SHIVASHANKARBHAT, J. ( 1 ) PETITIONER seeks the quashing of the order of the respondent whereby the latter set aside the order of assessment made against the petitioner by the Income-tax Officer, for the assessment year 1983-84; the respondent exercised his power under Section 263 of the Income Tax act, to revise the order of the Income-tax Officer and directed the Income-tax Officer to make a fresh order of assessment after considering the taxability of the sales tax amount refunded to the petitioner during the relevant year. Applicability of the doctrine of merger is the question involved. ( 2 ) THE petitioner is doing the business in the export of coffee; it also derives interest on deposits and dividend incomes. While computing the total income of the petitioner, the Inspecting Assistant Commissioner (I. A. C. for short) had disallowed certain expenses incurred by the petitioner, against which, petitioner filed an appeal before the commissioner of Income-tax (Appeals) - C. I. T. (A) for short, who allowed the appeal partly by his order dated 1-10-1986. Thereafter, the respondent issued the notice under Section 263 of the Act, proposing to revise the order of assessment made by the I. A. C. ,,on the ground that a sum of Rs. 19,93,855/- obtained by the petitioner as refund of the amount paid earlier by the petitioner as sales tax, was omitted to be brought to tax by the I. A. C. ( 3 ) PETITIONER challenged this notice initially; during the pendency of the Writ Petition, final order was passed by the respondent, hence Writ petition was amended questioning the said order (Annexure-D ). ( 4 ) THE short question is, whether the order of assessment made by I. A. C. stood merged with the order of the C. I. T. (A) when the latter allowed the appeal of the petitioner partly and if so, whether the respondent is barred from exercising his power under Section 263 to revise the order of the I. A. C. (the original authority ). ( 5 ) THE learned counsel for the revenue contended that there was no merger in the instantcase, because, taxability of the sales tax amount refunded to the petitioner was not the subject matter of the appeal before C. I. T. (A) and therefore, question of merger did not arise. ( 5 ) THE learned counsel for the revenue contended that there was no merger in the instantcase, because, taxability of the sales tax amount refunded to the petitioner was not the subject matter of the appeal before C. I. T. (A) and therefore, question of merger did not arise. The learned counsel cited two decisions (i) 172 ITR 733 (Commissioner of Income-tax v Travancore tea estates Co. Ltd.) of Kerala High Court and (ii) 164 ITR 197 (Commissioner of Income-tax v K. L. Rajput) of Madhya Pradesh High Court, while Sri Sarangan strongly relied on a Full bench decision of this Court in Commissioner of Income-tax v Hindustan Aeronautics Ltd. , ILR 1986 (1) Karnataka 1 : 157 ITR 315. ( 6 ) IT is not disputed before me that, in the appeal before C. I. T. (A), the said Appellate authority could have dealt with the question of the taxability of the sales tax amount refunded to the petitioner. When this position is not disputed, it follows that the said amount has to be treated as part of the subject matter of the assessment. ( 7 ) IN the Full Bench decision of this Court in Hindustan Aeronautics Ltd. 's case, Hakeem J. speaking for the Full Bench observed, at page 13 (of the ILR):"it is thus apparent that the AAC can look into and adjudicate upon findings recorded by the I TO not only against the assessee which may expressly be the subject matter of the appeal but also a matter which has been considered and determined by the ito in the course of the assessment. In other words, the entire subject matter of the assessment would be within the jurisdiction of the AAC. Since the entire subject matter of the assessment is with in the jurisdiction of the aac, some High Courts, in the light of the observations made by the Supreme Court in Madurai Mills' case have held that the entire assessment order will merge in the appellate order irrespective of the points urged by the parties or decided by the AAC. Since the entire subject matter of the assessment is with in the jurisdiction of the aac, some High Courts, in the light of the observations made by the Supreme Court in Madurai Mills' case have held that the entire assessment order will merge in the appellate order irrespective of the points urged by the parties or decided by the AAC. "after referring to divergent views on this question, amongst various High Courts, the learned judge held at page 15:"amid this diversity of opinions, this High court in Vijayalakshmi Lorry Service case without much fuss over the matter has held that the entire order merges when the order was taken in appeal and was modified by the AAC. Such an order becomes final and the Commissioner was precluded from taking proceeding under Section 263 of the act to revise the order of the ITO on another ground. That decision was rendered on September 17, 1975 and is being followed by the authorities in this state. The view taken in that decision is neither unreasonable nor erroneous. Similar view has been taken as earlier noticed, by the High Courts of Allahabad, calcutta, Madhya Pradesh etc. There is, therefore, no compelling reason to review that decision. "earlier, at page 12, the Full Bench had noticed that, the controversy, was in relation to the doctrine of merger to such issues "which could have been dealt with by the appellate authority within its jurisdiction but in fact have not been dealt with by the said authority," and also in relation to "such issues which were in fact raised before the appellate or revisional authority but not dealt with by the said authority. " ( 8 ) THE controversy was laid to rest, in this State, by the Full Bench, by extending the doctrine of merger, to all issues which necessarily arise in an assessment proceeding as part of its subject matter. ( 9 ) IN view of the above decision, the petitioner is entitled to succeed; the order of the respondent is liable to be set aside as without jurisdiction. ' ( 10 ) WRIT Petition is accordingly allowed. Rule made absolute. No costs. Writ Petition allowed. --- *** --- .