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Section 154 of the Income-tax Act, 1961 - Rectification of mistake - Apparent from record - Assessment year 1966-67 - Whether original assessment order does not merge into an order passed under section 148 and, therefore, it could not be rectified under section 154 after expiry of four years from original assessment order - Held, yes FACTS In computing the total income the assessee was granted development rebate in respect of some machinery. The assessee had also been allowed depreciation on certain assets including land. Subsequently, Supreme Court in CIT v. Alps Theatre [1967] 65 ITR 377 (SC) held that depreciation was allowable only on the value of building and not on the value of land. The ITO accordingly, issued a notice under section 148 on 15-11-1968, and passed a reassessment order on 16-10-1969, withdrawing depreciation on the value of land. Thereafter, the ITO found that the development rebate had also wrongly been allowed an issued a notice under section 154 on 14-4-1971, for rectification of mistake and finally passed an order on 10-9-1971, withdrawing the development rebate which had been allowed to the assessee in the original assessment order dated 9-2-1967. On writ, it was contended by the assessee that rectification order having been passed after four years, reckoned from the date of original assessment, it was barred by period of limitation. HELD An order under section 147 is a separate order dealing with an item of income which had escaped assessment. The original assessment order does not merge into an order under section 148. Where re-assessment is made under section 147 (corresponding to section 34 of the Indian Income-tax Act, 1922), the ITO's jurisdiction is confined to the income which had escaped assessment and does not extend to revising, reopening and reconsidering the whole assessment. Likewise, in proceedings under section 34 of the 1922 Act the assessee cannot re-agitate questions which have been decided in the original assessment. So the original assessment could not be challenged in appeal against an assessment order under section 34 of 1922 Act. Thus, in the instant case, the question of development rebate had become final when…

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