New Delhi: The Supreme Court has dismissed an appeal by the Income Tax Department against a Delhi High Court judgment that quashed a reassessment notice issued to Omaxe Limited, holding that once the Income Tax Settlement Commission passes a final and conclusive order under Section 245D(4) of the Income Tax Act, 1961 for an assessment year, the Assessing Officer cannot thereafter reopen that year through reassessment proceedings.
Justice S.V.N. Bhatti, delivering the judgment for the Bench also comprising Justice N.V. Anjaria, was hearing a civil appeal filed by the Assistant Commissioner of Income Tax against a Delhi High Court judgment dated 13.07.2012, which had quashed a show cause notice dated 30.06.2010 and a consequent reassessment order dated 08.11.2011 disallowing a deduction of Rs.65,65,17,999 claimed by the assessee under Section 80IB(10) of the Act for Assessment Year 2006-07.
The record showed that, following a search under Section 132 in September 2005, the assessee had approached the Income Tax Settlement Commission under Section 245C for the assessment years 2000-01 to 2006-07, and the Commission had passed a final settlement order on 17.03.2008 under Section 245D(4), accepting an additional income disclosure and determining the net taxable income after allowing the Section 80IB(10) deduction. Following a fresh survey in December 2009, the Revenue issued a notice under Section 148 proposing to disallow the deduction on the ground that the assessee had transferred commercial portions of its housing projects to subsidiaries in a manner incompatible with the conditions of the deduction.
For the Revenue, it was argued that the notice under Section 148 did not reopen any issue actually considered and concluded by the Settlement Commission, since the eligibility for deduction under Section 80IB(10) had not been examined in the 2008 settlement order, and that the reassessment was triggered by fresh material unearthed in the 2009 survey. For the assessee, it was submitted that the Settlement Commission's order had already computed the net taxable income after accounting for the Section 80IB(10) deduction, that any grievance the Revenue had regarding that deduction ought to have been raised before the Commission itself, and that Section 245-I makes every order of settlement conclusive as to the matters stated therein, reopenable only by the Commission itself and only on grounds of fraud or misrepresentation.
Tracing the scheme of Chapter XIX-A of the Act, the Court held that once a settlement application is admitted, the Settlement Commission under Section 245F(2) assumes exclusive jurisdiction over the assessment, which continues until the final order under Section 245D(4), after which Section 245-I renders that order conclusive. The Court observed that the Revenue itself later invoked the Commission's own procedure under Section 245D(6) to reopen the settlement on the ground of alleged concealment, resulting in an order dated 16.12.2011 which had itself attained finality, undermining the argument that regular reassessment was simultaneously available.
Describing the settlement scheme in Chapter XIX-A as one where the assessee and the Revenue "avoid the crust and crumb" the Revenue foregoing the full crust of penalty and prosecution in exchange for the crumb of voluntarily disclosed tax, and the assessee foregoing further crust and crumb once the order attains finality the Court held that "the Revenue has to revisit the procedure under Section 245D(6) by making out a case before the ITSC, but not otherwise."
Finding no merit in the Revenue's contention that regular reassessment under Sections 147 and 148 remained available notwithstanding the Settlement Commission's final order, the Court held that Chapter XIX-A is a self-contained code, as recognised in Brij Lal v. CIT, and that Section 147 has no application to a settlement that has attained finality under Section 245-I.
The appeal was accordingly dismissed, with pending applications disposed of.
Appearances:
For the Appellant: Mr. Arijit Prasad, Senior Advocate.
For the Respondent: Ms. Kavita Jha, Advocate.
Case Title: Assistant Commissioner of Income Tax and Another vs. M/s. Omaxe Limited, Civil Appeal No.9190 of 2013, 2026 INSC 1000
