Appellate assessment powers extend to fresh assessment where a statutory deduction issue was not properly considered.

The Appellate Assistant Commissioner's power under the 1922 Income-tax Act extended to the whole assessment, not merely the grounds raised in appeal, so long as the reassessment did not introduce a new source of income outside the original subject-matter. Where the Income-tax Officer failed to apply a relevant statutory provision to an existing deduction claim, that omission could amount to a non-exercise of power. In that situation, the Appellate Assistant Commissioner could correct the error, set aside the assessment, and direct a fresh assessment to enable recomputation of depreciation on the proper legal basis. The issue was answered in the affirmative.

---

---

Issues: Whether the Appellate Assistant Commissioner had power under section 31(3)(a) and (b) of the Indian Income-tax Act, 1922 to set aside the assessment and direct a fresh assessment so as to enable recomputation of depreciation allowance under the first proviso to section 10(5)(a).

Analysis: The power of the Appellate Assistant Commissioner extends over the whole assessment, not merely the grounds raised in appeal, though it cannot introduce a new source of income outside the subject-matter considered by the Income-tax Officer. Where the Income-tax Officer has failed to apply his mind to a statutory provision relevant to an existing claim in assessment, that omission may amount to non-exercise of power. In such a situation, the Appellate Assistant Commissioner may correct the error and, if necessary, set aside the assessment and direct a fresh assessment, provided the subject-matter remains the same. Recomputing depreciation on a different legal basis did not introduce a new subject-matter, but only required reconsideration of the same deduction claim.

Conclusion: The Appellate Assistant Commissioner had the power to make the order he made, and the question was answered in the affirmative.

Ratio Decidendi: In an appeal against assessment, the Appellate Assistant Commissioner may set aside the assessment and direct a fresh assessment where the Income-tax Officer has failed to exercise a statutory power relevant to an existing item of deduction, so long as the reassessment does not travel beyond the subject-matter of the original assessment.

---