In this appeal, assessee is challenging legality of addition of Rs. 19,300 as income from undisclosed sources as well as on merits of such addition. assessee is firm and carries on business in moulding and casting of iron. asst. yr. is 1974-75 and relevant previous year is Samvat year 2029. This case has chequered history as could be gathered from following facts: (a) assessment in case of assessee was originally framed on 26th March, 1977 under s. 143(3) of Act, wherein, ITO had determined total income of assessee at Rs. 1,88,170 as against Rs. 1,51,720 declared in return filed on 28th June, 1974. (b) Against aforesaid assessment, assessee had preferred appeal before Commissioner (Appeals) wherein, it had contested following items: (i) disallowance of bad debt of Rs. 25,560, (ii) disallowance of Rs. 5,000 under s. 40 A(3), (iii) charging of interest under s. 217, and (iv) by way of additional ground, assessee had also challenged certain disallowances out of motor car expenses and depreciation claimed thereon. (c) On 12th April, 1979, Commissioner (Appeals) disposed of appeal in following manner. "The first contention raised by appellant is against disallowance of appellant's claim for bad debt of Rs. 25,560. appellant's representative has drawn my attention to fact that ITO has disallowed appellant's claim without any investigation or examination. It has been claimed that in assessment order no reasons for disallowing appellants claim has been mentioned. I have examined assessment order. ITO has added sum of Rs. 25,560 stating that: "bad debt disallowed Rs. 25,560." It is really strange to see that ITO has not even cared to examine appellant's claim. ITO had to examine appellant's claim and to state detailed reasons if he did not find claim genuine or admissible. It is apparent that this has not been done in present assessment. assessment has therefore been made without proper investigation. assessment is therefore set aside. ITO is directed to make fresh assessment according to law giving opportunity to appellant to put his case. In case any part of appellant's claim for deduction is disallowed in assessment, reasons for disallowance must be stated in order. As assessment has been set aside, other contentions raised by appellant are not considered. appellant will be at liberty to put his claim afresh and ITO will examine any further evidence offered by appellant and take fresh decision according to law. assessments set aside. appeal is to be treated as allowed. Relief Rs. 30,560." Thereafter, on 19th Feb., 1980, ITO framed assessment afresh wherein, he made addition of Rs. 19,300 in following manner: "On scrutiny of books of accounts of assessee firm, it was found that assessee firm had purchases of Rs. 19,300 form M/s. Vijay Traders, Ahmedabad. There was racket of issuing bogus purchase vouchers and M/s. V ija y Traders, Ahmedabad was one of those parties. assessee was therefore asked as to why amount of Rs. 19,300 claimed to have been purchase price of bills in respect of purchases made by it from M/s. Vijay Traders should not be added as its income from undisclosed sources. In this connection, it is stated by assessee that purchases made by it are genuine and they have been accounted for in its books of accounts and therefore there is no question of addition on this score. On interrogation as to whether amount of Rs. 19,300 has been actually paid by assessee firm to M/s. Vijay Traders it has been admitted by assessee's accountant Shri S.A. Thakker and assessee's authorised representative Shri J.M. Shah that amount of Rs. 19,300 is not still paid by assessee firm to M/s. Vijay Traders and is being shown as liability in its books of account even today. It is however stated that when M/s. Vijay Traders come forward to demand their bills, amount would be paid to them and therefore their account is not still squared off. There is no force in this connection. assessee made purchases in Samvat year 2029. It is surprising that sellar namely M/s. Vijay Traders would not have come forward to claim their bills even till date. It is thus clear that M/s. Vijay Traders does not appear to be genuine party and therefore they must have simply issued bogus bills for sales made by them. In any case, since amount of purchase price of Rs. 19,300 has not been still paid by assessee firm and since whereabouts