Appellate enhancement cannot add a new source of income not examined in the original assessment record.

The Appellate Assistant Commissioner's enhancement power under the Indian Income-tax Act, 1922 extends only to matters already considered in the original assessment record. A new source of income not examined by the Income-tax Officer cannot be introduced in appeal, because escaped income from such a source must be brought to tax through the separate machinery for reassessment, not by appellate enlargement. Applying that principle, income from purchases in British India, having not been considered in the original assessment, could not validly be added in appeal; the enhancement was therefore unsustainable.

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Issues: Whether the Appellate Assistant Commissioner, in an appeal against assessment, could enhance the assessment by bringing to tax income from purchases in British India which had not been considered by the Income-tax Officer.

Analysis: The statutory scheme of the Indian Income-tax Act, 1922 confers wide powers on the Appellate Assistant Commissioner under section 31, including the power to confirm, reduce, enhance or annul an assessment. Those powers, however, have been judicially limited to matters already considered by the Income-tax Officer in the assessment record. Income from a distinct source not subjected to assessment cannot be introduced in appeal, because escaped income from new sources is dealt with separately under the special machinery of section 34, and the alternative power under section 33B does not enlarge appellate jurisdiction. On the Tribunal's finding that the Income-tax Officer had never considered the relevant purchase income, the appellate enhancement could not stand.

Conclusion: The Appellate Assistant Commissioner had no competence to add the disputed income from purchases in British India, since it was a new source not considered in the original assessment; the question was answered in the negative.

Final Conclusion: The reference was decided against the Revenue and in favour of the assessee, with costs awarded to the respondents.

Ratio Decidendi: In an appeal under the Income-tax Act, the Appellate Assistant Commissioner may enhance an assessment only in respect of matters already considered in the original assessment and cannot introduce a new source of income not examined by the Income-tax Officer; such income must be brought to tax, if at all, through the special provisions for escaped income.

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