Supreme Court to Income Tax Department: Once Settled, Always Settled — Even Rs.65 Crore and 'Manipulative' Evidence Can't Reopen an ITSC Order

In 2005, the Income Tax Department raided Omaxe Limited's offices. In 2007, Omaxe itself walked into the Income Tax Settlement Commission and offered to pay up. In 2008, the Commission settled the matter and closed the file. In 2009, a fresh survey turned up internal minutes suggesting Omaxe's own executives had discussed structuring commercial space across group companies specifically to keep claiming a tax deduction they may not have been entitled to. The Department reopened the assessment and added back Rs.65.65 crore to Omaxe's taxable income.

On 16th September 2026, the Supreme Court told the Income Tax Department it never had the power to do that at all, in Assistant Commissioner of Income Tax & Another vs M/s. Omaxe Limited (Civil Appeal No. 9190 of 2013, 2026 INSC 1000). Not because the Department's evidence was weak. Because once a Settlement Commission order becomes final, the ordinary tax machinery, including a reassessment notice, simply has no jurisdiction to touch that assessment year again, whatever new evidence turns up afterward.

How Omaxe Ended Up Before The Settlement Commission

Omaxe, a listed real estate company, filed its return for Assessment Year 2006-07 in November 2006, declaring taxable income of about Rs.89.2 crore and claiming a deduction of roughly Rs.79 crore under Section 80IB(10) of the Income Tax Act for its housing projects. Section 80IB(10) allows a tax holiday on housing project profits, but only if the commercial component of the project stays within a strict cap: 5% of the built-up area, or 2,000 square feet, whichever is lower.

While that assessment was still pending, Omaxe applied to the Income Tax Settlement Commission (ITSC) under Section 245C, offering to settle its tax position for several years including AY 2006-07 and disclosing an additional Rs.18 lakh of income. In March 2008, the ITSC passed its final order under Section 245D(4), computing Omaxe's net taxable income for that year at just over Rs.89.38 crore, expressly building in the Section 80IB(10) deduction Omaxe had claimed.

The Survey That Changed The Story

The matter should have ended there. It didn't. In December 2009, the Department's Investigation Wing conducted a fresh survey under Section 133A and impounded minutes of a meeting attended by Omaxe's Director of Taxation, its VP Finance, its GM Legal, and its auditors. According to the Department, those minutes showed Omaxe's leadership discussing a plan to transfer the commercial portions of projects like OMAXE City Lucknow and OMAXE City Sonepat to wholly-owned subsidiary companies before finalising the balance sheet, specifically to keep the commercial area within the Section 80IB(10) cap and protect the deduction.

On the strength of this, the Assessing Officer issued a notice under Section 148 in June 2010, proposing to disallow Rs.55.58 crore of the deduction across four projects. Omaxe objected that the matter was already settled and could not be reopened. The Assessing Officer rejected the objection, and by a reassessment order in November 2011 added back Rs.65.65 crore to Omaxe's income for AY 2006-07, effectively undoing the ITSC's 2008 settlement.

"You Already Passed This Through The Settlement Commission"

Omaxe went to the Delhi High Court, arguing that under Section 245-I of the Act, an ITSC order is conclusive on every matter it covers, and that no other authority, including an Assessing Officer wielding Section 148, can reopen it. The Revenue's counter was narrower than it looked: it argued the ITSC had never actually adjudicated the Section 80IB(10) deduction as such, because Omaxe hadn't disclosed anything new about it in the settlement application, so the deduction was simply never "covered" by the 2008 order and remained fair game.

The High Court didn't buy it. It pointed to the ITSC's own arithmetic: Omaxe's original return claimed the Section 80IB(10) deduction, and the ITSC's final computed income figure of Rs.89.38 crore was built directly on top of that claimed deduction. If the deduction hadn't been considered, the numbers wouldn't reconcile. The Reassessment Notice and Order were quashed, and the Revenue appealed to the Supreme Court.

The Revenue Tried Twice, And Lost Twice

What makes this case unusual is that the Income Tax Department didn't only try the reassessment route. In parallel, it also went back to the ITSC itself in 2010, invoking Section 245D(6), the one provision that lets a Settlement Commission order be declared void, but only on proof of fraud or misrepresentation by the taxpayer. The ITSC heard both sides and, in December 2011, rejected the Department's application outright.

"A perusal of this evidence nowhere makes out any case of misrepresentation by the applicant... There is no hint in the minutes of stating wrong facts or suppressing material facts by the applicant." — Income Tax Settlement Commission, Order dated 16.12.2011

The ITSC's reasoning was pointed: discussing how to structure a business to fit within a legal deduction is not the same as lying to get one. A tax planning strategy, however aggressive, is a legal dispute about what counts as one "housing project" under Section 80IB(10), not evidence of concealment. That finding became final, and the Supreme Court held it could not now be reopened through the back door of a Section 148 reassessment.

The Supreme Court's Core Holding: A Self-Contained Code

Writing for the bench, Justice S.V.N. Bhatti (with Justice N.V. Anjaria concurring) traced the full architecture of Chapter XIX-A of the Income Tax Act, the settlement scheme. The moment the ITSC admits a settlement application under Section 245D(1), Section 245F(2) hands it exclusive jurisdiction over that assessment year. The ordinary machinery, assessment, reassessment, rectification, everything from Sections 142 to 156, goes into statutory abeyance. It stays frozen unless the application itself abates.

