Facts of the Case

  • M/s Omaxe Ltd., a public limited company engaged in real estate business, was subjected to a search operation under Section 132 of the Income Tax Act on 22.09.2005.
  • The company filed its return for Assessment Year 2006-07 declaring taxable income of ₹89,20,76,630 and claimed deduction of ₹78,99,00,509 under Section 80IB(10).
  • Subsequently, the assessee approached the Income Tax Settlement Commission under Section 245C seeking settlement of income tax cases for Assessment Years 2000-01 to 2006-07.
  • The Settlement Commission passed a final settlement order under Section 245D(4), computing total income for AY 2006-07 at ₹89,38,76,630.
  • Later, the Assessing Officer issued notice under Section 148 alleging that deduction under Section 80IB(10) amounting to ₹55.58 crores was wrongly allowed because commercial area exceeded statutory limits.
  • The petitioner challenged the reopening proceedings and subsequent reassessment order.

Issues Involved

  1. Whether an assessment settled by the Income Tax Settlement Commission under Section 245D(4) can subsequently be reopened under Section 148 of the Income Tax Act?
  2. Whether matters relating to deductions claimed under Section 80IB(10) formed part of the final settlement order passed by the Settlement Commission?
  3. Whether the Assessing Officer possessed jurisdiction to reassess income already settled by the Settlement Commission?

Petitioner’s Arguments

The petitioner argued that:

  • The Settlement Commission's order under Section 245D(4) had attained finality under Section 245I.
  • Once a settlement order is passed, no issue covered by such order can be reopened under any proceeding under the Act.
  • The deduction under Section 80IB(10) formed part of the computation of total income before the Settlement Commission.
  • The reassessment proceedings represented an attempt to sit in appeal over the Settlement Commission's order and were therefore without jurisdiction.
  • Only the Settlement Commission itself could reopen matters in cases involving fraud or misrepresentation.

Respondent’s Arguments

The Revenue argued that:

  • The Settlement Commission order was conclusive only regarding matters expressly considered by it.
  • Deduction under Section 80IB(10) was not specifically adjudicated by the Settlement Commission.
  • Therefore, the deduction issue was outside the scope of settlement and could validly be reopened under Section 148.
  • Reliance was placed on judicial precedent including CIT v. Damani Brothers.

Court Findings / Order

The Delhi High Court allowed the writ petition and held that:

  • Once a settlement application is admitted and proceeded with, the Settlement Commission acquires exclusive jurisdiction over the assessee's case.
  • The deduction claimed under Section 80IB(10) was part of the return and consequently formed part of the matters considered while determining total income.
  • There cannot be parallel assessments or piecemeal determination of income for the same assessment year.
  • The Assessing Officer lacked jurisdiction to reopen matters already settled by the Settlement Commission.
  • The notice issued under Section 148 and reassessment order under Sections 147/143(3) were quashed.

Important Clarification

The Court clarified that:

  • The Settlement Commission exercises comprehensive jurisdiction over the entire assessment case once proceedings commence before it.
  • Finality attached to a settlement order cannot be disturbed except in cases of fraud or misrepresentation.
  • The Income Tax Act does not permit a different authority to reopen a final assessment concluded by another authority unless specifically authorized by law.

Sections Involved

Income Tax Act, 1961

  • Section 80IB(10) – Deduction in respect of housing projects
  • Section 132 – Search and Seizure
  • Section 142(1) – Inquiry before assessment
  • Section 143(2) – Scrutiny Assessment
  • Section 143(3) – Assessment Order
  • Section 147 – Income Escaping Assessment
  • Section 148 – Reassessment Notice
  • Section 153A – Assessment in search cases
  • Section 245A – Definition of Case
  • Section 245C – Application for Settlement
  • Section 245D(1) and 245D(4) – Settlement Procedure and Final Order
  • Section 245E – Power to Reopen Proceedings
  • Section 245F – Powers and Jurisdiction of Settlement Commission
  • Section 245H – Immunity from Penalty and Prosecution
  • Section 245I – Conclusiveness of Settlement Order 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2012:DHC:4291-DB/RVE13072012CW79752011.pdf

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