Stories
SC: No Reassessment After ITSC Final Settlement; Upholds Section 43B on Expense Payments
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CNBC TV18•01-10-2026, 09:47
SC: No Reassessment After ITSC Final Settlement; Upholds Section 43B on Expense Payments
- •The Supreme Court ruled that an Assessing Officer cannot issue a reassessment notice under Section 148 of the Income Tax Act once the Income Tax Settlement Commission (ITSC) has passed a final settlement order.
- •A final ITSC order is conclusive, and ordinary reassessment routes cannot bypass this finality; the Department cannot reopen settled portions it later regrets, reiterating the ‘crust and crumb’ principle.
- •If fraud or misrepresentation is suspected in a settlement, the exclusive remedy is to approach the ITSC directly under Section 245D(6) to declare the settlement void, not to use independent reassessment powers.
- •The Supreme Court stayed the Punjab and Haryana High Court's verdict striking down Section 147A of the Income Tax Act, allowing Jurisdictional Assessing Officers (JAO) to continue exercising reassessment powers until the appeal is disposed of.
- •The Apex Court reversed the Calcutta High Court's verdict, upholding Section 43B(f) of the Income Tax Act, which mandates that deductions for employee leave encashment are allowed only upon actual payment, not on an accrual basis.
Key Questions Answered
No, the Supreme Court held that an Assessing Officer has no jurisdiction to issue a reassessment notice under Section 148 once a final settlement order is passed by the Income Tax Settlement Commission (ITSC).
If the Revenue believes a settlement was secured through fraud or misrepresentation, its exclusive remedy is to approach the ITSC directly under Section 245D(6) to declare the settlement void, rather than using independent reassessment powers.
The Supreme Court upheld the validity of Section 43B(f), ruling that deductions for employee leave encashment are allowed only in the year the payment is actually made rather than on an accrual basis.
