ITAT holds AO cannot use section 153A to disturb issues settled u/s 245D without statutory steps

ITAT Mumbai dismissed Revenue's appeal and upheld the order of CIT(A), holding that the AO lacked jurisdiction to make additions under s.153A in respect of issues already settled by the Settlement Commission u/s 245D. The Tribunal observed that the AO had not invoked the specific statutory mechanisms under s.245D(6) or s.245D(6B), such as alleging fraud or misrepresentation or seeking rectification of the settlement order. By independently reopening the assessment u/s 153A without following the procedure prescribed in s.245D, the AO exceeded his jurisdiction, rendering the impugned additions unsustainable.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the delay of eight days in filing the appeals by the Revenue ought to be condoned.

1.2 Whether, after an order of the Income Tax Settlement Commission under section 245D(4) has attained finality for a given assessment year, the Assessing Officer has jurisdiction to reopen and reassess that year under section 153A.

1.3 Whether, in the facts of the case, the reassessment orders passed under section 143(3) read with section 153A were without jurisdiction and liable to be quashed.

1.4 Whether the ground raised in the cross-objection regarding absence of Document Identification Number (DIN) in the assessment order required adjudication in view of the decision on the Revenue's appeals.

1.5 Whether, for the subsequent assessment year having identical facts and grounds, the appeal of the Revenue was liable to be dismissed on the principle of consistency.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Condonation of delay in filing the Revenue's appeals

Interpretation and reasoning

2.1 The Court noted that the impugned orders of the first appellate authority were dated 15.04.2025 and the appeals by the Revenue were filed on 08.07.2025, resulting in a delay of eight days.

2.2 The Assessing Officer explained that the delay occurred due to administrative reasons in obtaining approval from the competent authority and was not intentional, and that no prejudice would be caused to the assessee if the delay were condoned.

2.3 The assessee did not oppose the Revenue's request for condonation.

Conclusions

2.4 Considering the short duration of delay, the administrative cause shown, and the absence of opposition from the assessee, the Court condoned the delay in filing the appeals and proceeded to decide the matters on merits.

Issue 2 - Jurisdiction to reopen under section 153A after final order of Settlement Commission under section 245D(4)

Legal framework (as discussed)

2.5 The Court referred to the scheme of Chapter XIX-A of the Act concerning settlement of cases, particularly sections 245C and 245D, including:

* Section 245C(1): enabling an assessee to apply for settlement of tax liabilities for specified assessment years.

* Section 245D(4): empowering the Settlement Commission to pass a final order on such applications.

* Section 245D(6): providing that the order under section 245D(4) shall prescribe the terms of settlement and also that the settlement shall be void if obtained by fraud or misrepresentation, in which event recourse lies before the Settlement Commission.

* Section 245D(6B): conferring power on the Settlement Commission to rectify mistakes apparent from the record in its order.

2.6 The Court also considered section 153A, which empowers the Assessing Officer to issue notice and make assessment or reassessment in consequence of a search under section 132.

2.7 Reliance was placed on judicial precedents discussed in the order, including decisions of the Delhi High Court and Gujarat High Court holding that, once a settlement under section 245D(4) is passed and attains finality, the Assessing Officer has no jurisdiction to reopen the assessments for those years except by recourse to the statutory mechanisms within section 245D itself.

Interpretation and reasoning

2.8 It was undisputed that:

* A search was conducted and, for the relevant assessment years, the assessee applied to the Settlement Commission under section 245C(1) for settlement of all tax disputes.

* The Settlement Commission admitted the applications and passed a final order under section 245D(4).

* The Assessing Officer gave effect to the Settlement Commission's order, accepting the total income determined therein, and such order attained finality.

2.9 The Court noted the principle laid down in:

* The Delhi High Court decision that, once an application for settlement is admitted, the Settlement Commission has exclusive jurisdiction in relation to the assessee's case till the final order, and all matters which could be examined by the Assessing Officer are within that exclusive jurisdiction.

