Appellate enhancement cannot change the head of income from business income to unexplained money without a lawful basis.

Appellate enhancement cannot be used to recast the very nature of an assessed receipt on a new footing. Where the Assessing Officer had treated cash deposits as business income, the first appellate authority could not, on the same material, recharacterise them as unexplained money under section 69A and tax them under section 115BBE merely by invoking enhancement powers. The power of enhancement does not extend to making a fresh and different assessment of the same receipt without a permissible basis for changing its head of income. The attempted reclassification was therefore held unsustainable and was set aside in favour of the assessee.

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Issues: Whether the first appellate authority could, in exercise of enhancement powers, change the basis of assessment from cash deposits assessed as business income to unexplained money chargeable under section 69A and assessable under section 115BBE.

Analysis: The Assessing Officer had already treated the cash deposits as business income taxable at 8%. The appellate authority, while dealing with the same material, altered the character of the income and invoked enhancement. The governing principle is that appellate enhancement cannot travel so far as to alter the very head of income in the absence of a permissible basis for such a change, as the power of enhancement does not authorise a fresh and different assessment of the same receipt on a new footing.

Conclusion: The enhancement was not sustainable and the alteration of the income from business income to unexplained money was set aside in favour of the assessee.

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