Case Law

Once Settled, Always Settled: Supreme Court Shuts the Door on Reopening ITSC Orders Through Reassessment

Published 18 Sept 2026· By Finoscape Editorial Team· 7 min read

Settlement is supposed to mean something is actually settled. That was, at bottom, the question the Supreme Court answered on 16 September 2026 in Assistant Commissioner of Income Tax & Anr. v. M/s. Omaxe Limited [2026 INSC 1000] — and it answered it in a way that should matter to every taxpayer, and every advisor, who has ever recommended the Income Tax Settlement Commission route to resolve a dispute rather than fight it out through ordinary assessment.

Sidebar: the amount at stake — ₹65,65,17,999, disallowed by way of a Section 80IB(10) housing-project deduction the Revenue said Omaxe had claimed through subsidiary structuring — is precise almost to the rupee in the Court’s own order, a reminder that this was not an abstract dispute but a very specific, very large number the company thought it had already put to rest.

Omaxe Limited had claimed a Section 80IB(10) deduction for housing projects in Assessment Year 2006-07. Before that year’s assessment was even concluded, the company went to the Income Tax Settlement Commission under Section 245C, voluntarily disclosing additional income — the entire point of the settlement route being that a taxpayer gets finality and immunity from penalty/prosecution in exchange for disclosure, while Revenue gets its tax without a protracted fight. The ITSC issued its final order on 17 March 2008. That should, ordinarily, have been the end of the matter.

It wasn’t. Following a survey in December 2009, the Revenue issued a fresh reassessment notice in June 2010 — nearly two and a half years after the settlement — alleging that Omaxe had misused subsidiary structures to retain eligibility for the Section 80IB(10) deduction, and disallowing the deduction entirely on reassessment. Revenue also tried the more obviously available route: an application before the ITSC itself under Section 245D(6), seeking to void the settlement on grounds of misrepresentation. The Commission rejected that application on 16 December 2011. Undeterred, Revenue pressed ahead with the separate reassessment anyway. The Delhi High Court quashed it, holding the ITSC’s settlement order conclusive; Revenue appealed to the Supreme Court.

A Division Bench of Justices S.V.N. Bhatti and N.V. Anjaria dismissed that appeal, in language that leaves very little room for a different reading next time. Chapter XIX-A of the Income Tax Act, the Court held, gives both sides — Revenue and assessee — a bargained exchange: the taxpayer gets immunity and finality, Revenue gets undisputed tax on disclosed income without protracted litigation. “Revenue and assessee must take crust and crumb together,” the Court said — neither side gets to keep the benefit of that bargain while reopening the parts it later dislikes. Once the ITSC passes its final order under Section 245D(4), an Assessing Officer’s ordinary reassessment powers under Sections 143(2), 148, 154 and similar provisions simply do not reach it. The only door left open to Revenue is Section 245D(6) — back before the Commission itself, and only on a showing of fraud or misrepresentation. Revenue had already tried that door in 2011, and the Commission had already closed it. “The AO’s power to reassess the Settlement Order passed by the ITSC is unavailable,” the Court stated plainly.

Why It Matters

This closes off a route Revenue had been trying to keep open in practice even where it had lost at the Commission itself: treat a rejected Section 245D(6) application as a setback, then pursue the same underlying grievance through an ordinary reassessment years later instead. The Supreme Court has now said, unambiguously, that this is not available — Section 245D(6) is not merely the preferred route to reopen a settlement, it is the only route, and losing there closes the question for good absent a fresh application on genuinely new grounds of fraud or misrepresentation.

Key Takeaways

The Supreme Court has held that an Assessing Officer cannot use ordinary reassessment powers (Sections 143(2), 148, 154, or similar) to reopen or revisit a final Income Tax Settlement Commission order passed under Section 245D(4).
Revenue’s only mechanism to disturb a final ITSC settlement is an application under Section 245D(6) before the ITSC itself, and only on a showing of fraud or misrepresentation.
Where Revenue has already tried and lost a Section 245D(6) application, it cannot pursue the same grievance through a later reassessment — the settlement’s finality holds.
The ruling affirms the Delhi High Court’s quashing of a reassessment that had disallowed a ₹65.65 crore Section 80IB(10) deduction Omaxe had already disclosed and settled through the ITSC in 2008.

