The Commissioner has no jurisdiction to rectify an order under Section 154 of the Income-tax Act, 1961, after the Appellate Assistant Commissioner has disposed of the appeal, as the original order merges in the order of the Appellate Assistant Commissioner.

( 1 ) IN this application under Article 226 of the Constitution, the petitioner challenges the notice dated the 23rd of March, 1972, issued under Section 263 of the Income-tax Act, 1961, by the Additional Commissioner of Income-tax, West Bengal II, Calcutta, for the assessment year 1965-66. In order to appreciate the contentions urged in this application it is necessary to refer to certain facts. On the 18th of March, 1970, assessment of the petitioner-company was completed in the status of a company in which it was held the public were not substantially interested. The Income-tax Officer accordingly applied the rate of tax applicable to such a company to the petitioner. The petitioner on the 7th of April, 1970, made an application under Section 154 of the Income-tax Act, 1961, requesting the Income-tax Officer to rectify the assessment order by recomputing the tax on the basis that the petitioner was a company in which the public were substantially interested. The petitioner also on the 21st of April, 1970, filed an appeal before the Appellate Assistant Commissioner contending, inter alia, that the petitioner-company being one in which the public were substantially interested, the Income-tax Officer without assigning any reason treated the petitioner-company as one in which the public were not substantially interested. The said ground was taken as ground No. 10 in the appeal preferred before the Appellate Assistant Commissioner. On the 12th of May, 1970, by an order the Income-tax Officer rectified the assessment order and treated the petitioner-company as a company in which the public were substantially interested. The appeal came up for hearing before the Appellate Assistant Commissioner on the 15th of January, 1972. At the time of hearing of the appeal before the Appellate Assistant Commissioner the petitioner did not press ground No. 10 in view of the fact that the Income-tax Officer had already made his order under Section 154 of the Act rectifying the original assessment order and had treated the petitioner-company as one in which the public were substantially interested. Thereafter, on the 3rd of February, 1972, the Appellate Assistant Commissioner by an order disposed of the appeal without deciding ground No. 10 as it was not pressed before him. The Additional Commissioner of Income-tax, West Bengal-II, Calcutta, on the 26th of March, 1970, issued a notice under Section 263 of the Income-tax Act, 1961, to show cause why the order as passed by the Income-tax Officer under Section 154 of the Income-tax Act, 1961, should not be rectified as being prejudicial to the interest of the revenue. The petitioner showed cause on the 7th of April, 1972, and on the 10th of April, 1972, moved this application and obtained the rule nisi.

( 2 ) TWO points were urged in support of the application. It was contended, firstly, that in the facts and circumstances of the case the original order having been amended on the 12th of May, 1970, by an order under Section 154 rectifying the original order what was in operation thereafter was the original order as rectified. When the Appellate Assistant Commissioner disposed of the appeal on the 3rd of February, 1972, the order which was the subject-matter of the appeal was the order as amended. Therefore, the Appellate Assistant Commissioner having disposed of the appeal the original order as rectified became merged in the order of the Appellate Assistant Commissioner. In the premises it was submitted that the Commissioner could not in the exercise of his power under Section 263 rectify that order under Section 154 of the Income-tax Act, 1961, in view of the fact that the operative order was the order of the Appellate Assistant Commissioner. It was, secondly, contended that in the facts and circumstances of the case the Commissioner had acted mechanically at the suggestion of the audit department and the exercise of power by the Additional Commissioner was not a proper ex