Reassessment notice for escaped income can cover undisclosed income within the assessment year under the statutory previous year rule.

A section 34 notice referring to escaped income for a stated accounting period can support reassessment of undisclosed income assessable in the relevant assessment year, even where the income arose from a source outside the period specifically mentioned in the notice. The statutory scheme treated the previous year as the financial year ending 31 March 1946, unless the assessee had validly adopted a different accounting year for that source. Because no separate accounting year had been chosen or disclosed for the money-lending business, the revenue was entitled to apply the statutory previous year and include the escaped income in reassessment. The assessee's objection therefore failed, and the reassessment was upheld.

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Issues: Whether, on a notice under section 34 stating that income for a particular accounting period had escaped assessment, the Income-tax Officer could lawfully reassess income from an undisclosed source that was assessable in the relevant previous year but fell outside that stated period.

Analysis: The notice under section 34 was issued in relation to the assessment year 1946-47, and the statutory scheme treated the previous year as the financial year ending 31 March 1946 unless the assessee had exercised an option for a different accounting year for the relevant source of income. The assessee had not exercised any such option in relation to the money-lending business and had not maintained or disclosed a different accounting year for that source. The court held that section 34 was not confined by the precise source or period initially mentioned in the notice, so long as the escaped income fell within the assessment year and the proper previous year applicable under the Act. The notice gave sufficient intimation that reassessment was proposed for the assessment year in question, and the revenue was entitled to assess the income on the basis of the statutory previous year.

Conclusion: The assessee's objection failed, and the reassessment including the undisclosed income was upheld.

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