of M/s. Vijay Traders are not known, amount of Rs. 19,300 which has been claimed as purchase made by assessee firm will be added as income from undisclosed sources in hands of assessee firm. Penalty proceedings under s. 271(1)(C) will be initiated against assessee firm". In said order, ITO had determined total income of assessee at Rs. 2,06,250. Against aforesaid order of ITO, assessee once again preferred n appeal before Commissioner (Appeals). Apart from taking up grounds which were earlier taken up before this predecessor assessee had also challenged addition of Rs. 19,300 made by ITO. (d) In meanwhile, ITO reopened assessment under s. 147(A) of Act, with view to bring to tax another bogus purchase of Rs. 12,358. After following procedure laid down under Act, ITO framed assessment on 18th Dec., 1980 under s. 143(3) read with s. 147 of Act, on total income of Rs. 2,18,608 (Rs. 2,06,250 as determined as per assessment order dt. 19th Feb., 1980 plus bogus purchase of Rs. 12,358). (e) Against order of ITO dt. 18th Feb., 1980, assessee preferred appeal before Commissioner (A). Commissioner (A), vide his order dt. 25th Oct., 1982, once again set aside assessment in respect of addition of Rs. 12,358 with direction that "the ITO will give specific opportunity to assessee to prove genuineness of purchases and make fresh assessment thereafter." (f) Against said order of Commissioner (A), assessee came up in appeal before Tribunal challenging addition of Rs. 12,358. Tribunal, in its order dt. 29th Jan., 1985 in I.T.A. No. 127/Ahd/83, deleted addition of Rs. 12,358 on ground that ITO, in his order, had mentioned Rs. 19,300 only as bogus purchase and there was no mention about alleged bogus purchase amounting to Rs. 12,358. In his order dt. 13th June, 1985 under appeal, Commissioner (A) confirmed action of ITO in making addition of Rs. 19,300, in following manner: "7. last ground of appeal is regarding addition of Rs. 19,300 as income from undisclosed sources on account of bogus purchase claimed from M/s. Vijay Traders. ld. Counsel of assessee firm initially made legal objection that ITO has gone beyond mandate given to him by order dt. 12th April, 1979 of CIT (A) in setting aside original assessment. He relies on ratio of decisions of Calcutta High Court in Surendra Overseas Ltd. vs. CIT (1979) 120 ITR 872 (Cal) and Katihar Jute Mills (P) Ltd. V CIT (1979) 120 ITR 861(Cal) wherein it has been held that ITO cannot go beyond specific directions of appellate authority if setting aside of order has been made for specific purpose. Reverting to facts of present case it is noticed that CIT(A) in his order dt. 12th April, 1979 did ask ITO to examine question of admissibility or otherwise of bad debt of Rs. 25,560; however, in para 3 of same order he left all other issues open by mentioning that: "As assessment has been set aside, other contentions raised by appellant are not considered. appellant will be liberty to put his claim afresh and ITO will examine any further evidence offered by appellant and take fresh decision according to law." From above it is obvious that neither CIT (A) examined any other grounds of appeal nor he precluded assessee or ITO to examine any claim afresh. Therefore, action taken by ITO in examining issue of bogus purchases while framing present assessment order is justified. legal objection taken by learned counsel of appellant has, therefore, no merit. Moreover it is also noticed that when against re-opened assessment order for this assessment year appellant went to Hon'ble Tribunal, and same ld. counsel of appellant was representing firm, question of bogus purchase of Rs. 19,300 got passing reference. In fact in para 3 of order of Tribunal Ahmedabad Bench 'B' in ITA No. 127/Ahd/83 it was observed as under: "At time of hearing before us assessee's counsel has produced c o p y off S.T.O's order wherein only amount of Rs. 19,300 has been mentioned as bogus purchase". Coming to merits of addition proposed by ITO it is noticed that during course of assessment proceedings ITO himself scrutinised books of accounts of assessee firm and discovered that purchase of Rs. 19,300 from M/s. Vijay Traders Ahmedabad was bogus. examination of books of accounts during any assessment proceedings is duty of ITO. As already mentioned above, when CIT (A) set aside original order he did not