Appellate enhancement in income tax is limited to sources already considered for taxability; new income cannot be added from outside the record.

The appellate power to enhance an assessment under section 31(3) of the Income-tax Act, 1922 is confined to matters already considered by the Income-tax Officer, expressly or by clear implication, on the question of taxability. An Appellate Assistant Commissioner cannot introduce a new source of income from outside the assessment record or from a transaction not examined for taxability in the return or assessment order. A merely incidental reference to a transaction is insufficient unless the Income-tax Officer had applied his mind to that source.

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Issues: Whether the Appellate Assistant Commissioner could enhance the assessee's assessment on the basis of the remittance of Rs. 5,85,000 when the Income-tax Officer had not considered that amount for its taxability.

Analysis: The power of enhancement under section 31(3) of the Income-tax Act, 1922 is confined to matters that were the subject-matter of consideration by the Income-tax Officer, either expressly or by clear implication, from the point of view of taxability. The Appellate Assistant Commissioner cannot travel outside the record to discover a new source of income not processed by the Income-tax Officer or not disclosed in the return or assessment order. A merely incidental or collateral reference to a transaction in the assessment proceedings is not enough; there must be material showing that the Income-tax Officer applied his mind to that source with reference to its taxability or non-taxability.

Conclusion: The Appellate Assistant Commissioner had no jurisdiction to enhance the assessment on the basis of the Rs. 5,85,000 remittance, because that amount had not been considered by the Income-tax Officer as a taxable source of income.

Final Conclusion: Enhancement is confined to sources of income actually considered in the assessment process, and a new source not examined for taxability cannot be introduced at the appellate stage.

Ratio Decidendi: In an assessee's appeal, the appellate power to enhance assessment is limited to the subject-matter of assessment already considered by the Income-tax Officer on the issue of taxability and does not extend to introducing a new source of income from outside the record.

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