Doctrine of merger is limited to issues actually appealed, preserving revisional power over untouched assessment findings.

The doctrine of merger does not extend to assessment findings that were not actually challenged in appeal before the appellate authority. Only matters carried in appeal merge into the appellate order, so favourable portions of the assessment left unagitated remain open to revision. On that basis, the Commissioner could validly invoke revisional jurisdiction under section 263 to examine whether those untouched parts were erroneous and prejudicial to the Revenue, and the revisional direction for withdrawal or recomputation was upheld.

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Issues: (i) Whether the assessment order merged in the appellate order even in respect of issues not raised before the appellate authority; (ii) Whether the Commissioner's revisional order under section 263 was valid.

Issue (i): Whether the assessment order merged in the appellate order even in respect of issues not raised before the appellate authority.

Analysis: The appellate jurisdiction under section 246 extends only to matters actually appealed against. Issues which were already decided in favour of the assessee and were not the subject of challenge before the appellate authority do not get carried into the appeal. The doctrine of merger therefore cannot be applied so as to treat the entire assessment order as merged in the appellate order when specific favourable findings were never in issue before the appellate authority.

Conclusion: The assessment order did not merge in the appellate order on issues not agitated in appeal.

Issue (ii): Whether the Commissioner's revisional order under section 263 was valid.

Analysis: Once the favourable portions of the assessment were not the subject of appeal, the Commissioner retained revisional power under section 263 to examine whether those portions were erroneous and prejudicial to the interests of the Revenue. The revisional authority could therefore lawfully direct withdrawal or recomputation in respect of those matters. The Tribunal was wrong in holding that the revisional order was invalid on the ground of merger.

Conclusion: The revisional order under section 263 was valid.

Final Conclusion: The reference was answered against the assessee and the Revenue succeeded on both questions.

Ratio Decidendi: The doctrine of merger does not extend to matters not carried in appeal, and the Commissioner may exercise revisional jurisdiction under section 263 over those parts of the assessment order that remain outside the appellate adjudication and are erroneous and prejudicial to the interests of the Revenue.

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