Doctrine of merger limits section 263 revision where appellate powers covered the disputed assessment matters.

An assessment under section 143(3) was treated as a composite order, and the doctrine of merger was applied by reference to the appellate authority's powers under section 251, including enhancement jurisdiction. The Tribunal held that merger depends on the full scope of matters the appellate authority could lawfully examine, not only the issues actually considered. Accordingly, once the assessment had merged in the appellate order, the Commissioner could not invoke section 263 to revise matters within that appellate jurisdiction. The revisional order was set aside and the assessee's appeal succeeded.

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Issues: Whether the Commissioner had jurisdiction under section 263 of the Income-tax Act, 1961, to revise an assessment order after the assessment had been carried in appeal before the Appellate Assistant Commissioner and the appellate authority had power to examine the matters sought to be revised.

Analysis: The assessment under section 143(3) was treated as a single composite order. The scope of merger was examined with reference to the appellate authority's powers under section 251, including the power to enhance assessment. The doctrine of merger was held not to depend merely on the items actually dealt with, but on the full extent of matters the appellate authority could lawfully examine. The Tribunal reconciled earlier High Court and Supreme Court authorities and concluded that, for section 263 purposes, once the assessment had merged in the appellate order, the Commissioner could not revise the same assessment on matters within that appellate jurisdiction.

Conclusion: The Commissioner lacked jurisdiction under section 263 to revise the assessment order on the disputed items, and the assessee succeeded.

Final Conclusion: The revisional order was set aside, and the assessee's appeal was allowed.

Ratio Decidendi: For section 263 of the Income-tax Act, 1961, an assessment order merges in the appellate order to the extent of matters the appellate authority had power to examine and determine, and the Commissioner cannot revise those matters thereafter.

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