Transitional reassessment bar under the Income-tax Act: pending proceedings under the repealed law prevented a fresh notice for the same escaped income.

The transitional saving provision under the Income-tax Act, 1961 was applied on the basis of factual pendency of reassessment proceedings under Section 34 of the 1922 Act on the commencement date, not on whether those earlier proceedings were ultimately legally sustainable. Because proceedings relating to the same escaped income were already pending when the 1961 Act came into force, fresh reassessment by notice under Section 148 could not be initiated. The annulment of the earlier order did not render the pending proceedings non est for purposes of Section 297(2)(d)(ii), and the notice under the 1961 Act was held invalid.

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Issues: Whether a notice for reassessment under the Income-tax Act, 1961 could be issued for the same escaped income when proceedings under Section 34 of the Indian Income-tax Act, 1922 were already factually pending on the date the 1961 Act came into force, and whether the legality of the earlier proceedings was material for Section 297(2)(d)(ii) of the 1961 Act.

Analysis: The transitional provision was held to turn on the factual pendency of proceedings under the repealed Act on the relevant date, and not on whether those proceedings were legally sustainable or ultimately valid. Since proceedings under Section 34 of the 1922 Act were already pending in respect of the same escaped income when the 1961 Act commenced, the department could not commence fresh reassessment proceedings by issuing a notice under Section 148 of the 1961 Act. The fact that the earlier reassessment order had been annulled did not make the earlier proceedings non est for the purpose of the saving clause.

Conclusion: The notice under Section 148 of the Income-tax Act, 1961 was invalid and was quashed, with the result that the assessee succeeded.

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