appeal is by assessee against order of Commissioner under section 263 of Income-tax Act, 1961 ('the Act'). assessment year involved is 1978-79. ITO originally completed assessment on 5-5-1981, in which weighted deduction under section 35B of Act had been allowed on commission paid to H.M.T. Ltd. Subsequently, ITO had reopened assessment under section 147(b) of Act on some other ground d also completed reassessment without any change in section 35B relief. Commissioner was of opinion that ITO erred in granting weighted deduction under section 35B on commission paid to H.M.T. Ltd. relief had been granted in original assessment made on 5-5-1981. As that order was erroneous in so far as it was prejudicial to revenue Commissioner issued show-cause notice to assessee as to why ITO's assessment should not be revised. assessee submitted that as reassessment had already been made on assessee, original assessment merged with reassessment and in effect what Commissioner was trying to revise was reassessment. This was not permissible as law stood at that time. Commissioner, however, brushed aside this contention stating that original assessment order is not vacated. He set aside order of ITO and directed him to disallow weighted deduction under section 35B. assessee is in appeal. 2. It cannot be disputed that when order sought to be revised is order of reassessment, section 263 cannot be applied. provisions of section 263(2), as they stood at relevant time, are as follows: "No order shall be made under sub-section (1)- (a) to revise order of reassessment made under section 147, or (b) after expiry of two years from date of order sought to be revised." question is whether original order merged with reassessment order. If answer is in affirmative, Commissioner was debarred from revising assessment. While learned departmental representative relied on decision of Gujarat High Court in case of CIT v. Ahmedabad Mfg. & Calico Printing Co. Ltd. [1981] 128 ITR 671, which dealt with effect of rectification of assessment order, we are now, in this case, faced with question whether there is merger of original assessment with reassessment. In one sense, it could be said that when assessment is reopened on some ground, entire assessment is open before ITO and he can make additions which had not been made in original assessment although assessment had been reopened on basis that certain items of income had escaped assessment. reassessment gives power to ITO to rope in every item of escaped assessment. Under these circumstances, it would be more proper to hold that original assessment merges with final assessment, tax being demanded on total income as reassessed. Hon'ble High Court of Karnataka has also held in case of Vijayalakshmi Lorry Service v. Addl. CIT [IT Reference Case No. 37 of 1973 dated 17-9-1975], recently affirmed by Full Bench in Writ Petition No. 721 of 1981 dated 26-10- 1984, that after passing of appellate order, ITO's order merged with that of AAC. same reasoning would hold good for reassessment also. Further, in case of Mysore Iron & Steel Co. Ltd. [IT Reference Case No. 171 of 1980 dated 26-10-1984], Karnataka High Court had to consider similar question. ITO sought to rectify mistake apparent from record in case applying time limit from date on which reassessment order was passed, while actually mistake had occurred in original assessment. Hon'ble High Court held that original order did not exist as independent order but merged with reassessment order. It held that time limit for rectification, accordingly, had to be counted from date on which reassessment order was passed. Respectfully following above decision, we hold that there is merger of original assessment in reassessment and, therefore, Commissioner had no powers to modify assessment under section 263. 3. appeal filed by assessee is allowed. *** H.M.T. (INTERNATIONAL) LTD. v. INCOME TAX OFFICER