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2007] 293 ITR 1 [2007] 162 TAXMAN 465 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax, Chennai v. Alagendran Finance Ltd.* S.B. SINHA AND H.S. BEDI, JJ. CIVIL APPEAL NO. 3301 OF 2007 JULY 27, 2007 Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment years 1994-95 to 1996-97 - Assessee's assessment for assessment years in question was completed by Assessing Officer accepting its claim relating to certain expenses and income shown by assessee under head 'Lease equalization fund' on 27-2-1997, 12-5-1997 and 30-3-1998, respectively - Subsequently, reassessment proceedings were initiated in respect of only items relating to expenses claimed by assessee and reassessment order was passed on 28-3-2002 - Commissioner taking view that part of assessment order relating to lease equalization fund was prejudicial to interest of revenue, passed order under section 263 on 29-3-2004 - Assessee's case was that order passed under section 263 was barred by limitation with reference to orders passed under section 143(3) by Assessing Officer - However, revenue's case was that in view of doctrine of merger, computation of period of limitation as provided in section 263(2) was to commence from date of passing of order of reassessment and not from date of initial assessment - Whether since only that part of order of assessment was found to be prejudicial to interest of revenue which related to lease equalization fund and proceedings for reassessment had nothing to do with said head of income, doctrine of merger would not apply in instant case - Held, yes - Whether since Commissioner in exercising its revisional jurisdiction reopened order of assessment in relation to lease equalization fund, which was not subject of reassessment proceedings, period of limitation provided for in section 263(2) would begin to run from date of order of original assessment and not from order of reassessment - Held, yes FACTS The assessee-company filed its return of income for the assessment years 1994-95 to 1996-97. The Assessing Officer accepting the assessee's income under the head 'Lease equalization fund' and its claim relating to share…

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