Escaped assessment can arise despite earlier proceedings if no assessment order was passed before limitation expired.

Reassessment under the Income-tax Act, 1961 is available where earlier proceedings had been initiated under section 22(2) of the 1922 Act but no assessment order was made before limitation expired. The mere pendency of prior assessment proceedings does not prevent income from being treated as escaped assessment if no effective assessment resulted within the statutory period. In that situation, the Income-tax Officer may invoke section 147(1)(b) and issue notice under section 148. The challenge to reassessment on the ground of pending earlier proceedings therefore fails.

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Issues: Whether a notice for reassessment under sections 147 and 148 of the Income-tax Act, 1961 was valid where assessment proceedings had earlier been initiated under section 22(2) of the Indian Income-tax Act, 1922 but no assessment order had been passed within the period of limitation.

Analysis: Proceedings initiated by a notice under section 22(2) of the Indian Income-tax Act, 1922 do not prevent the income from being treated as escaped assessment if those proceedings are not brought to a final assessment order before the statutory period expires. The earlier authorities show that escaped assessment is not confined to cases where no return was filed; it also covers cases where a return or notice exists but no effective assessment results. Once the assessment year remained unassessed after the limitation period, the Income-tax Officer could invoke the reassessment provisions under section 147(1)(b) of the Income-tax Act, 1961 and issue notice under section 148.

Conclusion: The reassessment notice was valid, and the challenge to it failed. The contention based on the pendency of the earlier proceedings did not succeed.

Ratio Decidendi: Income may be said to have escaped assessment even where earlier assessment proceedings were initiated, if no assessment order is made and the assessment becomes barred by limitation, enabling reassessment under section 147(1)(b) of the Income-tax Act, 1961.

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