Reopening on escaped income cannot be quashed in writ when the taxable entity's true constitution requires factual investigation.

Where the true constitution of the taxable entity is disputed, Section 34 reopening may proceed if the Income-tax Officer has reason to believe income has escaped assessment, and writ jurisdiction will not ordinarily stop the enquiry before facts are investigated in assessment proceedings. The Court noted that the challenge to notices under Section 34 and Rule 6-B raised factual questions about whether the business was a genuine firm or an association of persons, whether notice to all persons believed to constitute the association was sufficient, and whether absence of a prior assessment or the entity's later existence defeated action. The notices were therefore not liable to be quashed, and the objections to reopening and registration proceedings were rejected.

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Issues: Whether the notices issued under Section 34 of the Income-tax Act, 1922 and Rule 6-B of the Income-tax Rules for reopening the assessments and proposing cancellation of registration were liable to be quashed.

Analysis: The challenge was based on the contention that the Income-tax Officer had no new information, that the body sought to be assessed was not in existence, that the same income had already been assessed, that the notices were not addressed to a principal officer, that no prior assessment under Section 23 existed against the alleged association of persons, that the notices were time-barred, and that the registration proceedings under Rule 6-B afforded no effective remedy. The Court held that the material before the Income-tax Officer raised a real controversy as to the true character of the business entity, whether it was a genuine firm or an association of persons, and that this question depended on facts which required investigation in assessment proceedings. It was also held that Section 34 could be invoked where the officer had reason to believe that income had escaped assessment, that the existence of an association on the date of notice was not fatal because the Act contemplated assessment of dissolved associations, that notice to all the persons believed to constitute the association was not invalid merely because no notice was addressed to a principal officer, and that limitation did not bar action where no assessment had previously been made on the entity now sought to be taxed. The notices under Rule 6-B were likewise not held to be inherently unlawful at that stage.

Conclusion: The notices were not liable to be quashed in writ jurisdiction and the objections to the reopening and registration proceedings were rejected.

Ratio Decidendi: Where the true constitution of the taxable entity is in dispute and the Income-tax Officer has reason to believe that income has escaped assessment, writ jurisdiction will not ordinarily be used to arrest proceedings under Section 34 before the facts are investigated in assessment proceedings.

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