• Once the ITSC passes a final order under Section 245D(4), that order is conclusive under Section 245-I on every matter it covers.

• The only route to reopen it is Section 245D(6), where the ITSC itself finds fraud or misrepresentation and voids its own order.

• An Assessing Officer has no independent power under Section 148, or any other provision, to second-guess or reassess what the Settlement Commission has already settled.

• Judicial review of an ITSC order is available only under Article 226 or Articles 32/136 of the Constitution, and only on narrow grounds like bias, fraud, or a clear statutory violation, not on the merits.

The Court rejected the Revenue's argument that Section 80IB(10) was simply never "covered" by the settlement, calling out the contradiction in the Department's own position: it could not simultaneously claim the deduction fell outside the ITSC's order while also alleging Omaxe misrepresented facts about that very deduction before the ITSC. Both cannot be true at once, and the ITSC itself had already rejected the misrepresentation claim in 2011.

"The Crust And The Crumb": The Court's Own Metaphor

In one of the more quotable passages of the judgment, the Court described the settlement bargain in its own words: the Revenue avoids the "crust" of a long-drawn assessment dispute by collecting the "crumb" of tax on income voluntarily disclosed, while the taxpayer avoids the "crust" of penalty, interest and prosecution by offering that crumb upfront. Once both sides have taken that bargain, the Court held, Parliament did not intend for either side to come back later demanding a second helping of crust.

The Final Verdict

The Supreme Court dismissed the Revenue's appeal. The Delhi High Court's quashing of the Section 148 notice and the 2011 reassessment order was upheld, the ITSC's 2008 settlement stands, and the Income Tax Department's only lawful route to reopen it, a fresh application under Section 245D(6) to the ITSC itself, had already failed years earlier and cannot be relitigated through reassessment proceedings.

Why This Case Matters For Every Law Student And Tax Practitioner

This judgment is essential reading for anyone who wants to practise corporate tax litigation, because it draws a hard jurisdictional line that most junior lawyers only learn about after losing a case on it: once a client's matter has gone through the Settlement Commission and attained finality, drafting a reassessment challenge is not about re-arguing the facts, it is about identifying whether the Assessing Officer ever had jurisdiction to act at all. That is a drafting and strategy skill, not a factual one, and it is exactly the kind of procedural, jurisdiction-first thinking that separates a lawyer who wins on a technicality that actually matters from one who argues the merits and loses anyway.

If you are a law student or young advocate who wants to build this instinct for spotting jurisdictional defences, drafting precise objections, and structuring arguments around finality and estoppel, that is precisely what Into Legal World's Advanced Legal Drafting 6.0 course is designed to train, with modules on evidence-based drafting, litigation strategy, and how to build a case around the procedural safeguards that decide most disputes before the merits are ever reached.

Frequently Asked Questions

Q1. Why did the Supreme Court rule in favour of Omaxe Limited despite evidence of possible manipulation?

Because once the Income Tax Settlement Commission's order under Section 245D(4) became final in 2008, the Assessing Officer had no jurisdiction to reopen that assessment year through a Section 148 reassessment notice. The Department's own attempt to void the settlement for misrepresentation, filed directly with the ITSC under Section 245D(6), had already been rejected by the ITSC in 2011.

Q2. What is the Income Tax Settlement Commission (ITSC) and why is its order treated as final?

The ITSC is a quasi-judicial body under Chapter XIX-A of the Income Tax Act that lets a taxpayer voluntarily disclose previously undisclosed income and settle a pending assessment. Under Section 245-I, its final order is conclusive on every matter it covers, and the ordinary assessment machinery cannot reopen what it has settled.

Q3. Can the Income Tax Department ever reopen a case after a Settlement Commission order?

Only through Section 245D(6), by applying to the ITSC itself to declare its own earlier order void on grounds of fraud or misrepresentation by the taxpayer. If the ITSC rejects that application, as it did here, the Department cannot achieve the same result indirectly through a Section 148 reassessment notice.

Q4. Does this judgment mean taxpayers can hide aggressive tax planning behind a settlement order?

No. The Court drew a clear line between tax planning and misrepresentation: structuring a business to legally fit within a deduction's conditions is a legal dispute about interpretation, not concealment. Genuine fraud or misrepresentation would still let the ITSC void its own settlement under Section 245D(6).

Q5. What is the practical lesson for tax lawyers from this case?

That jurisdiction, not just merits, decides most reassessment disputes. Before arguing the facts of a reopened assessment, check whether the underlying year was ever settled by the ITSC, because if it was, a reassessment notice may be void for want of jurisdiction regardless of how strong the Department's evidence looks.

Keywords

Income Tax Settlement Commission judgment, ITSC order finality, Section 245D(4) Income Tax Act, Section 148 reassessment jurisdiction, Omaxe Limited Supreme Court case, Section 80IB(10) deduction, Chapter XIX-A Income Tax Act, Assistant Commissioner of Income Tax vs Omaxe, Supreme Court tax law 2026, Civil Appeal 9190 of 2013, criminal and tax law drafting course, Advanced Legal Drafting 6.0, Into Legal World.

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