decidendi: Where an assessment is altered in appeal, section 29 of the Income-tax Act, 1922 permits a fresh notice of demand on the revised liability, and limitation for recovery under section 46(7) runs from the demand made on that altered liability.

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