The second proviso to Section 34(3) allows re-assessment beyond the four-year limit if based on appellate findings or directions, holding that appellate bodies retain authority for corrections without strict temporal constraints.

1. This petition concerns the tax liability of the petitioner during the assessment years 1951-52 to 1957-58 that is, Diwali ending 1950 to Diwali ending 1956. During the said period, the petitioner was being assessed as a Joint Hindu Family Firm. With respect to the assessment years 1951-52, 1952-53 and 1953-54 the Income Tax officer made the assessment orders on 30th March 1956, 9th March 1957 and 7th March 1958 respectively. These orders were challenged by the assessee in appeal before the Appellate Assistant Commissioner of Income - tax and were disposed of by him by orders dated 20-10-1958, 23-10-1958 and 31-10-1958 respectively. Further appeals were taken by the petitioner before the Income - tax Appellate Tribunal, which decided all these three appeals by order dated 22-1-1960. All the three appeals were consolidated as they related to the same assessee and involved common contentions. Before the Tribunal, the Department had also filed appeals relating to the assessment years 1952-53 and 1953-54 and they were also disposed of by the same order.

2. One Ramnath son of Ramkrishna Agarwal of Kamptee was doing business of manufacture and sale of bidis. He died on 23rd of February 1948. On 10th of February 1948 he had executed a will disposing of the property and the business. In that will he made certain arrangement for his wife and also for his son - in - law and other relations of his. According to this arrangement made in the will, an amount of Rs. 6971/- each was paid to Chandabai and Madan Mohan Jaipuria, Rupees 3485/- to Pushkarraj Dharmashala, Rs. 3900/- to Chhugnibai during the year 1951-52. These sums were disallowed by the Income - tax Officer as being merely an appropriation of income after it had accrued to the family. This was upheld by the Appellate Assistant Commissioner in appeal. The Appellate Asst. Commissioner seems to have taken the view that Ramnath was assessed in his lifetime in the status of Hindu Undivided Family and, therefore, he had no right to execute the will. The Income - Tax Officer further applied the proviso to S.13 of the Income - tax Act, 1961. In the view he took, the manner of accounting was such that the income, profits and gains could not properly be deducted therefrom and the Income - tax Officer accordingly made an ad hoc addition to the income of the assessee. This decision of the Income - tax Officer was also confirmed. There were other objections taken before the Income - tax Officer, but we are concerned presently with these two points only as before the Appellate Tribunal these two grounds were put. It was argued before the Appellate Tribunal that the status of Ramnath was not fully appreciated by the Department. It was urged that Ramnath was an individual who could bequeath his property by the will. On the other hand, it was contended on behalf of the Department that the status of Ramnath must be taken to be that of a Hindu Undivided Family as he was assessed as such during his lifetime and acquiesced in such assessment. As regards the applicability of the proviso to S.13, the Appellate Tribunal seems to have taken the view that the production register was such as could be reasonably maintained by