1. This appeal by the assessee relates to the assessment year 1977-78, for which the relevant previous year ended on 31-3-1977.
2. The only ground raised in the appeal is that the AAC erred in bringing to tax a sum of Rs. 15,000 as income from profession.
3. The assessee was carrying on the profession of consulting engineer for over 40 years. Due to advancing age and also indifferent health, the assessee, on 1-4-1976, assigned his profession along with goodwill for Rs. 85,000 to one Shri A.D. Savardekar, who had been working with the assessee for some time. Out of the consideration of Rs. 85,000, Rs. 1,000 was in respect of furniture, fixtures and other articles. The balance amount of Rs. 84,000 was described as the price for the goodwill and name of the said business or profession, outstandings and other intangible rights in connection with the said business'. During the course of the assessment, the ITO bifurcated the sum of Rs. 84,000.
He estimated the outstanding fees at Rs. 25,000 and held that the balance of Rs. 64,000 represented the price of the goodwill. As pointed out by the AAC, there is an arithmetical mistake in this computation because there would be a balance of Rs. 64,000 under goodwill only if the amount under outstanding fees had been estimated at Rs. 20,000.
Rejecting the contention of the assessee that Rs. 64,000, being the price of goodwill, cannot be brought to tax, the ITO brought the amount to tax as representing capital gains. He did not bring to tax the balance amount of Rs. 20,000 under any head and the order was silent with regard to this matter.
4. In appeal, the AAC, relying upon the ruling of the Supreme Court in the case of CIT v. B.C. Srinivasa Setty  128 ITR 294, held that the goodwill cannot be taxed as it is a self-generated asset. But he thought that the amount received by the assessee under the sale deed to cover the outstanding fees should be brought to tax as income from profession. After issuing a notice of enhancement to the assessee, he brought to tax a sum of Rs. 15,000 as income from profession. The assessee has come up in appeal against the order. It was contended by the learned counsel for the assessee that in the light of the rulings of the Supreme Court in the case of CIT v. Shapoorji Pallonji Mistry  44 ITR 891 and in the case of CIT v. Rai Bahadur Hardutroy Motilal Chamaria  66 ITR 443 and that of the Madhya Pradesh High Court in the case of CIT v. Nirbheram Daluram  127 ITR 491, the AAC could not have brought to tax for the first time by way of enhancement, any amount under a head, under which no amount had been taxed at all by the ITO. The learned departmental representative, while not disputing the proposition, contended that a reading of the order of the ITO would show that he had actually intended to tax the amount.
5. The assessee has to succeed in his contention. A reading of the assessment order will show, that the ITO intended to and proceeded to tax only the goodwill. He estimated the amount covering the outstanding fees only for the purpose of arriving at the amount to be taxed as goodwill. Ultimately, although he assessed to tax amounts under various heads, like 'Interest on securities', 'Income from house property', 'Capital gains', etc., no amount was brought to tax under the head of income from profession or from business. It is, therefore, clear that the ITO did not intend to tax the amount and that he did not process the matter at all. In the case of Shapoorji (supra), the Supreme Court has held that the AAC has no power to enhance the assessment by discovering new sources of income not disclosed in the return by the assessee or considered by the ITO in the order appealed against. In the case of Rai Bahadur (supra), it was held by the Supreme Court that for taxing an amount for the first time in appeal, there must be something in the assessment order to show that the ITO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxabih'.y. and not to any incidental connection. In the present case, the ITO had estimated the amount to cover the outstanding fees only incidentally to work out the amount of capital gains. In the case of Nirbheram (supra), the Madhya Pradesh High Court has considered the scope of the Explanation to Section 251 of the Income-tax Act, 1961 which was not. present in Section 31(3) of the Indian Income-tax Act, 1922, considered by the Supreme Court in the cases cited earlier. It was held that the words 'any matter arising out of the proceedings' occurring in the Explanation are not wide enough to include a matter which could have been raised before or considered by the ITO, but was not raised before him or considered by him and, that the said words can refer only to a matter which was processed by the ITO or was raised before him for being processed. In the present case, as already pointed out, the ITO had not processed the matter at all. We, therefore, hold that the AAC could not have, by way of enhancement, brought to fax the sum of Rs. 15,000 and that the enhancement cannot be sustained.