Can the Commissioner (Appeals) use the enhancement power to tax a source of income the Assessing Officer never considered?
No. The Delhi High Court held that the first appellate authority's power, wide as it is, carries one limitation: it cannot introduce into the assessment a new source of income that the Assessing Officer never considered. That is what this judgment decides, and it decides it under s.251(1)(a). It does not say where the Revenue must go instead — for that, see CIT v Sardari Lal & Co, the Full Bench decision two years later, which added that the route lies under s.147/148 or s.263.
Decided by the High Court (Delhi High Court — Arun Kumar J and D.K. Jain J (judgment delivered by D.K. Jain J)) on 1999-09-23, reported as (1999) 240 ITR 556 (Delhi); 1999 VI AD (Delhi) 238; 82 (1999) DLT 584. It bears on section 251, section 251(1)(a) of the Income Tax Act 1961, in Appeals, Reassessment & Reopening and Revision & Rectification matters.
This is the authority for the boundary itself, and the boundary is what wins the argument: the Commissioner (Appeals) may go as deep as he likes into what the Assessing Officer did, but he may not open a subject the Assessing Officer never opened. Keep the two propositions apart when you cite them — the limitation is this case, the alternative route is Sardari Lal — because a citation that attributes the second to this judgment invites the answer that the judgment does not contain it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The Revenue sought to sustain an enhancement made in the first appeal on income that the Assessing Officer had not dealt with. The High Court examined the tension between the wide, coterminous powers repeatedly attributed to the first appellate authority and the restriction laid down in Shapoorji Pallonji Mistry and Rai Bahadur Hardutroy Motilal Chamaria. It concluded that the restriction as to a new source of income continued to operate notwithstanding later, more general statements about the width of appellate power. The Revenue's attempt to sustain the enhancement therefore failed.
The restriction as to the source of income continues under the 1961 Act, so it was not open to the first appellate authority to discover a new source of income. The Court's holding stops there. The further proposition — that the jurisdiction to tax income from a new source lies in appropriate cases under s.147/148 or under s.263 — is from CIT v Sardari Lal & Co (Delhi, Full Bench, 7 September 2001) and was previously printed on this page as though it came from this judgment. It does not: the words "147", "148" and "263" appear nowhere in this judgment.
The appellate authority's jurisdiction is derivative: it exists to correct the assessment before it, not to make a fresh one. The power under s.251(1)(a) to confirm, reduce, enhance or annul is wide as to the depth of scrutiny but bounded as to subject-matter — it operates on the assessment the Assessing Officer made, and a source he never considered was never part of it. The apparently wider language in later decisions was read as addressing the depth of appellate power over the assessment, not its subject-matter boundary.
However, there is a solitary but significant limitation to the power of revision, viz. that it is not open to the Appellate Commissioner to introduce in the Assessment a new source of income…
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court held that the first appellate authority's power, wide as it is, carries one limitation: it cannot introduce into the assessment a new source of income that the Assessing Officer never considered. That is what this judgment decides, and it decides it under s.251(1)(a). It does not say where the Revenue must go instead — for that, see CIT v Sardari Lal & Co, the Full Bench decision two years later, which added that the route lies under s.147/148 or s.263. This was decided by the High Court (Delhi High Court — Arun Kumar J and D.K. Jain J (judgment delivered by D.K. Jain J)) and bears on section 251, section 251(1)(a) of the Income Tax Act 1961. It is reported as (1999) 240 ITR 556 (Delhi); 1999 VI AD (Delhi) 238; 82 (1999) DLT 584. This is the authority for the boundary itself, and the boundary is what wins the argument: the Commissioner (Appeals) may go as deep as he likes into what the Assessing Officer did, but he may not open a subject the Assessing Officer never opened. Keep the two propositions apart when you cite them — the limitation is this case, the alternative route is Sardari Lal — because a citation that attributes the second to this judgment invites the answer that the judgment does not contain it. If it applies to you, the first step is this: When enhancement is proposed on something the AO never touched, ask the CIT(A) in writing to identify where in the assessment order or the AO's queries that source was considered.
The Revenue sought to sustain an enhancement made in the first appeal on income that the Assessing Officer had not dealt with. The High Court examined the tension between the wide, coterminous powers repeatedly attributed to the first appellate authority and the restriction laid down in Shapoorji Pallonji Mistry and Rai Bahadur Hardutroy Motilal Chamaria. It concluded that the restriction as to a new source of income continued to operate notwithstanding later, more general statements about the width of appellate power. The Revenue's attempt to sustain the enhancement therefore failed. The matter was decided on 1999-09-23 by the High Court (Delhi High Court — Arun Kumar J and D.K. Jain J (judgment delivered by D.K. Jain J)). On those facts the High Court held as follows. The restriction as to the source of income continues under the 1961 Act, so it was not open to the first appellate authority to discover a new source of income. The Court's holding stops there. The further proposition — that the jurisdiction to tax income from a new source lies in appropriate cases under s.147/148 or under s.263 — is from CIT v Sardari Lal & Co (Delhi, Full Bench, 7 September 2001) and was previously printed on this page as though it came from this judgment. It does not: the words "147", "148" and "263" appear nowhere in this judgment.
