Appellate enhancement in income-tax appeals cannot introduce a fresh source of income outside the assessment record.

Appellate enhancement in income-tax proceedings is confined to the subject-matter of the assessment and to income sources expressly or by clear implication considered by the Income-tax Officer. The power under section 31(3) of the 1922 Act and section 251(1) of the 1961 Act is in pari materia, but it does not authorise the appellate authority to travel beyond the record and introduce a fresh source of income not processed by the assessing officer or disclosed in the return or assessment order. Additions made on undisclosed sources were therefore unsustainable, and the assessee succeeded.

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Issues: Whether the Appellate Assistant Commissioner could, while disposing of an assessee's appeal, enhance the assessment by bringing in income from a new source not processed by the Income-tax Officer or disclosed in the return or assessment order, under the 1922 Act and the 1961 Act.

Analysis: The statutory powers of enhancement under section 31(3) of the Indian Income-tax Act, 1922 and section 251(1) of the Income-tax Act, 1961 were held to be in pari materia. The governing principle applied was that appellate enhancement is confined to the subject-matter of the assessment and to sources of income expressly or by clear implication considered by the Income-tax Officer from the point of view of taxability. The appellate authority cannot travel beyond the record to discover a fresh source of income not dealt with by the Income-tax Officer.

Conclusion: The Appellate Assistant Commissioner had no jurisdiction to add income traced to undisclosed sources that were not considered by the Income-tax Officer. The answer is in favour of the assessee.

Final Conclusion: The additions made in appeal from undisclosed sources could not be sustained, and the writ petitions succeeded.

Ratio Decidendi: The power of enhancement in income-tax appeals is restricted to the subject-matter of assessment and does not extend to assessing a new source of income not processed by the Income-tax Officer or disclosed in the return or assessment order.

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