Second appeal cannot introduce a new capital gains ground requiring fresh facts when it was never raised before the first appellate authority.

Appellate jurisdiction under the Income-tax Act, 1922 was confined ordinarily to objections raised before and decided by the Appellate Assistant Commissioner, so a new contention seeking to tax sale proceeds as capital gains could not be introduced for the first time in second appeal. Because the capital gains issue required fresh factual material, including valuation basis, it did not arise merely from the existing appellate order, and the proper route for taxing escaped income lay under the Act's separate machinery. The Tribunal was therefore justified in refusing to entertain the department's new ground, and the reference was answered in favour of the assessee.

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Issues: Whether the Tribunal was justified in refusing to entertain the department's contention, raised for the first time at the second appellate stage, that the profits from the sale of plots were assessable under the head of capital gains.

Analysis: The appeal provisions under section 33 of the Income-tax Act, 1922 contemplate an objection to the order of the Appellate Assistant Commissioner, and the appellate jurisdiction is ordinarily confined to matters that were raised before and decided by that authority. A point not urged before the Appellate Assistant Commissioner does not ordinarily constitute an objection arising from his order, and the appellate forum is not meant to be used to raise a completely new source of income requiring additional factual inquiry. The assessment of capital gains in the present case would have depended on material not on record, including the relevant valuation basis, and the special machinery for bringing escaped income to tax was available under the Act.

Conclusion: The Tribunal was right in declining to allow the new capital gains contention to be raised for the first time before it, and the answer to the referred question was in the affirmative, against the department and in favour of the assessee.

Ratio Decidendi: A new ground seeking to tax a different source of income, not raised before the Appellate Assistant Commissioner and requiring fresh factual foundation, cannot ordinarily be introduced for the first time in second appeal under the Income-tax Act, 1922.

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