Reassessment and rectification are distinct powers; external allocation reports can justify reopening even after rectification time limits expire.

Sections 35(5) of the 1922 Act and 147(b) of the 1961 Act were described as operating in different fields: rectification under section 35(5) corrected a partner's share after the firm's assessment, while section 147(b) addressed escaped income. The expiry of the rectification time limit did not bar reassessment if the separate conditions for reopening were met. Allocation reports were treated as external information capable of supporting reopening, and the earlier inclusion of the partner's share on the basis of the return was treated as a completed assessment, not an impermissible piecemeal assessment.

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Issues: Whether reassessment proceedings under section 147(b) of the Income-tax Act, 1961 could validly be initiated where rectification under section 35(5) of the Indian Income-tax Act, 1922 was also available but had become time-barred, and whether the information contained in the allocation reports constituted information justifying reopening.

Analysis: The available statutory powers for disturbing the finality of an assessment were held to be independent and operating in different fields. Section 35(5) dealt with correction of a partner's share on completion of the firm's assessment, while section 147(b) was directed to bringing escaped income to tax. The expiry of the time-limit under section 35(5) did not exclude resort to section 147(b) if its own conditions were satisfied. The allocation reports were treated as information from an external source and not as part of the assessee's record. The failure to act under rectification provisions did not convert escaped income into merely non-assessed income. The Court also held that the original inclusion of the partner's share on the basis of the return was a completed assessment and not impermissible piecemeal assessment.

Conclusion: Reassessment under section 147(b) was validly initiated and the conditions for reopening were satisfied, in favour of the Revenue.

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