Accord Distillers & Brewers Private Limited Vs PCIT (ITAT Chennai)
Settlement Commission Proceedings Defeat Section 263 Revision: ITAT Allows Accord Distillers’ Appeal
The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) set aside a revisionary order concerning an assessment year already covered by a final settlement order. The Tribunal held that the PCIT’s intervention was not justified in the circumstances, applying the statutory framework governing Settlement Commission proceedings and a coordinate bench precedent.
In Accord Distillers & Brewers Private Limited vs. PCIT, Central-2, Chennai, ITA No. 2273/Chny/2026, concerning Assessment Year 2016-17, the Tribunal allowed the company’s challenge to revision under Section 263.
Accountant Member Inturi Rama Rao and Judicial Member S.S. Viswanethra Ravi pronounced the order on 14 October 2026.
Assessment Year Covered by Final Settlement
The assessee had filed its return for AY 2016-17 declaring a loss of ₹8,45,14,947.
Following a search involving the group of Shri S. Jagatrakshakan, the company filed a settlement application on 25 February 2019, covering AYs 2011-12 to 2017-18.
The Income Tax Settlement Commission admitted the application on 5 March 2019 and subsequently passed a consolidated final settlement order on 14 December 2020.
Giving effect to that order, the Assessing Officer determined the company’s total income at nil for AY 2016-17 through an order dated 9 July 2021.
This completed settlement formed the foundation of the assessee’s jurisdictional objection.
Reassessment and Revision Follow Settlement
Despite the settlement, the Assessing Officer issued a reassessment notice on 30 March 2023 for AY 2016-17.
The reassessment concluded through an order dated 29 March 2024 under Section 147 read with Section 144, determining income at ₹80,32,28,371.
The assessee challenged that reassessment before the CIT(A). The Tribunal recorded that the CIT(A), through an order dated 21 May 2026, remanded the matter to the Assessing Officer.
Separately, the PCIT passed the challenged Section 263 order dated 29 March 2026, treating the reassessment as erroneous and prejudicial to the Revenue’s interests and requiring fresh examination of the identified issue.
Assessee Relies on Statutory Finality
Before the Tribunal, the company argued that the assessment year had already attained finality through the Settlement Commission’s order under Section 245D(4).
It relied on Section 245-I, contending that matters settled through that order could not be reopened or revised in subsequent proceedings.
The company also submitted that the reassessment had already been challenged before the CIT(A). It invoked Explanation 1(c) to Section 263 against simultaneous revision in the circumstances.
The central submission was that ordinary reassessment and revisionary machinery could not be used to unsettle the concluded settlement in the manner attempted.
High Court Authorities Cited
The assessee relied on Omaxe Ltd. vs. ACIT, [2012] 25 taxmann.com 190 (Delhi).
It argued that the decision recognised the breadth of settlement proceedings and rejected reassessment of an issue after the case had been settled.
Reliance was also placed on Madhana Industries Ltd., [2019] 103 taxmann.com 301 (Bombay), for the proposition that settlement could encompass the assessment for the relevant year.
The Revenue contested the assessee’s interpretation, arguing that the Bombay High Court decision permitted reopening concerning matters not covered by the settlement order.
The Tribunal therefore examined the statutory scheme and its application to the present sequence of proceedings.
Settlement Commission’s Exclusive Jurisdiction Explained
The Tribunal discussed Chapter XIX-A, observing that settlement concerns a “case” involving assessment proceedings pending when the application is made.
It explained that an application under Section 245C requires full and true disclosure of previously undisclosed income.
Once the Commission permits the application to proceed, it assumes exclusive jurisdiction over the assessment case. The Act does not contemplate parallel proceedings before the Commission and the Assessing Officer while that jurisdiction operates.
The Tribunal also described the Commission’s authority over matters covered by the application and other matters relating to the case referred to in the Commissioner’s report.
