Reassessment limitation under income-tax law cannot be extended by findings relating to a different assessment year.

A reassessment notice issued under section 34 of the Income-tax Act, 1922 for assessment year 1952-53 was treated as time-barred because it was issued after the four-year limitation period. The department invoked the second proviso to section 34(3) on the basis of an appellate finding about deemed dividend income, but the controlling principle was that such a finding can extend limitation only if it relates to the very assessment year under reassessment. An observation concerning another year cannot save proceedings for a different year. On that basis, the notice and consequent reassessment were held invalid.

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Issues: Whether the notice under section 34 of the Income-tax Act, 1922 for the assessment year 1952-53 and the consequent inclusion of the deemed dividend income were valid, or whether the reassessment was barred by limitation and not saved by the second proviso to section 34(3).

Analysis: The reassessment notice was issued after the expiry of the four-year period prescribed under section 34 for the assessment year in question. The department relied on the appellate finding that the deemed dividend belonged to assessment year 1952-53 and contended that the second proviso to section 34(3) saved the proceedings. The controlling principle was that a finding of the appellate authority can be used only if it relates to the very assessment year involved in the proceedings, and an observation concerning another year cannot extend limitation for reassessment of a different year.

Conclusion: The notice under section 34 and the consequent reassessment for assessment year 1952-53 were not valid; the answer was in favour of the assessee and against the Revenue.

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