Doctrine of merger limits revision to issues actually decided in appeal; untouched assessment findings remain subject to statutory limitation.

The doctrine of merger applies only to the portion of an assessment order actually considered and decided in appeal; any untouched part continues to subsist in the original order. Revision under section 39(2) may therefore reach only that surviving portion, and the three-year limitation is computed from the assessment order for that untouched subject-matter. On the facts, the appellate authority did not decide the exemption on the disputed turnover, so that part had not merged. The Commissioner was consequently barred from revising the exempt turnover after expiry of the statutory period.

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Issues: Whether the Commissioner could revise under section 39(2) the portion of the assessment order granting exemption on turnover that was neither assessed nor in issue before the appellate authority, and whether the revision was barred by limitation after three years from the original assessment order.

Analysis: The appellate authority had jurisdiction under section 38(5) to deal with the whole assessment, including matters not separately appealed against, but it did not in fact consider or decide the exemption granted on sales worth Rs. 66,360. The doctrine of merger applies only to the extent the subject-matter is considered and decided in appeal; matters untouched by the appellate authority continue to survive in the original assessment order. Revision under section 39(2) is controlled by the proviso limiting initiation of proceedings to three years from the date of the order sought to be revised, and that limitation is computed with reference to the assessment order insofar as the untouched part of that order remains operative.

Conclusion: The Commissioner could not revise the exempt turnover of Rs. 66,360.05 under section 39(2) after expiry of three years from the assessment order, because that part of the assessment order had not merged in the appellate order.

Final Conclusion: The reference was answered against the Revenue and in favour of the assessee, affirming that revision was barred for the untouched portion of the assessment.

Ratio Decidendi: The doctrine of merger applies only to the part of an assessment order that is actually considered and decided in appeal; any part left untouched by the appellate authority remains open to revision, but only within the statutory period of limitation.

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