Fresh assessment after full set aside allows re-examination of disclosed expenses and fresh disallowances on record

Where an assessment is fully set aside and remanded for fresh assessment, the Assessing Officer may re-examine items already disclosed in the return and profit and loss account and make fresh disallowances, even if they were not disallowed in the original assessment. The fact that the expenses were already on record does not make them a new source of income, and the appellate power limiting enhancement to matters already on record does not bar such disallowance in a de novo assessment. The contrary view of the first appellate authority was held unsustainable, and the deletion of the disallowances was set aside.

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Issues: Whether, after the original assessments were set aside and the matters remanded for fresh assessment, the Assessing Officer could make fresh disallowances in respect of items already appearing in the return and profit and loss account though not disallowed in the original assessment.

Analysis: The assessment had been set aside fully, not merely for a limited purpose. On remand, the expenses in question were already part of the recorded accounts and return, and did not constitute a new source of income. The appellate power to restrict enhancement to matters already on record did not bar the Assessing Officer, in a fresh assessment after full set aside, from examining and disallowing such items. The contrary view of the first appellate authority was therefore unsustainable.

Conclusion: The Assessing Officer was within jurisdiction in making the fresh disallowances, and the deletion of those disallowances was set aside.

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