Fresh reassessment after appellate order may include later deemed dividend income and is not time-barred under the proviso.

When an assessment is set aside and a fresh assessment is made under section 31(3) of the Income-tax Act, 1922, the new assessment replaces the earlier one and the officer may consider all relevant material then available, subject to the appellate directions. Findings in the original assessment do not survive as res judicata, so later section 23A deemed dividend income could validly be included in the reassessment. Reassessments made in pursuance of an order under section 31 also fall within the proviso to section 34(3), and are therefore not barred by limitation.

---

---

Issues: (i) Whether, on reassessment made after an appellate order setting aside the original assessment, the Income-tax Officer could include dividend income deemed to have been received under section 23A of the Income-tax Act, 1922; (ii) whether reassessments made pursuant to orders under section 31 of the Income-tax Act, 1922 were barred by limitation under section 34(3) of that Act.

Issue (i): Whether, on reassessment made after an appellate order setting aside the original assessment, the Income-tax Officer could include dividend income deemed to have been received under section 23A of the Income-tax Act, 1922.

Analysis: A fresh assessment made under section 31(3) is a new assessment in substitution of the assessment that was set aside. In making such a reassessment, the Income-tax Officer is bound by the appellate directions but is otherwise free to consider all relevant material available at the time of reassessment. Findings recorded in the original assessment do not operate as res judicata and do not survive once that assessment is set aside. Accordingly, the officer could take into account the section 23A orders and assess the assessee on the larger dividend income deemed to have been received.

Conclusion: Yes. The reassessment could validly include the deemed dividend income under section 23A.

Issue (ii): Whether reassessments made pursuant to orders under section 31 of the Income-tax Act, 1922 were barred by limitation under section 34(3) of that Act.

Analysis: Section 34(3) imposed a general time bar for assessment or reassessment after four years from the end of the relevant year, but its second proviso excluded reassessments made in pursuance of an order under section 31. The reassessments in question were made in direct compliance with the Appellate Assistant Commissioner's directions, and therefore fell within that exception. The inclusion of the deemed dividend income did not create any separate limitation problem once reassessment itself was authorised under the appellate order.

Conclusion: No. The reassessments were not barred by limitation.

Final Conclusion: The reference was answered against the assessee on both questions, and the reassessments were upheld as valid.

Ratio Decidendi: When an assessment is set aside and a fresh assessment is directed under section 31(3) of the Income-tax Act, 1922, the Income-tax Officer may reassess on the basis of all relevant material then available, including a later section 23A order, and such reassessment is not barred by section 34(3) where it is made in pursuance of the appellate order.

---