Reassessment linked to appellate direction remains valid where the non-resident assessee is closely connected with the assessed income.

Section 34(3) of the Indian Income-tax Act, 1922 allows reassessment action taken in consequence of, or to give effect to, an appellate finding or direction. The expression "any person" is confined to a person closely connected with the assessment year and liable for the income under consideration, not a stranger to the proceedings. On these facts, a non-resident company linked to its agent's assessment fell within the appellate direction, so the reassessment notice was treated as valid and not barred by limitation.

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Issues: Whether a reassessment notice issued to the non-resident assessee pursuant to a direction in appellate proceedings was barred by limitation or invalid because the assessee was not the appellant in the earlier appeal.

Analysis: The second proviso to section 34(3) of the Indian Income-tax Act, 1922 permits action in consequence of or to give effect to a finding or direction in appeal, but the expression "any person" is confined to a person intimately connected with the assessment year under appeal and liable to be assessed for the income that formed part of that assessment. The non-resident company's liability was intrinsically linked with the assessment of its agent, and the appellate direction concerned only the machinery of assessment, not a stranger to the proceedings. The notice was therefore within the ambit of the appellate direction and could not be treated as time-barred on the facts.

Conclusion: The reassessment notice was valid and the objection based on limitation and lack of binding effect failed.

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