Escaped assessment under income tax law includes income omitted from final taxation for any reason, including appellate cancellation.

Income can be treated as having escaped assessment when it is not brought to tax in the final assessment for any reason, even if it was originally returned or later excluded through an erroneous assessment or cancellation on appeal. The Lahore High Court construed "escaped assessment" in section 34 of the Income-tax Act, 1922 in its wider ordinary sense, relying on the words "for any reason" and reading earlier authority as not limiting the provision to non-disclosure by the assessee alone. On that basis, it treated notice and reassessment as valid and answered the referred question in the affirmative.

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Issues: Whether income returned by the assessee but left unassessed in the individual assessment, and later found excluded from the family assessment, could be treated as income that had "escaped assessment" so as to attract section 34 of the Income-tax Act, 1922.

Analysis: The Court construed the expression "escaped assessment" in section 34 in its ordinary and wider sense. It held that the phrase is not confined to cases where income was omitted from the return altogether, but also covers cases where income was returned yet, for any reason, was not charged in the final assessment, including where an appellate or revisional order later cancels an earlier assessment. The Court relied on the language of section 34, especially the words "for any reason", and read the Privy Council decision as not limiting the provision to non-disclosure by the assessee alone. It also held that the scheme of revision and rectification provisions did not exclude section 34 from operating in such cases.

Conclusion: The income had escaped assessment within section 34, and the notice and reassessment were valid. The answer to the referred question under section 66(2) was in the affirmative.

Ratio Decidendi: Income may be said to have "escaped assessment" under section 34 of the Income-tax Act, 1922 when it is not brought to tax in the final assessment for any reason, including an erroneous exclusion by the Income-tax Officer or cancellation of an earlier assessment on appeal.

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