Appellate remand limits reassessment, but development rebate is withdrawn when the asset is transferred within the statutory period.

On a partial appellate remand, reassessment was confined to the matters actually sent back for enquiry, so the Income-tax Officer could not reopen development rebate on the two ships when that issue was outside the remand. The special statutory machinery for withdrawal and rectification of development rebate also could not be bypassed by using reassessment as an unrestricted reopening. However, development rebate was properly withdrawn where the ships were sold or otherwise transferred within the prescribed period, because the statutory condition turned on transfer itself and not on the purpose of scrapping.

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Issues: (i) Whether, on reassessment made after the original assessments were set aside in part, the Income-tax Officer could reconsider the admissibility of development rebate on the two ships when that matter was not covered by the appeal or the appellate directions; (ii) Whether, in such reassessment, the Income-tax Officer could disallow development rebate without proceeding under the special withdrawal and rectification provisions and without being affected by limitation; (iii) Whether development rebate was rightly withdrawn on the footing that the two ships had been sold for scrapping within the prescribed period.

Issue (i): Whether, on reassessment made after the original assessments were set aside in part, the Income-tax Officer could reconsider the admissibility of development rebate on the two ships when that matter was not covered by the appeal or the appellate directions.

Analysis: A fresh assessment made after an appellate remand is controlled by the scope of the appellate order. Where the appellate authority has set aside only specified parts of the assessment and has not directed a general reopening, the Income-tax Officer cannot travel beyond the matters remitted for enquiry. The assessment is not treated as wholly obliterated for all purposes when the order shows only a partial setting aside. The question of development rebate had not been in dispute before the appellate authority and was not covered by the remand.

Conclusion: The Income-tax Officer was not justified in reconsidering the development rebate on the two ships; the answer was against the revenue and in favour of the assessee.

Issue (ii): Whether, in such reassessment, the Income-tax Officer could disallow development rebate without proceeding under the special withdrawal and rectification provisions and without being affected by limitation.

Analysis: The Act contained specific machinery for rectification and for withdrawal of development rebate where the asset was sold or transferred within the prescribed period. Those provisions could not be bypassed merely because a reassessment was being made after remand. The existence of separate statutory remedies meant that the reassessment power could not be enlarged to cover matters outside the remand order. The limitation attached to the special withdrawal mechanism therefore remained relevant.

Conclusion: The Income-tax Officer could not disallow the rebate by treating the reassessment as an unrestricted reopening; the answer was against the revenue and in favour of the assessee.

Issue (iii): Whether development rebate was rightly withdrawn on the footing that the two ships had been sold for scrapping within the prescribed period.

Analysis: The statutory condition for withdrawal was that the ship should be sold or otherwise transferred within the prescribed period. The purpose for which the transfer was made was not material. On the facts found, the ships had been sold or transferred, and it had not been found that they had ceased to be ships at the time of transfer. Scrapping did not take the case outside the statutory language.

Conclusion: Development rebate was rightly withdrawn; the answer was in favour of the revenue and against the assessee.

Final Conclusion: The reference succeeded for the assessee on the jurisdictional questions but failed on the merits of the development rebate issue, resulting in a mixed outcome with no order as to costs.

Ratio Decidendi: In a reassessment made pursuant to a partial appellate remand, the Income-tax Officer is confined to the scope of the remand and cannot reopen matters not covered by the appellate directions, while development rebate stands withdrawn if the relevant asset is sold or otherwise transferred within the statutory period, irrespective of the purpose of the transfer.

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