Pending reassessment proceedings do not permit a fresh section 34 notice or extend limitation for completion.

Where reassessment proceedings had already been validly initiated under section 34 and remained pending, income could not again be treated as escaped assessment on the same facts to justify a fresh notice. The Calcutta HC held that a transfer of the case under section 5(7A) did not extinguish the pending proceedings or create a new limitation period. The assessment had to be completed within the time running from the first valid notice, and the revenue could not extend the period by issuing a later notice shortly before expiry. The later notice and the assessment made under it were therefore barred by limitation and invalid.

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Issues: Whether, where reassessment proceedings had already been initiated by a valid notice and were pending, a fresh notice under section 34 could be issued so as to extend the period available for completion of the assessment, and whether the assessment completed pursuant to the later notice was barred by limitation.

Analysis: A valid notice under section 34 starts reassessment proceedings, and while such proceedings remain pending, the income cannot be treated as having escaped assessment so as to justify a new resort to section 34 on the same facts. Section 5(7A) transferring a case from one Income-tax Officer to another does not wipe out pending proceedings or confer a fresh period of limitation. The statutory scheme requires the assessment to be completed within the period allowed from the first valid notice, and the revenue cannot obtain an additional year by issuing another notice shortly before expiry of the eight-year period. The later notice did not displace the earlier proceedings, and the assessment made after the expiry of the permissible period could not be sustained.

Conclusion: The later notice under section 34 and the assessment made pursuant to it were invalid in law, and the assessment was barred by limitation. The decision was in favour of the assessee.

Ratio Decidendi: Where reassessment proceedings have been validly initiated and remain pending, income cannot be said to have escaped assessment for the purpose of issuing a fresh notice under section 34, and limitation for completing the assessment runs from the first valid notice.

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