Case Note & Summary
The matter arose from a civil appeal filed by the Revenue before the Supreme Court of India against the judgment dated 13.07.2012 of the High Court of Delhi in Writ Petition (C) No. 7975 of 2011. The High Court had quashed a Show Cause Notice dated 30.06.2010 issued under Section 148 of the Income Tax Act, 1961 and the consequent Reassessment Order dated 08.11.2011 passed under Section 147 read with Section 143(3) of the Act, by which the Assessing Officer disallowed the deduction claimed by the assessee under Section 80IB(10) and added back Rs.65,65,17,999/- to the total income for Assessment Year 2006-07. The assessee, M/s OMAXE Limited, a public limited company engaged in real estate, had filed its return on 30.11.2006 declaring taxable income of Rs.89,20,76,630/- and claimed deduction under Section 80IB(10) in respect of housing projects. On 31.05.2007, during pendency of regular assessment, the assessee filed an application under Section 245C before the Income Tax Settlement Commission for Assessment Years 2000-01 to 2006-07. The Settlement Commission passed a final order under Section 245D(4) on 17.03.2008, accepting additional surrender of Rs.18,00,000/- and determining net taxable income after allowing deduction under Section 80IB(10). Subsequently, on 17.12.2009 and 18.12.2009, the Revenue conducted a survey under Section 133A and impounded documents containing minutes of meetings which, according to the Revenue, showed a plan to transfer commercial portions of projects to subsidiary companies to maintain the commercial area within the statutory limit under Section 80IB(10)(vi), i.e., 5% of aggregate built-up area or 2000 sq. ft., whichever is lower. The Revenue alleged that commercial area in four projects—OMAXE City Lucknow, OMAXE City Sonepat, OMAXE Heights Sonepat, and OMAXE Heights Faridabad—exceeded the limit, thereby making the projects ineligible for deduction. On 30.06.2010, a notice under Section 148 was issued proposing disallowance of Rs.55,58,96,486/-. The assessee filed objections contending that Section 245-I made the settlement order conclusive and barred reopening. The Assessing Officer rejected the objections on 03.10.2011 and passed the reassessment order on 08.11.2011. Meanwhile, on 29.10.2010, the Commissioner of Income Tax (Central)-III, Delhi filed an application under Section 245D(6) before the Settlement Commission seeking to declare the settlement order void on the ground of misrepresentation. The Settlement Commission, by order dated 16.12.2011, rejected that application, holding that the difference of opinion between the Department and the assessee on what constitutes a 'project' eligible for deduction under Section 80IB(10) was a legal dispute and did not amount to misrepresentation. The Commission also noted the contradictory stand of the Revenue, which on one hand argued that the settlement order did not cover the deduction issue and on the other alleged misrepresentation before the Commission. The assessee challenged the reassessment before the High Court, which quashed the notice and order. The Revenue appealed to the Supreme Court. The extract provided does not include the Supreme Court's final conclusion, but the lower court and Settlement Commission had held that the Assessing Officer lacked jurisdiction to reopen matters covered by the conclusive settlement order, and that a mere legal dispute did not constitute misrepresentation under Section 245D(6).
Headnote
A) Income Tax - Reassessment - Jurisdiction to Reopen After Settlement Order - Income Tax Act, 1961, Sections 147, 148, 245D(4), 245-I - The Revenue issued notice under Section 148 for AY 2006-07 after the ITSC passed a final settlement order under Section 245D(4) computing total income; the assessee objected that Section 245-I made the order conclusive and barred reopening; the High Court quashed the notice and reassessment order on that ground - Held that AO lacked jurisdiction to reopen matters covered by settlement order (Paras 1-5). B) Income Tax - Settlement Commission - Application to Declare Settlement Order Void - Income Tax Act, 1961, Section 245D(6) - Revenue filed application under Section 245D(6) alleging settlement order obtained by misrepresentation regarding Section 80IB(10) deduction; ITSC rejected application on 16.12.2011, finding no misrepresentation but only a difference of opinion on legal issue of what constitutes a project eligible for deduction - Held that legal dispute does not amount to misrepresentation (Paras 8-9). C) Income Tax - Deductions - Section 80IB(10) Housing Project Eligibility - Commercial Area Limit - Income Tax Act, 1961, Section 80IB(10)(vi) - Survey revealed minutes indicating transfer of commercial portions to subsidiaries to maintain commercial area within 5% aggregate built-up area or 2000 sq ft; Revenue alleged deduction wrongly claimed across four projects - The substantive eligibility for deduction was disputed, with Revenue claiming commercial area exceeded limit - This formed basis for reassessment but was rejected by ITSC as legal dispute (Paras 3, 9).
Issue of Consideration
Whether the Assessing Officer had jurisdiction to issue notice under Section 148 and pass reassessment order under Section 147 for AY 2006-07 after the Income Tax Settlement Commission passed a final settlement order under Section 245D(4) dated 17.03.2008, given the conclusiveness under Section 245-I; and whether the ITSC order dated 16.12.2011 rejecting the Revenue's Section 245D(6) application was valid.
Final Decision
Not mentioned (extract ends before final Supreme Court holding; High Court quashed notice and reassessment order, ITSC rejected Revenue's Section 245D(6) application).
Law Points
- Settlement order under Section 245D(4) is conclusive under Section 245-I
- Reopening under Section 148 barred for matters covered by settlement order
- Section 245D(6) requires misrepresentation of facts
- not mere legal dispute
- High Court quashed reassessment for lack of jurisdiction
- Commercial area limit under Section 80IB(10)(vi) forms basis for disallowance
