Supreme Court affirms finality of settlement orders, bars reassessment in Omaxe case

The Supreme Court has ruled that tax officers cannot reopen issues already settled by the Income Tax Settlement Commission, reinforcing the finality of settlement orders and limiting reassessment powers following a dispute involving Omaxe Limited.

The Supreme Court has ruled that tax officers cannot reopen issues already concluded by the Income Tax Settlement Commission, strengthening the finality of settlement orders in a dispute involving Omaxe Limited. A bench of S.V.N. Bhatti and N.V. Anjaria dismissed the Revenue’s appeal against a Delhi High Court ruling that had already struck down reassessment proceedings for assessment year 2006-07.

The case arose after Omaxe sought settlement for assessment years 2000-01 to 2006-07 following a search and seizure operation. The Settlement Commission passed its final order in March 2008 under Section 245D(4), fixing the company’s taxable income for 2006-07 and allowing a deduction claim under Section 80-IB(10). But after a later survey in December 2009, the tax department issued a reassessment notice under Section 148, seeking to disallow Rs 55.58 crore linked to housing project deductions.

The court said that once a settlement order has attained finality, allowing an assessing officer to use powers under provisions such as Sections 143(2), 148 and 154 would undermine that finality. The judges said the Revenue cannot use reassessment to revisit matters already settled by the commission. According to the reports on the judgment, the Revenue had argued that it should be able to challenge the settlement because of alleged misrepresentation, but that argument did not prevail.

The court also noted that the tax authorities are not left without a remedy if they believe a settlement was obtained by fraud or misrepresentation. In that event, Section 245D(6) allows them to approach the Settlement Commission directly. In Omaxe’s case, that route had already been tried, but the commission rejected the Revenue’s plea after finding that the material relied upon did not show misrepresentation.