In the return of income, the assessee claimed deduction u/s. 80-IC in respect of income from oil wells by describing itself as a mineral based industry. The deduction was denied by the AO on the ground that each well did not constitute a separate ‘undertaking’. The order of the AO was reversed by the CIT(A) and deduction was granted. Subsequently, the assessment order was sought to be revised by the Commissioner on the ground that the AO had not examined whether the assessee was a mineral based industry or not. Held that so far as the issue of deduction u/s. 80-IC was concerned, the order of the AO had merged with the order of the CIT(A) in terms of clause (c) of Explanation 1 to S. 263(1) as the AO and the CIT(A) had already adjudicated on the eligibility of the assessee to such deduction. The AO had proceeded on the basis of the information that the assessee was a mineral based industry. Furthermore, since the AO had already denied the deduction, there was no financial prejudice to the Revenue. Therefore, the proceedings u/s. 263 were wrongly initiated. (AY. 2005-06, 2006-07)