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The Supreme Court on Wednesday (September 16) held that once an Income Tax Settlement Commission passes an order determining the net taxable income, it is impermissible for the Assessing Officer to issue a reassessment notice against the assessee under the Income Tax Act.

“If the jurisdiction of the AO under Sections 143(2), 148, 154, etc., is made independent and available for exercise again, the finality attached to the Settlement Commission will be defeated. Parliament did not envisage this course. On the contrary, while reopening the issues before the ITSC is provided for, judicial review by the Constitutional Courts under Articles 226 and 32/136 is available, but the AO's power to reassess the Settlement Order passed by the ITSC is unavailable.”, observed a bench of Justice SVN Bhatti and Justice NV Anjaria, while dismissing the Revenue's appeal against the Delhi High Court judgment quashing the reassessment proceedings initiated against real estate company Omaxe Limited for Assessment Year 2006-07.

The respondent, the assessee, had filed a settlement application covering AYs 2000-01 to 2006-07 after a search and seizure operation. The Settlement Commission passed its final order under Section 245D (4) in March 2008 and determined Omaxe's taxable income for AY 2006-07 after allowing the deduction claimed under Section 80-IB (10), which provides a 100% deduction on profits derived by an undertaking from developing and building eligible housing projects approved by a local authority.

Subsequently, following a survey conducted in December 2009, the Revenue issued a reassessment notice under Section 148, proposing to disallow ₹55.58 crore of deduction claimed under Section 80-IB (10) in respect of four housing projects.

Aggrieved by the Delhi High Court's decision to quash the reassessment notice, the revenue appealed to the Supreme Court.

Affirming the impugned decision, the judgment authored by Justice Bhatti said that the reassessment was not permissible once the issue had been covered by the final settlement order.

The Court noted that the Revenue was not without a remedy where it believed that a settlement order had been obtained through fraud or misrepresentation. Under Section 245D(6), the Revenue could approach the Settlement Commission on such grounds.

Noting that the Revenue had in fact moved an application under Section 245D (6), alleging that the settlement order had been obtained through misrepresentation. However, the Settlement Commission rejected the application, finding that the material relied upon by the Revenue did not establish misrepresentation.

In essence, the Court said that the participation of the Revenue in the proceedings before the ITSC does away with the power of the AO to issue a reassessment order under Section 148.

“The Revenue can oppose continuation before the ITSC based on the material and grounds discovered during the search and seizure against the Assessee. The Revenue participates before the ITSC in the Assessee's Application, including any income further disclosed by the Assessee. Therefore, the argument that, after the proceedings before the ITSC attain finality, the regular assessment/re-assessment is still available to the Revenue is contrary to the defining expressions in Sections 245C, 245D(2), 245D(3), and finally 245D(4) of the Act, 1961.”, the Court said.

In terms of the aforesaid, the appeal was dismissed.

Cause Title: Assistant Commissioner of Income Tax & Anr. v. M/s. Omaxe Limited

Citation : 2026 LiveLaw (SC) 944

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Appearance:

For Appellant(s) Mr. N Venkatraman, A.S.G. Mr. Arijit Prasad, Sr. Adv. Mr. Sudarshan Lamba, AOR Mr. V Chandrashekhara Bharathi, Adv. Mr. Gaurav Arya, Adv. Ms. Rashmi Malhotra, Adv. Mr. Bhuvan Kapoor, Adv. Ms. Mrigna Shekhar, Adv. Mrs. Gargi Khanna, Adv.

For Respondent(s) Ms. Kavita Jha, Sr. Adv. Mr. Vaibhav Kulkarni, Adv. Mr. Aniket Deepak Agrawal, AOR Mr. Akash Shukla, Adv. Mr. Yash Nagar, Adv.

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