Coordinate Bench Precedent Applied
On the present facts, the Tribunal emphasised that the application had been admitted, a final consolidated settlement order passed and an order giving effect issued.
It then considered the subsequent reassessment and the PCIT’s revision.
The Bench found the circumstances comparable to the Tribunal’s decision in Shri Bhanwarlal Jain, which addressed parallel proceedings arising from revision in a settlement-related setting.
Following that precedent, it held that the PCIT’s exercise of jurisdiction treating the reassessment as erroneous and prejudicial to the Revenue was not justified.
The Revenue’s arguments were rejected, and the challenged revisionary action was set aside.
Appeal Allowed Against Revision
The assessee’s appeal was allowed, removing the Section 263 order challenged before the Tribunal.
The decision concerns the validity of that revision in the settlement-related circumstances recorded. It does not separately quantify the company’s final liability or decide every addition in the reassessment.
Its central conclusion is that the PCIT’s revision could not stand against the settlement framework and the comparable precedent applied by the Bench.
Cases Discussed
- Omaxe Ltd. Vs ACIT — [2012] 25 taxmann.com 190 (Delhi); cited by the assessee. Linked TaxGuru coverage concerns the subsequent Supreme Court ruling in the Omaxe litigation.
- Madhana Industries Ltd. — [2019] 103 taxmann.com 301 (Bombay); cited by both sides. Link is related coverage, not a direct case page.
- Shri Bhanwarlal Jain — ITAT Chennai, IT(SS)A No. 3/Chny/2019, order dated 8 March 2024; followed. Exact TaxGuru case URL not verified.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT CHENNAI
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 29.03.2026 passed by the Principal Commissioner of Income Tax (Central), Chennai-2, for the assessment year 2016-17.
2. The assessee raised ground nos. 2 to 4 challenging action of the ld.PCIT in invoking the jurisdiction u/s. 263 of the Act in holding reassessment order dated 29.03.2024 is erroneous in so far as prejudicial to the interest of revenue.
3. The ld.AR, Shri. B. Ramakrishnan, CA, submits the PCIT is not justified in invoking the provisions of section 263 of the Act when the underlying reassessment order dated 29.03.2024 passed u/s. 147 r.w.s. 144 of the Act is not erroneous in so far as it is prejudicial to the interest of revenue within the meaning of section 263 and thereby erred in setting aside the reassessment order with directions to the AO to re-examine afresh the issue identified therein. He vehemently argued that the PCIT erred in invoking revisionary jurisdiction under 263 of the Act, though the said assessment year already formed part of the proceedings before Income-tax Settlement Commission and stands covered by final order passed u/s. 245D(4) of the Act dated 14.12.2020 and the matter so settled are by virtue of section 245-I of the Act conferred statutory finality and are not liable to re-opened or revised in subsequent proceedings under the Act. Further, he argued that the PCIT erred in invoking revisionary powers u/s. 263 of the Act in respect of reassessment order dated 29.03.2024 when the said reassessment order had already been challenged by the appellant in appeal before the CIT(A)-19, Chennai on the ground that said assessment year had attained finality pursuant to the order of Income Tax Settlement Commission order u/s. 245D(4) of the Act and such appeal is pending adjudication, and in view of explanation 1(c) to section 263 of the Act could not be simultaneously taken up for revision. He referred to decision of Hon’ble High Court of Delhi in the case of Omaxe Ltd vs ACIT reported in (2012) 25 taxmann.com 190 (Delhi) and by referring to para nos. 13, 18 & 19 of the said order and argued that the provisions of Chapter XIV-A suggests that all matters in relation to the case of the assessee shall be dealt with by the Income Tax Settlement Commission just as the Assessing authority would deal with them while completing the assessment order u/s.143(3) of the Act and rejected the arguments of revenue that the matter relating to deduction u/s. 80-IB(10) of the Act was not a subject matter of the final order of Settlement Commission. He argued the Hon’ble High Court held that the AO had no jurisdiction to reopen the assessment by issuing notice u/s. 148 of the Act on the ground that the deduction was wrongly allowed. Further, he referred to decision of Hon’ble High Court of Bombay in the case of Madhana Industries Ltd reported in (2019) 103 taxmann.com 301 (Bom) and by referring to para no. 17, 19, 20 & 23 argued that if an application for settlement is allowed and the case is settled, the entire assessment for such assessment year in question would stand settled. Further, he relied on the order of this Tribunal dated 08.03.2024 in IT(SS)A No. 3/Chny/2019 and drew our attention to para no.9.4 and submits that the Tribunal held AO has no power to pass any order when Settlement Commission admits the application of the assessee and settled by way of paid taxes.
