Assessing Officer Cannot Reopen Tax Issues Already Settled By Income Tax Settlement Commission: SC

New Delhi, Sep 17 (KNN) The Supreme Court has held that an Assessing Officer (AO) cannot issue a reassessment notice against an assessee once the Income Tax Settlement Commission (ITSC) has passed a final order determining the net taxable income.

A bench of Justices SVN Bhatti and NV Anjaria dismissed the Revenue's appeal against a Delhi High Court judgment that had quashed reassessment proceedings initiated against real estate company Omaxe Limited for Assessment Year 2006-07.

Finality of Settlement Order Cannot Be Defeated

The Court held that allowing the AO to independently exercise powers under provisions including Sections 143(2), 148 and 154 of the Income Tax Act after a settlement order would defeat the finality attached to the ITSC's decision.

Omaxe had filed a settlement application covering AYs 2000-01 to 2006-07 following a search and seizure operation. The ITSC passed its final order under Section 245D(4) in March 2008, determining the company's taxable income for AY 2006-07 after allowing its claim for deduction under Section 80-IB(10).

Following a survey in December 2009, the Revenue issued a reassessment notice under Section 148 proposing to disallow Rs 55.58 crore claimed as deduction under Section 80-IB(10) for four housing projects.

Revenue Has Remedy for Fraud, Misrepresentation

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

In Omaxe's case, the Revenue had invoked Section 245D(6), alleging misrepresentation, but the Settlement Commission rejected the application, holding that the material relied upon did not establish misrepresentation.

The Court said the Revenue participates in settlement proceedings and can oppose the continuation of the process based on material discovered during search and seizure. Once the ITSC's order attains finality, the AO cannot reopen the settled issues through reassessment proceedings under Section 148.

The Court accordingly affirmed the Delhi High Court's decision and dismissed the Revenue's appeal.

(KNN Bureau)