Limited appellate remand keeps assessment alive, but revision cannot exceed jurisdiction on subsidy and depreciation treatment.

A limited appellate remand does not annul the original assessment in full; the assessment process continues until the consequential order is passed, so limitation for revision under section 263 runs from that later order. On the subsidy issue, the subsidy treatment had already entered the assessment through reduction of actual cost and allowance of depreciation on the reduced cost, but the Commissioner could not use section 263 to direct assessment of the subsidy as income or compel a fresh depreciation recomputation beyond lawful jurisdiction. The revision was therefore timely, but the subsidy and depreciation directions were struck down for want of jurisdiction.

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Issues: (i) Whether the revisional order under section 263 of the Income-tax Act, 1961 was barred by limitation having regard to the appellate order that set aside the original assessment only for limited purposes; (ii) Whether the Commissioner could revise the assessment so as to direct inclusion of the subsidy as income and consequential reworking of depreciation.

Issue (i): Whether the revisional order under section 263 of the Income-tax Act, 1961 was barred by limitation having regard to the appellate order that set aside the original assessment only for limited purposes.

Analysis: The appellate order did not annul the assessment in full but set it aside only for two specified matters, namely relief under section 80J and the claim for advertisement expenditure. In such a limited remand, the original assessment did not become non est. The later order passed to give effect to the appellate directions was part of the same assessment process under section 143 of the Income-tax Act, 1961, and the assessment could be said to culminate only when that order was passed. The revisional limitation was therefore to be reckoned from that later order.

Conclusion: The revisional action was not barred by limitation.

Issue (ii): Whether the Commissioner could revise the assessment so as to direct inclusion of the subsidy as income and consequential reworking of depreciation.

Analysis: The subsidy treatment had been considered by clear implication in the assessment because the assessee had reduced the actual cost of assets by part of the subsidy and depreciation had been allowed on the reduced cost. That subject, therefore, formed part of the assessment process and was not outside the scope of appellate or revisional scrutiny in principle. However, the assessment on that point had merged to the extent it was considered by the assessing authority, and the Commissioner could not exercise section 263 jurisdiction to direct assessment of the subsidy as income in excess of his power. The consequential direction to recast depreciation could not survive independently.

Conclusion: The revisional direction on subsidy and consequential depreciation was without jurisdiction and was set aside.

Final Conclusion: The assessee succeeded because the revisional order could not be sustained to the extent it directed assessment of the subsidy and recomputation of depreciation, even though the revision was held to be within time.

Ratio Decidendi: Where an appellate authority sets aside an assessment only for limited specified matters, the original assessment is not obliterated; the assessment process continues until the consequential order is made, but revisional jurisdiction under section 263 cannot be used to travel beyond the lawful scope of the matters already absorbed in the assessment or to direct enhancement beyond that jurisdiction.

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