Valid assessment proceedings continue where a timely notice remains operative, and Section 34 does not bar completion of assessment.

A valid notice under Section 22(2) kept the assessment proceedings alive, and the later proceedings before the Special Income-tax Officer did not nullify that notice. As the original proceedings had not ended in a final assessment, the income could not be treated as escaped assessment, and Section 34 did not bar completion of the assessment. The subsequent assessment by the jurisdictional Income-tax Officer under Section 23(3) was therefore valid, and the reference was answered in favour of the Revenue.

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Issues: Whether a valid assessment could be made after the Special Income-tax Officer's proceedings were found nugatory, where the original notice under Section 22(2) had been issued within time and the assessment proceedings were still pending, and whether Section 34 barred the assessment.

Analysis: A valid notice under Section 22(2) had been issued by the officer having jurisdiction, and the later proceedings before the Special Officer did not abrogate or nullify that notice. The income could not be treated as having escaped assessment while proceedings on that valid notice remained pending and had not terminated in a final assessment. The subsequent assessment by the jurisdictional Income-tax Officer was made in the ordinary course under Section 23(3), and the time limit relied upon by the assessees under Section 34 did not defeat an assessment that was still within live and continuing proceedings.

Conclusion: The assessment was valid and the question was answered in the affirmative, against the assessees and in favour of the Revenue.

Final Conclusion: The reference was decided by holding that the income-tax authorities retained power to complete the assessment on the basis of the original valid notice, notwithstanding the void proceedings before the Special Officer.

Ratio Decidendi: Where a valid notice initiating assessment proceedings remains operative and those proceedings are still pending, the income cannot be treated as escaped assessment so as to attract a bar under Section 34.

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