Fresh assessment after appellate directions upheld; limitation bar under section 34(3) did not apply and proviso was valid.

Limitation under section 34(3) of the Indian Income-tax Act, 1922 governed original assessment and reassessment for escaped income, but did not restrict fresh assessment proceedings taken in consequence of appellate, revisional, or reference directions. The Bombay HC held that a fresh assessment made by the Income-tax Officer pursuant to such directions fell within the second proviso, which removed the limitation bar in those cases. It further held that the proviso was not discriminatory against an assessee who was a party to the earlier proceedings, and that the constitutional invalidity found in earlier Supreme Court rulings was confined to strangers to the assessment. The notices were therefore valid and the proviso was intra vires as applied to the petitioner.

---

---

Issues: Whether notices issued for fresh assessment proceedings pursuant to appellate directions, after expiry of four years from the end of the assessment years, were invalid and whether the second proviso to section 34(3) of the Indian Income-tax Act, 1922 was unconstitutional as violating Article 14 of the Constitution of India.

Analysis: The Court held that the limitation in section 34(3) governed the original assessment by the Income-tax Officer and reassessment for escaped income, but did not control appellate, revisional, or reference proceedings. A fresh assessment made by the Income-tax Officer in consequence of a finding or direction of the appellate authority was treated as falling within the second proviso, which lifted the bar of limitation for such cases. The Court further held that the proviso was not discriminatory as regards an assessee who was a party to the earlier proceedings, and that the constitutional invalidity recognised in earlier Supreme Court decisions was confined to strangers and not to persons intimately connected with the assessment under appeal.

Conclusion: The notices were valid and the second proviso to section 34(3) was intra vires in its application to the petitioner.

---