Reassessment notice valid where definite information supported belief of escaped income; later order did not invalidate the proceeding.

Section 34 of the Indian Income-tax Act, 1922 could be invoked where the Income-tax Officer had definite information leading to an honest and reasonable belief that income had escaped assessment, and the notice was issued on that basis. Material obtained from recomputation proceedings supported the belief, and the later passing of the Commissioner's final order in the excess profits matter did not invalidate the notice. Section 34 was treated as a machinery provision; the tax liability arose from the charging provisions of the Act, not from the notice itself. The proceeding was therefore held valid and the question was answered in the affirmative against the assessee.

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Issues: Whether the proceeding initiated under Section 34 of the Indian Income-tax Act, 1922 was valid.

Analysis: Section 34 could be invoked when the Income-tax Officer, on the basis of definite information coming into his possession, discovered that income had escaped assessment. The notice was issued after the officer had obtained material from the recomputation proceedings and had formed an honest and reasonable belief that part of the assessee's income had escaped assessment. The fact that the Commissioner's final order in the excess profits matter was passed later did not make the notice invalid. In any event, Section 34 was treated as a machinery provision, while the liability to tax arose from the charging provisions of the Act and not from the notice itself.

Conclusion: The proceeding under Section 34 was valid and the question referred was answered in the affirmative, against the assessee.

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