Partial merger in income-tax appeals means untouched assessment issues keep their original limitation period for rectification.

In income-tax rectification, limitation under section 154 is computed from the date of the order sought to be amended. Where an assessee appeals only against part of an assessment and the appellate authority does not consider the remaining portion, that untouched part retains its independent existence. The doctrine of merger is therefore partial, not universal, and applies only to the matters actually dealt with in appeal. On that footing, the original assessment order remained the relevant order for limitation in respect of the rebate not affected by the appellate order, making the rectification time-barred.

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Issues: Whether the rectification order passed under section 154 of the Income-tax Act, 1961 was barred by limitation because the four-year period had to be computed from the original assessment order dated 23 November 1956 or from the consequential order dated 10 March 1961, and whether the doctrine of merger applied to the whole assessment order or only to the part actually dealt with in appeal.

Analysis: The limitation under section 154(7) runs from the date of the order sought to be amended. The appellate powers under section 31(3) of the Indian Income-tax Act, 1922 allowed the Appellate Assistant Commissioner to deal only with the matters placed in appeal, though with limited power to enhance the assessment. Where the assessee challenges only part of the assessment and the appellate authority does not examine the remaining part, that untouched portion of the original assessment order retains its independent existence. The doctrine of merger is not of universal application and, in income-tax proceedings, merges only that part of the order actually subjected to appellate scrutiny. The rebate granted in the original assessment was not affected by the appellate order and therefore the original order remained the relevant order for limitation.

Conclusion: The rectification was time-barred, because the relevant limitation period had to be counted from the original assessment order dated 23 November 1956, not from the consequential order dated 10 March 1961. The order under section 154 was invalid.

Final Conclusion: Only the portion of an assessment order actually considered in appeal merges in the appellate order, and an untouched part remains open to rectification only within the statutory period computed from the original assessment order.

Ratio Decidendi: In income-tax proceedings, merger is partial and confined to the matters actually decided in appeal; for rectification under section 154, limitation is computed from the date of the original order in respect of the part that was never brought under appellate adjudication.

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