Practical Implications

Any client who has resolved a dispute through the Income Tax Settlement Commission — or Interim Board for Settlement, its successor mechanism under current law — should be advised that this ruling substantially strengthens the finality of that outcome against a later reassessment attempt, provided Revenue has not separately and successfully invoked Section 245D(6) on fraud or misrepresentation grounds. For clients currently facing a reassessment notice that revisits an issue already covered by a final settlement order, this ruling is now the lead authority to raise, and should be raised at the earliest possible stage — ideally in response to the reassessment notice itself, rather than waiting to litigate the point after an order is passed.

Action Checklist

Identify any client with a final ITSC/Interim Board settlement order who has subsequently received, or is at risk of receiving, a reassessment notice touching the same assessment year or issue.
Where such a notice exists, raise this ruling directly with the Assessing Officer at the earliest stage, citing the settlement order’s finality under Section 245D(4) and this decision’s holding on Section 245D(6) being the exclusive route.
Separately confirm whether Revenue has ever filed — and, critically, whether it won or lost — a Section 245D(6) application against that same settlement; a prior loss there materially strengthens the client’s position under this ruling.
For clients considering the settlement route for a live dispute, this ruling is a genuine point in its favour: finality is now more clearly protected than it may have appeared in practice.

Relevant Sections / Rules / Notifications

Section 245C (application for settlement), Section 245D(4) (final settlement order) and Section 245D(6) (the exclusive route to disturb a final order, on fraud/misrepresentation) of the Income-tax Act, 1961.
Sections 143(2), 148 and 154 of the Income-tax Act, 1961 — the ordinary assessment/reassessment/rectification powers the Court held unavailable here.
Section 80IB(10) of the Income-tax Act, 1961 — the housing-project deduction underlying the original dispute.
Supreme Court of India, Assistant Commissioner of Income Tax & Anr. v. M/s. Omaxe Limited, 2026 INSC 1000, decided 16 September 2026.

FAQs

Q: Does this ruling mean a Settlement Commission order can never be reopened?
A: No — it can be, but only through a fresh Section 245D(6) application before the ITSC itself, on a genuine showing of fraud or misrepresentation. What this ruling closes off is the parallel or fallback route of an ordinary reassessment, especially after a Section 245D(6) attempt has already failed.

Q: Does this apply to settlements reached under the current Interim Board for Settlement mechanism, or only the erstwhile Income Tax Settlement Commission?
A: The ruling itself concerns an ITSC order from 2008, decided under Chapter XIX-A as it then stood. The Court’s reasoning — that Parliament designed the settlement chapter to provide genuine, bargained-for finality — is general in nature and should apply with equal force to the Interim Board mechanism that succeeded the ITSC, though a client relying on this point for a post-ITSC settlement should still take specific advice given the change in the deciding authority.

Q: What should a client do if they’re currently facing a reassessment notice on an already-settled issue?
A: Raise the settlement order’s finality and this ruling with the Assessing Officer immediately, in writing, rather than waiting to litigate the point later — and check whether Revenue has ever previously and unsuccessfully sought to disturb that same settlement under Section 245D(6).

Internal Links

“Change of Opinion” Reaffirmed: Bombay HC Quashes a Six-Year-Late Reassessment on a Settled Section 54F Claim · Finoscape’s Income Tax coverage

Any future Finoscape coverage of Interim Board for Settlement rulings testing the same finality principle under current law.

Prepared by Finoscape Editorial Team — hello@finoscape.com. This article is for general informational purposes and is based on the Supreme Court’s order dated 16 September 2026 in Assistant Commissioner of Income Tax & Anr. v. M/s. Omaxe Limited [2026 INSC 1000], cross-checked against its reproduction on IndianKanoon and reporting from LiveLaw, Verdictum, LawChakra, A2Z Taxcorp, RawLaw and Law Trend. It does not constitute legal or tax advice. Readers and advisors relying on this development for a specific client matter should verify the order’s full text and confirm no subsequent review or clarification has been issued before acting. Professional advice should be sought for any specific situation.