Doctrine of merger in income-tax revision applies only to issues decided in appeal, leaving other matters open to section 263 review.

In income-tax proceedings, the doctrine of merger applies only to issues actually considered and decided in appeal. Where the matter proposed for revision under section 263 was not the subject-matter of the appellate proceedings, the assessment order did not merge with the appellate order on that issue. On that basis, revision under section 263 remained valid and within jurisdiction.

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Issues: Whether an order under section 263 of the Income-tax Act, 1961 could validly be made when the assessment order had merged with the appellate order, where the point sought to be revised was not the subject-matter of the appeal.

Analysis: In tax matters, the principle of merger applies only to those matters actually considered and decided by the appellate authority. It does not extend to issues falling outside the scope of the appeal. Since the matter sought to be revised under section 263 was not the subject-matter of the appellate proceedings, the assessment order could not be treated as having merged with the appellate order on that issue.

Conclusion: The order of revision under section 263 was held to be valid and within jurisdiction. The question referred was answered in the affirmative, against the assessee and in favour of the Revenue.

Ratio Decidendi: In income-tax proceedings, the doctrine of merger operates only in respect of issues actually decided in appeal and does not bar revision under section 263 on matters not covered by the appellate order.

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