Limitation for reassessment notice is mandatory; an out-of-time service cannot be cured by the assessment-extension proviso.

Service of the reassessment notice within the period prescribed by section 34(1) of the Income-tax Act, 1922 was held to be a mandatory jurisdictional for valid reassessment. The proviso to section 34(3) was interpreted as extending only the time for completing the assessment after a notice has been validly issued and served in time; it could not cure a notice served beyond the statutory limitation. Because the notice in question was served after the prescribed period, the foundational requirement failed and the reassessment was unsustainable.

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Issues: Whether a notice under section 34(1) of the Income-tax Act, 1922 had to be served within the prescribed period of eight years, and whether the proviso to section 34(3) could validate an assessment where the notice itself was served out of time.

Analysis: Section 34(1) makes service of notice within the prescribed period a prerequisite to a valid reassessment. The proviso to section 34(3) operates only after a valid notice has been issued and served within time, so that it may extend the period for completing the assessment. The proviso cannot be read so as to override or curtail the assessee's statutory right to have the notice served within the limitation prescribed by section 34(1). Since the notice in the present case was served beyond the eight-year period, the foundational jurisdictional requirement failed and the subsequent assessment could not be sustained.

Conclusion: The notice was invalid and the reassessment was bad in law; the question was answered in the negative, in favour of the assessee.

Final Conclusion: Limitation for service of notice under section 34(1) is mandatory, and the extension in the proviso to section 34(3) does not cure a notice served beyond time.

Ratio Decidendi: A reassessment under section 34 of the Income-tax Act, 1922 is incompetent unless the statutory notice is served within the period prescribed by section 34(1), and the proviso to section 34(3) cannot validate a notice served out of time.

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