Appellate direction for reassessment must be necessary, reasoned, and preceded by hearing; otherwise jurisdiction and limitation fail.

An appellate direction can support reassessment only if it is necessary for disposing of the appeal, contains the requisite finding, and is made after hearing the affected person; otherwise, it cannot confer jurisdiction on the Income-tax Officer under section 147. On the stated facts, the direction in the firm's appeal did not find that the excluded income belonged to the partners, and the partners were not heard, so the section 153(3) deeming provision did not assist the revenue. Once that direction was invalid, the reassessment could not be treated as saved by the limitation exception and was therefore time-barred.

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Issues: (i) Whether the appellate authority's direction to reopen the assessments of the non-appealing partners was a valid direction conferring jurisdiction on the Income-tax Officer to initiate reassessment under section 147. (ii) Whether the reassessment proceedings were barred by time.

Issue (i): Whether the appellate authority's direction to reopen the assessments of the non-appealing partners was a valid direction conferring jurisdiction on the Income-tax Officer to initiate reassessment under section 147.

Analysis: A direction by the appellate authority must be one that is necessary for the disposal of the appeal or for granting relief to the appealing assessee. A finding or direction which is not required for that purpose cannot validly authorise action against persons who were not the appealing assessees. On the facts, the direction made in the firm's appeal did not record a finding that the amount excluded from the firm's income was the income of the partners, and the partners were not heard before the direction was made. The deeming provision in section 153(3) could not assist the revenue in the absence of those requirements.

Conclusion: The direction was invalid and conferred no jurisdiction to initiate proceedings under section 147.

Issue (ii): Whether the reassessment proceedings were barred by time.

Analysis: Once the direction was held to be invalid, the reassessment could not be treated as one made in consequence of or to give effect to a valid finding or direction under the relevant limitation provision. The revenue's reliance on the deeming fiction therefore failed, and the reassessment remained outside time.

Conclusion: The proceedings under section 147 were barred by time.

Final Conclusion: The reassessment of the partners could not be sustained either on jurisdiction or on limitation, and the assessee succeeded on both questions.

Ratio Decidendi: An appellate direction can sustain reassessment only if it is necessary for disposing of the appeal, contains the requisite finding, and is made after affording the affected person an opportunity of being heard; otherwise, it cannot confer jurisdiction or extend limitation.

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