Reassessment can admit omitted claims, but it cannot reopen finally decided issues or reduce income below the original assessment.

Reassessment proceedings remain reassessment proceedings even after a prior reassessment is set aside and a fresh order is directed. Omitted claims not finally decided in the original assessment may be entertained in reassessment, so claims for departmental recoveries and depreciation were in principle allowable. However, matters already specifically assessed and attaining finality, such as interest on FDRs taxed under other sources, cannot be re-agitated. Even where fresh claims are admitted, the reassessed income cannot be reduced below the income originally assessed, because reassessment is meant to bring escaped income to tax, not to create a net reduction below the final original figure.

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Issues: (i) Whether an assessment made after setting aside a reassessment order continues to be a reassessment and whether fresh claims can be entertained in reassessment proceedings; (ii) whether departmental recoveries and depreciation could be allowed in reassessment when not pressed in the original assessment; (iii) whether interest on FDRs, already assessed under other sources in the original assessment, could be re-agitated in reassessment; and (iv) whether the reassessed income could be reduced below the income originally assessed.

Issue (i): Whether an assessment made after setting aside a reassessment order continues to be a reassessment and whether fresh claims can be entertained in reassessment proceedings.

Analysis: A reassessment order passed pursuant to appellate directions does not lose its character as a reassessment merely because the earlier reassessment was set aside and a fresh order was directed. Once reassessment is validly opened, the proceeding is at large to the extent recognised by binding precedent, and the assessee may raise claims not considered in the original assessment, provided they were not already finally decided.

Conclusion: The assessment remained a reassessment, and fresh claims not earlier adjudicated were entertainable.

Issue (ii): Whether departmental recoveries and depreciation could be allowed in reassessment when not pressed in the original assessment.

Analysis: The claim for adjustment of departmental recoveries from contract receipts and the depreciation claim had not been specifically raised and decided in the original assessment, and therefore they could be considered in reassessment. The legal principle applied was that reassessment permits consideration of omitted claims, but the resulting relief cannot disturb the finality of the original assessed figure beyond the permissible limit.

Conclusion: The claims for departmental recoveries and depreciation were allowable in principle.

Issue (iii): Whether interest on FDRs, already assessed under other sources in the original assessment, could be re-agitated in reassessment.

Analysis: The interest income from FDRs had been specifically brought to tax in the original assessment and that assessment had attained finality. A claim that was considered and rejected, or necessarily decided, in the original assessment cannot be reopened in reassessment proceedings.

Conclusion: The assessee could not re-agitate the treatment of FDR interest in reassessment.

Issue (iv): Whether the reassessed income could be reduced below the income originally assessed.

Analysis: Even where fresh claims are entertained in reassessment, the resulting income cannot be taken below the income originally assessed. The reassessment machinery is meant to bring escaped income to tax and not to confer a net reduction below the final original assessment figure.

Conclusion: The reassessed income could not be reduced below the original assessed income.

Final Conclusion: Although some omitted claims were legally entertainable, the reassessed figure could not go below the income originally determined, so the assessee obtained no effective relief.

Ratio Decidendi: In reassessment proceedings, omitted claims not finally decided in the original assessment may be raised, but claims already concluded cannot be reopened, and the reassessed income cannot be brought below the income originally assessed.

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