CAN THE INCOME TAX DEPARTMENT REOPEN A CASE AFTER A SETTLEMENT COMMISSION ORDER? SUPREME COURT CLARIFIES THE INTERPLAY BETWEEN SECTION 148 AND SECTION 245

Assistant Commissioner of Income Tax & Another v. M/s. Omaxe Limited, Civil Appeal No. 9190 of 2013

 

A recurring question in tax litigation is whether the finality attached to an order of the Income Tax Settlement Commission (ITSC) can be disturbed by a subsequent reassessment notice issued by an Assessing Officer. In a judgment delivered on 16 September 2026, the Supreme Court, in Assistant Commissioner of Income Tax & Another v. M/s. Omaxe Limited, has answered this question firmly in favour of finality, holding that once the ITSC passes a final settlement order under Section 245D(4) of the Income Tax Act, 1961, the Assessing Officer cannot reopen the assessment for that year, even where the Assistant Commissioner of Income Tax (the Appellant, i.e., the tax department, hereinafter the Revenue) believes a claim was wrongly allowed.

 

Background of the Dispute

Omaxe Limited, a real estate company, filed its return for Assessment Year 2006-07 declaring a taxable income of over Rs. 89 crore and claiming a deduction of nearly Rs. 79 crore under Section 80IB(10) for housing projects. While regular assessment was pending, the Company approached the ITSC under Section 245C, disclosing additional income. The ITSC passed a final settlement order on 17 March 2008, computing the Assessee’s total income after accounting for the Section 80IB(10) deduction.

Nearly two years later, following a fresh survey at the Company’s premises, the Revenue formed the view that certain housing projects exceeded the permissible limit on commercial area under Section 80IB(10)(vi), rendering the deduction wrongly claimed. On this basis, a notice under Section 148 was issued in June 2010, followed by a reassessment order in November 2011 disallowing the deduction and adding back over Rs. 65 crore to the Assessee’s income.

The Revenue simultaneously moved the ITSC itself under Section 245D(6), seeking a declaration that its earlier settlement order was void on account of misrepresentation. The ITSC rejected this Application in December 2011, finding no evidence that the Assessee had concealed or misstated facts. The Delhi High Court subsequently quashed the reassessment Notice and Order, holding that the ITSC’s jurisdiction, once invoked, is exclusive and its final order conclusive. The Revenue appealed to the Supreme Court.

 

The Supreme Court’s Reasoning

A bench comprising Justices S.V.N. Bhatti and N.V. Anjaria dismissed the Revenue’s appeal, tracing in detail the statutory scheme of Chapter XIX-A of the Act. The Court explained that once a settlement application is admitted under Section 245D(1), Section 245F(2) vests the ITSC with exclusive jurisdiction over the case, displacing the ordinary assessment machinery under Sections 142 to 156. This exclusivity continues until the ITSC passes its final order, which, under Section 245-I, is conclusive on all matters stated therein and cannot be reopened in any other proceeding.

The Revenue had argued that the Section 80IB(10) deduction was never specifically placed before the ITSC, since the Assessee’s disclosure concerned undisclosed income rather than the deduction itself and so the deduction fell outside the settlement order’s scope. The Court rejected this distinction. It noted that the ITSC’s final computation of total income expressly reflected the deduction as claimed in the original return, showing that the deduction had, in substance, formed part of what the Commission considered and settled.

The Court also addressed the Revenue’s reliance on its own remedy under Section 245D(6), which allows a settlement order to be declared void where it was obtained through fraud or misrepresentation. The Court observed that this is the only route by which the Revenue may seek to unsettle a concluded ITSC order and the Revenue had, in fact, pursued that very route, only to have its application rejected by the ITSC on merits. Having failed there, the Revenue could not achieve the same result indirectly through a Section 148 notice. Permitting simultaneous or successive determinations of income for the same assessment year, one by the ITSC and another by the Assessing Officer, would, the Court held, produce exactly the kind of piecemeal and conflicting outcomes that Chapter XIX-A was designed to avoid.

Drawing on its earlier decisions in Brij Lal v. CIT and CIT v. Express Newspapers Ltd., the Court reiterated that the settlement procedure is a self-contained code aimed at the “settlement of liability” rather than a mere determination of it, akin in character to arbitration. The Assessing Officer’s jurisdiction, once frozen by admission of a settlement application, revives only if the application abates under Section 245HA, or if the ITSC’s own order is set aside through the fraud-or-misrepresentation route under Section 245D(6) or in writ proceedings before a Constitutional Court.

 

Significance of the Ruling

The Judgment reinforces the settled position that the ITSC’s determinations, once final, enjoy a high degree of insulation from collateral attack through the ordinary reassessment machinery. For the Revenue, the message is that any grievance about a settlement order allegedly obtained through misrepresentation must be pursued before the ITSC itself under Section 245D(6), or through writ jurisdiction and cannot be routed around through a fresh Section 148 notice years later. For assessees who have gone through the settlement process, the ruling offers reassurance that a concluded ITSC order genuinely closes the chapter on that assessment year, subject only to the narrow exceptions Parliament has itself carved out.

Shomdeepta Chanda

Associate

The Indian Lawyer & Allied Services

Watch our latest video