Limitation for reassessment cannot be saved by findings relating to a different assessment year under the Income-tax Act.

The second proviso to section 34(3) of the Indian Income-tax Act, 1922 was construed narrowly: limitation is saved only where the reassessment gives effect to a finding or direction necessary for disposing of the appeal or revision concerning the same assessment year. The words "in consequence of or to give effect to" do not widen that power to a different year. On that basis, reassessment for an assessment year outside the subject-matter of the earlier appellate or revisional proceedings was time-barred, and the question referred was answered against the revenue and in favour of the assessee.

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Issues: Whether the second proviso to section 34(3) of the Indian Income-tax Act, 1922 saved limitation for reassessment of escaped income relating to an assessment year other than the year which was the subject-matter of the appeal or revision in which the finding or direction was recorded.

Analysis: The proviso was construed in the light of the governing principle that a finding or direction for this purpose must be one necessary for the disposal of the appeal in respect of the assessment year in question. A direction under the proviso is confined to directions which the appellate or revisional authority is empowered to give under the relevant sections, and the words "in consequence of or to give effect to" cannot enlarge that scope. Accordingly, the saving provision does not authorise reassessment of escaped income for a different assessment year merely because a related finding was recorded elsewhere.

Conclusion: The reassessment proceedings for the assessment year 1948-49 were barred by limitation and the question referred was answered in the negative, in favour of the assessee.

Final Conclusion: The assessment made under section 34(1)(b) could not be sustained because the statutory saving in the second proviso to section 34(3) did not extend to a year outside the subject-matter of the earlier appellate or revisional proceedings.

Ratio Decidendi: The second proviso to section 34(3) of the Indian Income-tax Act, 1922 saves limitation only for reassessment or assessment made to give effect to a finding or direction necessary for the disposal of the appeal or revision concerning the very assessment year in question, and not for a different assessment year.

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