Legal Principle: Appeal Merges Assessment Order, Limits Commissioner's Revision Power

The case involved a dispute over the Commissioner's jurisdiction to revise an assessment order under the Income-tax Act, 1961. The Tribunal held that once an appeal is filed, the original assessment order merges with the appellate order, limiting the Commissioner's power to revise. The doctrine of merger prevails, preventing the Commissioner from revising orders once an appeal is made. The judgment favored the assessee, emphasizing the legal principle that the Commissioner's revisionary powers are restricted once an appeal is lodged.

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Issues Involved: Reference u/s 256(1) of the Income-tax Act, 1961 regarding the jurisdiction of the Commissioner to revise assessment orders.

Summary:
The case involved a reference u/s 256(1) of the Income-tax Act, 1961, initiated by the Revenue. The questions raised were whether the Commissioner could revise an assessment order covered by directions from the Inspecting Assistant Commissioner, and whether the entire assessment order merged with the appellate order of the Commissioner of Income-tax (Appeals), limiting the Commissioner's jurisdiction to revise the assessment order u/s 263 of the Act.

The assessee, a company, was being assessed for the year 1976-77 by the Income-tax Officer. The draft assessment order was referred to the Inspecting Assistant Commissioner as per section 144B, and the assessment was finalized thereafter. An appeal against the assessment order was made to the Commissioner of Income-tax (Appeals), who partially allowed the appeal. Subsequently, the Commissioner of Income-tax revised the order u/s 263(1) of the Act, leading to an appeal and a reference to the Tribunal on the jurisdictional questions.

The Tribunal held that the Commissioner lacked jurisdiction to revise the order, as the assessment order merged with the appellate order. The legal provision u/s 263(1) empowered the Commissioner to revise orders prejudicial to the Revenue, but the doctrine of merger, as established by the Supreme Court, supported the view that once an appeal is filed, the original assessment order merges with the appellate order, precluding revision by the Commissioner.

The judgment answered the questions against the Revenue, emphasizing that the approval of the draft assessment order by the Assistant Commissioner did not constitute a final assessment order, and once an appeal is filed, the original assessment order merges with the appellate order, limiting the Commissioner's revisionary powers. The decision was supported by legal precedents and upheld by both judges.

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