Doctrine of merger in section 263 revisions depends on identical subject matter; distinct reassessment issues do not extend limitation.

Reassessment under section 147 on arrears of depreciation and revaluation reserve in computing book profit under section 115JB did not merge with a later revision under section 263 aimed at alleged failure to disallow exempt dividend income under clause (f) of Explanation 1 to section 115JB. Because the reassessment and revision concerned distinct subject matter, the doctrine of merger did not shift the limitation base to the reassessment order. Limitation under section 263(2) therefore had to run from the original assessment order, and the revisionary order was time-barred and unsustainable.

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Issues: Whether the revisionary order under section 263 was barred by limitation because the reassessment under section 147 dealt with issues different from the issue revised, and whether the period of limitation had to be reckoned from the original assessment order.

Analysis: The reassessment was initiated for adjustments relating to arrears of depreciation and revaluation reserve while computing book profit under section 115JB. The revision under section 263, however, was directed against the alleged failure to make disallowance in respect of exempt dividend income under clause (f) of Explanation (1) to section 115JB. Since the subject matter of reassessment was distinct from the subject matter of revision, the doctrine of merger did not extend to the revised issue. The period of limitation under section 263(2) therefore had to be computed from the date of the original assessment order and not from the reassessment order.

Conclusion: The revisionary order was time-barred and could not be sustained.

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