Reassessment of escaped income under section 34 is not barred by an unchallenged appellate order where statutory conditions are met.

Section 34 of the Income-tax Act was treated as an independent reassessment machinery for bringing escaped income to tax, provided its statutory conditions were met. The absence of an appeal or revision against the earlier appellate order did not bar reopening, because that order did not create a finality that excluded the section 34 power. The court relied on its earlier similar decision and held that the reassessment was valid, so the assessed interest on arrears of rent remained taxable and the reference was answered in favour of the Revenue.

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Issues: Whether proceedings under section 34 of the Income-tax Act could be validly initiated to reassess income that had been excluded in an earlier assessment order when the department had not appealed or sought revision against that order.

Analysis: Section 34 was construed as an independent statutory machinery for bringing to tax income that had escaped assessment, provided the statutory conditions for its invocation were satisfied. The absence of an appeal or revision against the earlier appellate order did not create any implied restriction on the exercise of power under section 34. The earlier order did not acquire such finality as to bar reopening under that provision, because section 34 was not dependent on keeping the original proceedings alive by appeal or revision. The court also noted that its earlier decision in a materially similar case supported the validity of reassessment in such circumstances.

Conclusion: The reassessment proceedings under section 34 were valid and the escaped income could be brought to tax; the answer was in favour of the Revenue.

Final Conclusion: The reference was answered by holding that section 34 could be used notwithstanding the earlier unchallenged appellate order, and the assessed interest on arrears of rent was liable to tax.

Ratio Decidendi: Section 34 of the Income-tax Act is an alternative statutory remedy to reassess escaped income and is not barred merely because an earlier appellate order was not appealed or revised, so long as the statutory prerequisites for reopening are fulfilled.

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