Time limits on income-tax review and reassessment remain controlling, while wrongly assessed income may still count as escaped assessment.

Statutory powers of review and reassessment under the Income-tax Act, 1922 were treated as time-bound, so they could not be exercised indefinitely after the relevant limitation period expired. The commentary further notes that, even where income had not been assessed within time, the revenue was not barred from proceeding if the amount had been wrongly assessed in another person's hands and therefore remained income that had escaped assessment in relation to the real recipient. Sections 33 and 34 were described as unavailable after the statutory period in respect of the accounting year discussed, but the escaped-assessment concept still operated within the limits of the Act.

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Issues: (i) Whether the Commissioner's powers of review under section 35 of the Income-tax Act, 1922 were subject to any period of limitation; (ii) whether the Commissioner was debarred from taking action in the present case because the income had not been assessed within the prescribed time.

Issue (i): Whether the Commissioner's powers of review under section 35 of the Income-tax Act, 1922 were subject to any period of limitation.

Analysis: The reference proceeded on the basis that the revisional and review powers of the income-tax authorities could not be exercised indefinitely. The governing scheme of the Act treated statutory powers affecting assessment as controlled by the limitation applicable to the relevant reassessment or review provisions.

Conclusion: The powers under section 35 were subject to limitation.

Issue (ii): Whether the Commissioner was debarred from taking action in the present case because the income had not been assessed within the prescribed time.

Analysis: The Court held that once the period prescribed by law had expired, the Income-tax Officer had no competence to assess the income, whatever the reason for the failure to do so within time. The fact that the income had been assessed in the hands of a person to whom it did not belong did not prevent it from being treated as income which had escaped assessment so far as the real recipient was concerned. Sections 33 and 34 could not be invoked in 1926 in respect of income derived during the accounting period 1921-22.

Conclusion: The Commissioner was not debarred, and the second question was answered in the negative.

Final Conclusion: The reference was answered by holding that the statutory powers were time-bound, but the particular objection to the Commissioner's action failed because the income had escaped assessment within the meaning of the Act.

Ratio Decidendi: Where the Act prescribes a period for assessment or review, the revenue cannot act after expiry of that period, but income wrongly assessed in another person's hands may still be treated as escaped assessment for the real recipient within the limits of the Act.

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