Law: Income Tax Act, 1961

Section: 156,220

Income-tax----Recovery of tax---Notice of demand---Assessment making an addition of a particular amount on ground that it represented cash credits---Addition set aside by Tribunal with a direction to A.O. to re-examine genuineness of credit---Order of rectification deleting addition---Notice of demand issued on basis of rectified assessment order--Assessment order had not been set aside in its entirety---Recovery of tax and interest on the basis of notice of demand was valid---Indian Income Tax Act, 1961, Ss.156 & 220---Constitution of India; Art.226. A notice of demand remains valid and effective to the extent that the tax is finally determined to be due and payable by the assessee and in case of reduction, so in the case of a remand, the -enforceability of the notice of demand is qualified by and subject to the fresh determination of the liability. The provisions contained in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, make this clear. It has been provided that where. Government dues are reduced in appeal or other proceedings, it shall not be necessary for the taxing authority to serve upon the assessee a fresh notice of demand and any notice of payment served upon the assessee before the disposal of the appeal or proceedings may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal. The Income-tax Officer completed the assessment of the assessee for the assessment year 1984-85 under section 143(3) of the. Income Tax Act, 1961, on a total income of Rs.17,32,260 which included an addition of Rs.50,000 being unexplained cash credit. The Commissioner of Income-tax (Appeals) confirmed the addition but the Tribunal set aside the addition of Rs.50,000 with a direction to the Assessing Officer to re-examine the genuineness of the cash credit after affording a reasonable opportunity to the assessee. On April 24, 1989, the Assistant Commissioner of Income-tax passed an order under section 154 of the Act in which it was held that the credit of Rs.50,000 was genuine and thus, the total income was re-determined to be Rs.16,82,260. He also…

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