The appellate authority's jurisdiction is derivative: it exists to correct the assessment before it, not to make a fresh one. The power under s.251(1)(a) to confirm, reduce, enhance or annul is wide as to the depth of scrutiny but bounded as to subject-matter — it operates on the assessment the Assessing Officer made, and a source he never considered was never part of it. The apparently wider language in later decisions was read as addressing the depth of appellate power over the assessment, not its subject-matter boundary. In the words reproduced by the source cited on this page: "However, there is a solitary but significant limitation to the power of revision, viz. that it is not open to the Appellate Commissioner to introduce in the Assessment a new source of income…" The decision followed or applied CIT v. Sardari Lal & Co. [2001] 251 ITR 864 (Delhi) (FB) — the source of the s.147/148 and s.263 proposition formerly misattributed to this judgment; see /caselaw/case/cit-v-sardari-lal-enhancement/.
It was decided by the High Court on 1999-09-23 and is reported as (1999) 240 ITR 556 (Delhi); 1999 VI AD (Delhi) 238; 82 (1999) DLT 584. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 251, section 251(1)(a), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The restriction as to the source of income continues under the 1961 Act, so it was not open to the first appellate authority to discover a new source of income. The Court's holding stops there. The further proposition — that the jurisdiction to tax income from a new source lies in appropriate cases under s.147/148 or under s.263 — is from CIT v Sardari Lal & Co (Delhi, Full Bench, 7 September 2001) and was previously printed on this page as though it came from this judgment. It does not: the words "147", "148" and "263" appear nowhere in this judgment. It arises in Appeals, Reassessment & Reopening and Revision & Rectification matters, on section 251, section 251(1)(a) of the Income Tax Act 1961, and was decided by Delhi High Court — Arun Kumar J and D.K. Jain J (judgment delivered by D.K. Jain J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Cite this judgment for the limitation itself, and cite CIT v Sardari Lal & Co for the proposition that the Revenue's route is s.147/148 or s.263 — this judgment does not say that, and an opponent who checks will say so. Point out that the Revenue is not without remedy, so refusing enhancement causes no loss of revenue, only a change of route. Check whether the limitation for reassessment or revision has run: that is often the real reason enhancement is being attempted. Record the objection before the enhancement order is passed, because s.251(2) requires a reasonable opportunity of showing cause and your objection is the record of that. Carry the point to the ITAT as a jurisdictional ground if enhancement is nonetheless made.
Still good law. A separate validity check found the Union Tyres approach adopted and reinforced by the Delhi High Court Full Bench in CIT v Sardari Lal & Co (2001) 251 ITR 864, which held that the wide, coterminous powers of the first appellate authority do not extend to discovering an entirely new source of income. No overruling was found. That finding was checked against a published source, which is linked on this page, on 2026-08-19. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Correction, 9 September 2026. This entry previously carried a key quote — "…the jurisdiction to deal with it lies in appropriate cases under section 147/148 or under section 263" — attributed to this judgment. That sentence is not in this judgment. It is paragraph 4 of CIT v Sardari Lal & Co, decided two years later, and the two Delhi decisions had been run together in the digest this entry was originally written from. The quote has been replaced with the paragraph 12 holding, which is this Court's own, and the summary, held, reasoning and what-to-do have been brought back to what this judgment decides. The page's address still contains the words "new-source-goes-to-147", which names the proposition that belongs to Sardari Lal; the address is kept because it is published and links to it exist, but it does not describe this judgment's holding. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The restriction as to the source of income continues under the 1961 Act, so it was not open to the first appellate authority to discover a new source of income. The Court's holding stops there. The further proposition — that the jurisdiction to tax income from a new source lies in appropriate cases under s.147/148 or under s.263 — is from CIT v Sardari Lal & Co (Delhi, Full Bench, 7 September 2001) and was previously printed on this page as though it came from this judgment. It does not: the words "147", "148" and "263" appear nowhere in this judgment.
TaxSphere, “CIT v Union Tyres — the Commissioner (Appeals) cannot bring in a new source of income”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-union-tyres-new-source-goes-to-147/ (validity last checked 2026-08-19)
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