Fresh assessment wipes out the original order, allowing new tax grounds and treating loom-hour sale proceeds as capital receipts.

When an original assessment is set aside and a fresh assessment is made, the earlier order is treated as wiped out and tax liability must be determined afresh under the Act. In that setting, the appellate authorities may allow a new ground to be raised even if it was not taken in the original assessment appeal, where it bears on the true taxability of the receipt. The article also notes that sale proceeds of loom hours were treated as capital receipts and, if taxable at all, as capital gains under the applicable charging provision. The reference was answered in favour of the Revenue.

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Issues: Whether, in appeals against fresh assessments made pursuant to directions setting aside the original assessments, the assessee could raise a new ground not taken in the appeals against the original assessments, and whether the sale proceeds of loom hours were revenue receipts or capital receipts chargeable as capital gains.

Analysis: The fresh assessment orders were treated as having wiped out the earlier assessments, so the tax liability had to be determined afresh in accordance with the Act. Since capital gains could be brought to tax only under section 12B of the Indian Income-tax Act, 1922, the appellate authorities were justified in allowing the assessee to raise the new plea that the loom-hour sale proceeds were not revenue receipts. The earlier omission to raise the point in the original assessment proceedings did not prevent consideration of the correct character of the receipt in the fresh assessment appeals.

Conclusion: The assessee was entitled to raise the new ground, and the loom-hour sale proceeds were capital receipts assessable, if at all, as capital gains; the reference was answered in favour of the Revenue.

Ratio Decidendi: When an original assessment is set aside and a fresh assessment is made, the earlier order is wiped out and the appellate authorities may permit a new ground bearing on the true taxability of the receipt to be raised, because tax must be levied only under the charging provisions applicable to the receipt in question.

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