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

The appellate power of enhancement could not be used to bring to tax a new source of income where the Income-tax Officer had not assessed that head at all and had referred to the amount only incidentally while computing capital gains. The amount relating to outstanding fees was used only for goodwill and capital gains computation, not as a distinct item of professional income, so it did not form part of the subject-matter examined in the original assessment. The attempted enhancement was therefore beyond jurisdiction and the addition as income from profession was invalid.

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Issues: Whether the Appellate Assistant Commissioner could, by way of enhancement, bring to tax for the first time an amount under the head of income from profession when the Income-tax Officer had not taxed any amount under that head and had considered the amount only incidentally while computing capital gains.

Analysis: The assessment order showed that the Income-tax Officer had intended to tax only the goodwill element and had estimated the amount relating to outstanding fees merely for working out the capital gains computation. No amount was brought to tax under the head of profession or business, and the particular source of income was not processed as a distinct subject-matter for taxability. The scope of enhancement under the appellate power did not extend to discovering and taxing a new source of income not considered by the Income-tax Officer, and the expression covering matters arising out of the proceedings did not authorise introduction of a matter that had not been examined or processed by him.

Conclusion: The enhancement could not be sustained, and the addition of Rs. 15,000 as income from profession was invalid.

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