Law:

Section:

Section 153, read with section 150 of the Income-tax Act, 1961 [Corresponding to section 34(3), read with section 34(1) of the Indian Income-tax Act, 1922] - Income escaping assessment - Time limit for completion of reassessment - Assessment year 1946-47 - Whether a finding or direction by appellate authority in an order relating to assessment of one year may warrant avoidance of bar of limitation under section 34(1) of 1922 Act against initiation of proceedings for assessment for another assessment year against same assessee or against another assessee - Held, no FACTS The assessee claimed that he had deposited a portion of the amount with another person out of the amount brought on return to India in March 1946. The ITO started proceedings under section 34 of 1922 Act and brought to tax the entire amount as income from undisclosed sources in the subsequent assessment year 1947-48. On appeal, the AAC modified the ITO's order to the extent that only the amount deposited with the another person was taxable. On second appeal, the Tribunal set aside the Order of the AAC holding that the amount brought in India by the assessee was not taxable in the assessment year 1947-48. In the meantime the ITO had initiated reassessment proceedings on 23-10-1958 under section 34(1)(a) of 1922 Act for assessment of income of assessee for year 1946-47, consequent upon finding recorded by AAC in proceedings for assessment of assessee's income relating to year 1947-48. The assessee pleaded that as eight years had elapsed since the end of the assessment year and the amount involved was less than Rs. 1 lakh, no proceeding for assessment of income could be initiated under section 34(1)(a) of the 1922 Act for the assessment year 1946-47. This plea was rejected by the departmental authorities and the Tribunal. They held that the proceeding for assessment initiated pursuant to the finding of the AAC in the earlier proceeding was saved by the second proviso to section 34(3) of the 1922 Act. The high court, at the hearing of the reference, also accepted that view. HELD On appeal to the Supreme Court : The High Court was in error in holding that a finding or direction by an appellate…

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