Strict limitation in tax assessments bars late reassessment, and a pure question of law may still be raised on appeal.

A taxing statute's limitation period for escaped-income assessment must be strictly enforced, and it cannot be extended by equity or general considerations of justice; on that basis, an assessment made beyond the time prescribed by section 34(3) of the Income-tax Act, 1922 was treated as invalid. Where the original assessment is time-barred, the second proviso excluding reassessments under section 27 does not save it. A pure question of law going to the root of the assessment may also be raised at the appellate stage even if not urged earlier, so the plea of limitation remained open in subsequent proceedings.

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Issues: (i) Whether the original assessment made after the period prescribed under section 34(3) of the Income-tax Act, 1922 was barred by limitation and therefore invalid; (ii) whether, in subsequent proceedings, the assessee could raise the plea of limitation even though it had not been taken earlier.

Issue (i): Whether the original assessment made after the period prescribed under section 34(3) of the Income-tax Act, 1922 was barred by limitation and therefore invalid.

Analysis: The statutory scheme fixed a definite time limit for making an assessment on escaped income, and the first proviso to section 34(3) allowed completion only within one year from service of notice even if that period exceeded the outer limit. The original assessment was made beyond that extended period. The second proviso excluding reassessments under section 27 could operate only where a valid original assessment existed. In a taxing statute, time limits cannot be enlarged by equity or by importing general considerations of justice.

Conclusion: The original assessment was barred by time and was invalid.

Issue (ii): Whether, in subsequent proceedings, the assessee could raise the plea of limitation even though it had not been taken earlier.

Analysis: The plea concerned a pure question of law and went to the root of the matter. No further factual inquiry was required, and such a ground could be entertained in appeal even if it had not been urged before the Income-tax Officer in the earlier proceedings.

Conclusion: The plea of limitation was open to the assessee in the subsequent proceedings.

Final Conclusion: The reference was answered in favour of the assessee, the original assessment was held time-barred, and the fresh assessment based on it was held unsustainable.

Ratio Decidendi: In taxing statutes, prescribed limitation periods must be strictly enforced, cannot be extended on equitable grounds, and a pure question of law going to the root of the assessment may be raised at a later appellate stage.

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