Supreme Court Holds an Assessing Officer Cannot Reopen a Settlement Commission Order by Reassessment Under Section 148
Updated: Sep 26
Background and Facts
The Supreme Court has held that once the Income Tax Settlement Commission passes a final order, the Assessing Officer has no jurisdiction to reopen a Settlement Commission order through ordinary reassessment, and that the Revenue's only route lies within the settlement chapter itself. The judgment in Assistant Commissioner of Income Tax and Another v. M/s Omaxe Limited [Civil Appeal No. 9190 of 2013] carries the neutral citation 2026 INSC 1000.
The assessee had claimed a deduction under Section 80IB(10) of the Income Tax Act, 1961 in respect of housing projects. The matter went to the Settlement Commission, which passed a final order under Section 245D(4) on March 17, 2008. Following a survey in December 2009, the Department issued a notice under Section 148 proposing to disallow deductions on the footing that the commercial area in four projects exceeded the statutory limit. The Assessing Officer completed the reassessment and made an addition of about Rs 65.65 crore. The assessee challenged the reopening as barred by the finality of the settlement.
Key Legal Issue
The question was whether Section 148 of the Income Tax Act, 1961 is available to an Assessing Officer in respect of income already covered by a settlement order under Section 245D(4), given the conclusiveness conferred by Section 245-I.
The Supreme Court's Ruling
The Bench of Justice S.V.N. Bhatti and Justice N.V. Anjaria dismissed the Revenue's appeal, recording that
"For the reasons stated above, we find no merit in the Appeal. The Appeal fails and is dismissed."
Section 245-I Is a Bar, Not a Presumption
Section 245-I provides that
"Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force".
Two phrases carry the decision. The first is that no matter covered by the order shall be reopened in any proceeding under the Act, which is wide enough to include a reassessment under Section 148. The second is the carve-out,
save as otherwise provided in this Chapter. The exception is internal to Chapter XIX-A. It does not import the general reassessment machinery. The Court held that the Assessing Officer's power to reassess the settlement order passed by the Settlement Commission is unavailable.
The Revenue's Remedy Is Section 245D(6)
The Revenue is not without recourse where a settlement has been procured improperly, but the recourse is the one Parliament provided. Section 245D(6) requires every order under sub-section (4) to provide that
"the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts". The forum is the settlement authority and the ground is fraud or misrepresentation. A survey that produces a different view of the same deduction is not that ground, and the Assessing Officer is not that forum.
Crust and Crumb
The Court expressed the mutuality of the settlement bargain in a phrase that will be quoted: the Revenue and the assessee must take the crust and the crumb together. A settlement is a composite disposal. The Department accepts finality on the matters covered in exchange for immediate and certain recovery, and it cannot later retain the benefit of the settlement while reopening the parts it has come to regret.
Precedent and Statutory Context
The reasoning rests on the architecture of Chapter XIX-A rather than on a contested line of authority. Once an application under Section 245C is admitted, Section 245F(2) vests the Settlement Commission with the exclusive jurisdiction of an income tax authority over the case, and the regular assessment machinery stands displaced for the matters covered. Section 245-I then seals the result.
Practice Notes
In practice, the judgment matters most to the tail of settlement cases still in the system:
For assessees holding a settlement order: A notice under Section 148 touching a matter covered by the order can be resisted on jurisdiction rather than on merits. Identify precisely which heads the settlement order covered, because the bar operates on the matters stated in the order.
For the Revenue: Where material later suggests the settlement was obtained by fraud or misrepresentation, the application belongs before the settlement authority under Section 245D(6). Reassessment proceedings on the same material are liable to be quashed for want of jurisdiction.
On scope: The bar attaches to matters covered by the order. Income and heads genuinely outside the settled matters remain open to the ordinary machinery, so the pleadings should map the disputed additions against the settlement order head by head.
On the current landscape: No application under Section 245C could be made on or after February 1, 2021. The Finance Act, 2021 discontinued the Settlement Commission and inserted Section 245AA, under which the Central Government constitutes Interim Boards for Settlement of three members of the rank of Chief Commissioner to dispose of pending applications. The finality principle in this judgment attaches to orders already passed and continues to govern them.
On limitation arguments: Because the objection is to jurisdiction, it does not depend on the reassessment being time barred. Raise it first and independently of any limitation point.
Key Provisions Discussed
Section 80IB(10) of the Income Tax Act, 1961: Deduction in respect of profits from developing and building housing projects, the head at issue in the settlement.
Section 148 of the Income Tax Act, 1961: Notice where income has escaped assessment, the provision under which the Department sought to reopen.
Section 245C of the Income Tax Act, 1961: Application for settlement of cases. No application could be made on or after February 1, 2021.
Section 245D(4) of the Income Tax Act, 1961: Order of the Settlement Commission on the matters covered by the application.
Section 245D(6) of the Income Tax Act, 1961: Requirement that the order provide that the settlement is void if the Settlement Commission subsequently finds it was obtained by fraud or misrepresentation of facts.
Section 245F(2) of the Income Tax Act, 1961: Exclusive jurisdiction of the Settlement Commission over the case once the application is allowed to be proceeded with.
Section 245-I of the Income Tax Act, 1961: Order of settlement to be conclusive, and the bar on reopening matters covered by it save as otherwise provided in Chapter XIX-A.
Section 245AA of the Income Tax Act, 1961: Interim Boards for Settlement, inserted by the Finance Act, 2021 with effect from February 1, 2021, to dispose of pending applications.
Case Details
Case: Assistant Commissioner of Income Tax and Another v. M/s Omaxe Limited
Case No: Civil Appeal No. 9190 of 2013
Citation: 2026 INSC 1000
Court: Supreme Court of India
Date of Judgment: September 16, 2026
Bench: Justice S.V.N. Bhatti and Justice N.V. Anjaria
Outcome: Appeal of the Revenue dismissed. The Assessing Officer has no power to reassess a matter covered by a Settlement Commission order; the remedy lies under Section 245D(6).
Sources and References
Assistant Commissioner of Income Tax v. M/s Omaxe Limited, Supreme Court, September 16, 2026
Section 245-I of the Income Tax Act, 1961: Order of settlement to be conclusive
Income Tax Act, 1961, Sections 80IB(10), 148, 245C, 245D(4), 245D(6), 245F(2), 245-I and 245AA, and Chapter XIX-A
Finance Act, 2021, discontinuing the Income Tax Settlement Commission with effect from February 1, 2021
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
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