Supreme Court holds that an Assessing Officer cannot reopen an assessment settled by the Income Tax Settlement Commission after finality attaches to its order.
The Supreme Court has upheld the finality of orders passed by the Income Tax Settlement Commission, ruling that an Assessing Officer cannot initiate reassessment proceedings on issues settled by the Commission.
The Supreme Court has held that once the Income Tax Settlement Commission (ITSC) passes an order determining an assessee’s net taxable income, the Assessing Officer (AO) cannot subsequently reopen the assessment through reassessment proceedings under the Income Tax Act.
A bench comprising Justice S.V.N. Bhatti and Justice N.V. Anjaria dismissed the Revenue’s appeal against a judgment of the Delhi High Court, which had quashed reassessment proceedings initiated against real estate company Omaxe Limited for Assessment Year 2006-07.
The ruling reinforces the principle that an order passed by the Settlement Commission carries finality and cannot be indirectly reopened by the Assessing Officer.
Supreme Court: Finality Of Settlement Commission Order Must Be Preserved
The Court examined whether the AO could exercise powers under provisions of the Income Tax Act, including Sections 143(2), 148 and 154, after the Settlement Commission had already determined the assessee’s taxable income.
The Supreme Court held that permitting such independent powers to be exercised again would undermine the finality attached to the Settlement Commission’s determination.
The Court observed:
“If the jurisdiction of the AO under Sections 143(2), 148, 154, etc., is made independent and available for exercise again, the finality attached to the Settlement Commission will be defeated.”
According to the Court, Parliament did not contemplate a situation where an Assessing Officer could reassess matters that had already been settled by the ITSC.
The judgment therefore places emphasis on the statutory purpose of settlement proceedings, under which disputes concerning the assessee’s tax liability are brought to a conclusion through the Settlement Commission’s order.
AO Cannot Reassess Settlement Order
The Supreme Court made a distinction between reopening matters before the Settlement Commission and reopening an order after the Commission has finally determined the taxable income.
While the law may provide mechanisms for dealing with issues before the ITSC, the AO cannot use ordinary reassessment powers to effectively reconsider or reassess the Settlement Commission’s final order.
The Court specifically stated that judicial review by Constitutional Courts remains available. Challenges may therefore be pursued before the appropriate courts under Articles 226 and 32/136 of the Constitution, subject to the applicable legal requirements.
However, the AO does not possess an independent power to reassess the order passed by the ITSC.
The Court concluded that:
“the AO’s power to reassess the Settlement Order passed by the ITSC is unavailable.”
Delhi High Court Order Upheld
The proceedings arose from reassessment action taken against Omaxe Limited concerning Assessment Year 2006-07. The Delhi High Court had earlier quashed the reassessment proceedings.
The Revenue challenged that decision before the Supreme Court, contending that the Assessing Officer could invoke the statutory reassessment provisions.
The Supreme Court, however, dismissed the Revenue’s appeal and upheld the Delhi High Court’s view.
The decision is significant for taxpayers whose assessments have been conclusively settled through the Settlement Commission mechanism. It clarifies that the statutory powers ordinarily available to an Assessing Officer cannot be used to reopen a determination that has already attained finality through the ITSC.
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The ruling thus underscores the importance of finality in tax settlement proceedings and limits the scope for subsequent reassessment by the Assessing Officer after the Settlement Commission has determined the assessee’s taxable income.
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