Reassessment validity upheld where cancellation of registration constituted fresh material for action and could not be collaterally challenged.

An existing order cancelling firm registration can amount to fresh information or material enabling the Income-tax Officer to form the belief that income had escaped assessment, where the original assessments were made on the basis of registration. The validity of that cancellation cannot be collaterally challenged in the reassessment reference, and the reassessment was not shown to be time-barred or otherwise outside section 34(1)(b). The section 34 proceedings were therefore validly initiated, with the issue answered in favour of the Revenue.

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Issues: Whether the proceedings under section 34 of the Income-tax Act were validly initiated.

Analysis: The cancellation of registration under rule 6B remained operative when the Income-tax Officer initiated action under section 34. That cancellation constituted fresh information/material on which the officer could form the view that income had escaped assessment, because the original assessments had proceeded on the basis of registration as a firm. The merits of the cancellation order itself were not open to examination in the reference arising out of the reassessment proceedings. The reassessment was also not shown to be barred by time or outside section 34(1)(b).

Conclusion: The proceedings under section 34 were validly initiated and the answer is in the affirmative, against the assessee and in favour of the Revenue.

Ratio Decidendi: An existing order cancelling registration can constitute fresh information/material sufficient to justify initiation of reassessment proceedings under section 34, and the validity of that cancellation cannot be collaterally challenged in the reassessment reference.

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