Reassessment for escaped income may continue alongside pending appellate directions, while draft-assessment safeguards can still apply.

Reassessment for escaped income can proceed even where the original assessment has been set aside only in part and remains pending for limited re-determination, and a consolidated order covering both the reassessment and the appellate directions is not inherently invalid. The tribunal also declined to hold that the draft-assessment safeguard was inapplicable to reassessment proceedings for the relevant year, treating the issue as governed by binding Special Bench authority and not displaced by the later decision relied on by the assessee. The matter was therefore restored for decision on the remaining grounds on merits.

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Issues: (i) Whether, after the original assessment had been set aside in part and was still pending for giving effect to the appellate directions, the Income-tax Officer could validly reopen the matter under the reassessment provisions and combine the proceedings in one order. (ii) Whether the procedural safeguard contained in the draft-assessment reference provision applied to the reassessment made for the relevant assessment year.

Issue (i): Whether, after the original assessment had been set aside in part and was still pending for giving effect to the appellate directions, the Income-tax Officer could validly reopen the matter under the reassessment provisions and combine the proceedings in one order.

Analysis: The original return had already culminated in an assessment, and that assessment had thereafter been set aside only for limited re-examination on specific issues. In that situation, the earlier return could not be treated as ignored in the manner contemplated in the authority relied upon for completed-but-ignored returns. The reassessment notice was issued for escaped income, and the officer was entitled to proceed with the reassessment while also carrying out the appellate directions in relation to the same assessment year. The making of one consolidated order for both streams of proceedings did not create illegality merely because two separate assessments could also have been framed.

Conclusion: The combined assessment order was not invalid on the ground accepted by the first appellate authority, and the assessee's challenge on this issue failed.

Issue (ii): Whether the procedural safeguard contained in the draft-assessment reference provision applied to the reassessment made for the relevant assessment year.

Analysis: The argument that the reassessment proceeding stood outside the scope of the draft-assessment procedure was not accepted. The Tribunal treated the question as governed by its earlier Special Bench view and held that the later High Court decision relied upon by the assessee dealt with a different statutory setting and did not displace that view. Since the Tribunal was bound by the Special Bench decision, it declined to hold that the draft-assessment safeguard was inapplicable to reassessment proceedings under the statutory scheme then in force.

Conclusion: The contention that the draft-assessment procedure could not apply to the reassessment was rejected.

Final Conclusion: The order of the first appellate authority was set aside and the matter was restored for decision on all remaining grounds on merits, with the appeal and cross-objection treated as partly allowed for statistical purposes.

Ratio Decidendi: A reassessment proceeding may be pursued for escaped income even where the original assessment has been set aside only in part and remains pending for limited re-determination, and the procedural mechanism applicable to assessment may, in the absence of a contrary binding authority, govern the reassessment process for the relevant assessment year.

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