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Issues:
1. Legality of section 34(1)(b) proceedings against the assessee for the assessment year 1951-52. Detailed Analysis: The judgment concerns the legality of section 34(1)(b) proceedings initiated against the assessee for the assessment year 1951-52. The assessee, a shareholder in a limited company, had dividends deemed distributed to them in 1950. Subsequently, an order under section 23A was passed in 1956, affecting the original assessments for 1951-52 and 1952-53. The Income-tax Officer then issued a notice under section 34(1)(b) for the assessment year 1952-53, adding the dividend amount to the total income. The Appellate Assistant Commissioner annulled this assessment, stating that the relevant financial year for the dividend was 1950-51, making the assessment for 1951-52 improper. Despite this, a fresh notice under section 34(1)(b) for 1951-52 was issued in 1960, leading to a dispute over the bar of limitation. The Income-tax Officer contended that the bar of limitation was removed due to the provisions of section 34(3), allowing the reopening of the assessment to give effect to the Appellate Assistant Commissioner's finding for 1952-53. This decision was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, citing precedents from the Madras High Court and the Bombay High Court. However, the Supreme Court in later cases took a different view of section 34(3), clarifying that it does not save the time-limit for an escaped assessment of a different year. The Supreme Court emphasized that a finding or direction in an order for one year does not waive the limitation for assessments in another year. Ultimately, the High Court concluded that the initiation of proceedings under section 34(1)(b) for the year 1951-52 was not in accordance with the law. The court relied on the Supreme Court's interpretation of section 34(3) and emphasized that the provision could not be used to circumvent the time-limit prescribed under section 34(1). As a result, the court ruled against the initiation of proceedings for the assessment year in question and directed the Commissioner to pay the costs of the assessee.
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