prohibit ITO from scrutiny of books of accounts or examining claim of assessee on other assessments. As stated in detail in later part of para 4 of assessment order framed by ITO, it was found that neither this amount of Rs. 19,300 has ever been paid to M/s. Vijay Traders nor any evidence could be produced to suggest actual existence of M/s. Vijay Traders. Even Sales Tax Authorities had raided business premises of assessee firm and initially found two purchases one of amount of Rs. 12,358 and other of Rs. 19,300 (which is amount in question now). Later Sales Tax Authorities could establish that only purchase of Rs. 19,300 from Vijay Traders is bogus purchase. ld. Counsel of appellant himself has produced copy of order of Sales Tax Authorities before Tribunal in appeal proceedings in reopened assessment. During proceedings before me appellant was asked to give proof of existence of M/s. Vijay Traders and establish that there has been genuine case of purchase. ld. Counsel of appellant, however, admitted that this amount of Rs. 19,300 had never been paid to M/s. Vijay Traders as business premises of Vijay Traders were washed away in floods in Sabarmati river in recent past. When asked as to what entries have been effected regarding non-payment of alleged business liability, he admitted that in later years this amount has been transferred to profit and loss account but has not been shown as income as at any time claimant can come. These explanations submitted by ld. Counsel are self-contradictory. Firstly, neither existence of M/s. Vijay Traders is proved nor any attempt has been made by assessee firm to show this as income in later years. In view of facts and circumstances pointed out by ITO in his order as also above circumstancial evidence, I find that addition of Rs. 19,300 as income from undisclosed sources has been rightly made. This ground of appeal is, therefore, dismissed". Being aggrieved by order of Commissioner (A), assessee has come up in appeal before Tribunal. As regards legality of addition of Rs. 19,300, ld. counsel for assessee kly argued that since Commissioner (A), vide his order dt. 12th April, 1979, had set aside assessment on specific grounds taken up before him, ITO was not justified in making addition of Rs. 19,300 in manner he did, vide his order dt. 19th Feb., 1980. In this connection, he relied on decision of Hon'ble Calcutta High Court in cases of Surendra Overseas Ltd. (1979) 120 ITR 872 (Cal) and Katihar Jute Mills Ltd. (1979) 120 ITR 861 (Cal) as well as order of Tribunal reported as ITO vs. Chabbra (1986) 25 TTJ (Bom) 101. In this connection, he submitted that once Commissioner (A) has no power to find new source and tax it in appeal preferred by assessee, ITO was not justified in adding Rs. 19,300 in assessment which was framed after setting aside of earlier assessment by Commissioner (A) with specific directions. In support of his submissions, he relied on decision of Hon'ble Supreme Court in case of CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC), of Hon'ble Gujarat High Court in case of CIT vs. Jagdish Mills Ltd. (1964) 51 ITR 266 (Guj) and of Hon'ble Gujarat High Court in case of Prabhudas Ramji vs. CIT (1966) 62 ITR 621 (Guj). He, therefore, urged that Commissioner (A) ought to have held that legally ITO was not justified in making addition of Rs. 19,300. As regards merits of addition of Rs. 19,300, ld. Counsel for assessee placed before us copy of order of Tribunal in assessee's own case for asst. yr. 1970-71 (I.T.A. No. 125/Ahd/83, dt. 19th Jan., 1985) and pointed out that on identical facts and circumstances obtaining in that year, Tribunal was pleased to delete similar addition made by ITO on account of alleged bogus purchase. Tribunal, in its said order found that STO had only held that purchases were not made from registered dealers but had not made from registered dealers but had not held that purchases were not made at all. Thereafter, he invited our attention to pages 7 to 13 of his paper books containing account, delivery slip, etc., of goods purchased from M/s. Vijay Traders. He also placed before us copy of extract from order of STO dt. 30th Dec., 1975 wherein sales tax of 3 per cent was charged on assessee on ground that it had purchased goods from unregistered dealer. Finally, he invited our attention to page 15 of his paper book