Second proviso to section 34(3) does not lift limitation absent an operative finding or directive in the appellate order.

The article explains that the second proviso to section 34(3) protects only steps taken in consequence of a finding or directive in an appellate order under section 31; where the appellate officer merely suggested that amounts "if at all" could be assessed for an earlier year and advised the officer to act "if so advised," there was no operative finding or direction. Consequently the proviso did not remove the limitation bar and the assessment notice for the earlier year was invalid, leaving the restraint in favour of the taxpayer intact.

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Issues: Whether a notice under section 34(3) seeking assessment for the assessment year 1944-45, issued eight years after that year, is saved from limitation by the second proviso to section 34(3) of the Income-tax Act by reason of an order of the Appellate Assistant Commissioner.

Analysis: The second proviso to section 34(3) protects only actions taken "in consequence of or to give effect to any finding or direction" contained in an order under section 31 (an order by an Appellate Assistant Commissioner). The Appellate Assistant Commissioner in the earlier order only found that the amounts did not form part of the income for the assessment year 1945-46 and explicitly stated that, "if at all", they could be assessed for 1944-45 and that the Income Tax Officer may take steps "if so advised." That language does not constitute a finding or a directive that an assessment for 1944-45 must be made, nor did the Appellate Assistant Commissioner determine that the amounts were income for 1944-45. The appellate order therefore did not contain any operative finding or direction which the second proviso could characteristically require to justify lifting the limitation bar.

Conclusion: The notice for assessment in respect of assessment year 1944-45 is not saved by the second proviso to section 34(3) and is invalid; decision upholding the trial judge's restraint is in favour of the assessee.

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