* The Gujarat High Court decision that, after an order under section 245D is passed, the assessment for those years stands concluded and the Assessing Officer cannot reopen the assessment.

* A later Delhi High Court decision that the Settlement Commission's order is conclusive for all matters pertaining to the concerned assessment years covered by the settlement; such matters can only be revisited through the procedure in section 245D (including grounds of fraud or misrepresentation) and not by regular reassessment routes.

2.10 The Court emphasised that the Assessing Officer did not allege that the settlement order had been obtained by fraud or misrepresentation, nor was any proceeding initiated before the Settlement Commission under section 245D(6) to declare the settlement void.

2.11 No attempt was made to seek rectification of the Settlement Commission's order under section 245D(6B).

2.12 Despite the above, the Assessing Officer independently initiated proceedings and passed assessments under section 143(3) read with section 153A for the same assessment years already settled.

2.13 The Revenue's contention that the reopening under section 153A related to issues not covered before the Settlement Commission was rejected in substance, as the Court treated the Settlement Commission's order as conclusive for all matters pertaining to the assessment years covered, subject only to the statutory exceptions and procedures laid down in section 245D.

Conclusions

2.14 Once the assessee's applications under section 245C(1) were admitted and final orders under section 245D(4) were passed and given effect to, the assessments for those years stood concluded.

2.15 The Assessing Officer could not reopen or reassess those years under section 153A; any challenge or modification to the settlement order lay only within the framework of section 245D, which was not invoked.

2.16 The Assessing Officer, in issuing notice under section 153A and completing assessment under section 143(3) read with section 153A, exceeded his jurisdiction.

2.17 Accordingly, the orders passed under section 143(3) read with section 153A were held to be without jurisdiction for the assessment years covered by the Settlement Commission's order and were rightly quashed by the first appellate authority.

2.18 The Revenue's grounds challenging the quashing of the assessments and alleging error in the application of sections 153A and 245-I / 245D were rejected.

Issue 3 - Validity of the impugned assessments under section 143(3) read with section 153A

Interpretation and reasoning

2.19 The Court examined the fact that, subsequent to the Settlement Commission's final order and the Assessing Officer's order giving effect to it, a fresh notice under section 153A was issued, and additions on account of transfer pricing adjustment and disallowance under section 35(2AB) were made.

2.20 Given the conclusive nature of the settlement for the concerned assessment years, and absent any statutory challenge under section 245D(6) or rectification under section 245D(6B), the Court held that the Assessing Officer lacked jurisdiction to disturb the settled assessments.

Conclusions

2.21 The assessments framed under section 143(3) read with section 153A for the relevant assessment years were held to be nullities for want of jurisdiction.

2.22 The order of the first appellate authority quashing these assessments was upheld, with the Court adding that the Assessing Officer's action was beyond the jurisdiction conferred by law in light of the existing settlement.

2.23 The Revenue's appeals on merits were dismissed.

Issue 4 - Cross-objection regarding absence of Document Identification Number (DIN)

Interpretation and reasoning

2.24 In the cross-objection, the assessee contended that the assessment order, having been passed without allotting a DIN and without justification for issuance of a manual order, was in contravention of a specific circular and should be deemed never to have been issued.

2.25 The Court noted that, since the Revenue's appeals had been dismissed on the core jurisdictional issue, resulting in full relief to the assessee, the cross-objection ground became academic.

Conclusions

2.26 The cross-objection on the DIN issue was held to be infructuous and was dismissed as such, without adjudication on merits.

Issue 5 - Disposal of the appeal for the subsequent assessment year on the principle of consistency

Interpretation and reasoning

2.27 For the subsequent assessment year, the Revenue raised grounds identical to those in the lead assessment year, and the factual matrix was also the same, both years being covered by the same settlement scheme and order of the Settlement Commission.

2.28 The Court had already decided the legal issues in detail in respect of the lead assessment year.

Conclusions

2.29 Following its detailed reasoning and conclusions in the lead year and applying the principle of consistency to the identical facts and grounds, the Court dismissed the Revenue's appeal for the subsequent assessment year as well.

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