containing comparative chart of sale and rate of gross profit disclosed by assessee for and from asst. yrs. 1970-71 to 1977-78 and highlighted fact that rate of gross profit disclosed at 26.2 per cent in year under appeal was all time high as compared to rate of gross profit disclosed in other years varying between 10 per cent to 25.1 per cent wherein, book results of assessee had been accepted by ITO himself except for asst. yrs. 1971-72, 1975-76 and 1976-77. He hastened to state that additions made by ITO in these years were ultimately deleted by Tribunal. In this view of matter, he submitted that addition of Rs. 19,300 sustained by Commissioner (A) is not only invalid in itself but on merits cannot be retained. He, therefore urged that Rs. 19,300 should be deleted from total income of assessee. ld. Representative for Department kly relied on orders of IT authorities and justified their action. Adverting to majority decision of Tribunal in case of ITO vs. A.C. Mathiah (1986) 16 ITD 28 (Mad) (TM), he Tribunal in case of ITO vs. A.C. Mathiah (1986) 16 ITD 28 (Mad) (TM), he submitted that in assessment framed afresh by ITO, ITO can look into other items as was done by him in present case. He also submitted that t h e assessment order of STO would not be relevant for determining bogus purchases. Therefore, according to him, order of Tribunal in respect of asst. yr. 1970-71 would not be of much help to assessee. We have carefully considered rival submissions of parties as well as material already brought on record and we find considerable force in submissions made on behalf of assessee both on validity of addition of Rs. 19,300 as well as on merits of such addition. aforesaid two decisions of Hon'ble Calcutta High Court reported in (1979) 120 ITR 861 & 872 (supra) clearly support stand taken on behalf of assessee that in assessment set aside on specific issues, ITO cannot make addition of new item which he had not considered while framing assessment originally. Again, it is trite law that appellate authority, like Commissioner (A) has no power to find out new source of income and tax it. If that is so, then ITO has also no power to tax new source of income in assessment which he was required to frame on specific directions of first appellate authority. order of Tribunal reported in CIT vs. V.N. Chabbra (1986) 25 TTJ (Bom) 101 and other decisions of Hon'ble Supreme Court, Hon'ble Gujarat High Court and Hon'ble Bombay High Court, relied on behalf of assessee clearly support its case that addition of Rs. 19,300 made by ITO after his original assessment was set aside by Commissioner (A) on specific grounds, was invalid in law. We have carefully gone through majority decision of Tribunal reported in (1986) 16 ITD 28 (Mad) (TM). It appears to us that Tribunal has decided case in favour of Revenue in view of binding decision of Hon ble Madras High Court mentioned in its order. Therefore, said order of Tribunal would not be of any help to Revenue in view of direct decisions of Hon'ble Calcutta High Court reported in (1979) 120 ITR 861 (Cal). Even on merits of case, it is difficult to distinguish facts and circumstances obtaining in year under appeal with that considered by Tribunal in respect of asst. yr. 1970-71. We have perused assessment order of STO and we find that he has charged sales-tax of 3 per cent on ground that M/s. Vijay Traders was not registered dealer. In other words, on material already brought on record, it is difficult to hold that assessee had not made purchases from M/s. Vijay Traders. Apart from this, looking at comparative chart contained in page 15 of paper book, we find that rate of gross profit of 26.2 per cent disclosed by assessee in year under appeal is highest during years 1970-71 to 1977-78. Further, we find that in most of years, including year under appeal, ITO has accepted book results of assessee. Whatever additions made on account of bogus purchases or otherwise in asst. yrs. 1971-72, 1975-76 and 1976-77 stand deleted by either orders of Commissioner(A) or Tribunal. Keeping this factor also in mind, we do not find any justification to retain addition of Rs. 19,300. For reasons stated above, we have no hesitation in deleting addition of Rs. 19,300 from total income of assessee. In result, appeal is allowed. *** MODERN ENGINEERING & MOULDING COMPANY v. INCOME TAX OFFICER