4. The ld.DR, Ms. Nayani Swapna, CIT, drew our attention to para no. 23 of the decision of Hon’ble High Court of Bombay in the case of Madhana Industries Ltd (Supra) and argued that the AO has jurisdiction to reopen by such matter not covered u/s. 245D(4) of the Act. She placed reliance on para no.7.1 of the ld.CIT(A) order.
5. Heard both the parties and perused material available on record. We have gone through the provisions of Chapter XIX-A and noted that the object of the scheme of the Settlement Commission is for the settlement of cases under the chapter. A case, according to us is defined to mean any proceeding for assessment under the Act which is pending before the Assessing Officer on the date when an application for settlement is made under Section 245C of the Act. The assessment is the subject of the case which is to be settled. An assessee who moves the Settlement Commission under Section 245C of the Act has to do so on the basis of a true and full disclosure of his income which has not been disclosed before the revenue. Disclosure of income which has not been disclosed before the revenue is essential to the validity of the application. The application is to have the case settled. Under sub- section (1B) of Section 245C of the Act, where the income disclosed in the application relates to one previous year, if the applicant has furnished a return in respect of total income of that year, the tax has to be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate were the total income. The Settlement Commission is empowered to call for a report of the Commissioner at two stages. In both the cases the report of the Commissioner is not a condition precedent for the Settlement Commission to proceed further with the settlement of the case. If the Commissioner does not submit his report to the Settlement Commission, that does not bring an end to the proceeding before the Settlement Commission. On the contrary, both the second proviso to sub-section (2C) and the proviso to sub-section (3), make it abundantly clear that the Settlement Commission is empowered to proceed further even in a situation where the Commissioner does not furnish a report within the prescribed period. Once the Settlement Commission is seized of the proceedings and an application under Section 245C of the Act has been allowed to be proceeded with under Section 245D of the Act, the Settlement Commission has exclusive jurisdiction to exercise the powers and to perform the functions of an income tax authority under the Act in relation to the case. When the Settlement Commission decides to proceed with a case under Section 245D(1) of the Act, it assumes exclusive jurisdiction in regard to the assessment. That is because the Settlement Commission is then seized of the case in respect of which a settlement is sought and the expression “case” itself is defined to mean any proceeding for assessment under the Act which is pending before the AO. The Act does not contemplate a parallel proceeding before the Settlement Commission and before the AO, once the Settlement Commission has decided to proceed with the application under Section 245D(1) of the Act. So long as the proceedings remain before the Settlement Commission, it is that authority alone which has jurisdiction in all matters pertaining to assessment. The jurisdiction of the Settlement Commission is to pass orders (i) on matters covered by the application; and (ii) on any other matter relating to the case, not covered by the application but referred to in the report of the Commissioner. In the present case before us, we find the assessee filed return of income for the year under consideration declaring loss of Rs.8,45,14,947/- and in view of search in assessee’s group of Shri. S. Jagatrakshakan, the assessee filed an settlement application for AYs 2011-12 to 2017-18 on 25.02.2019, wherein Income Tax Settlement Commission admits the said application on 05.03.2019 holding them as valid. We note that in accordance with the procedure Income-tax Settlement Commission passed consolidated final settlement order on 14.12.2020 for all AYs 2011-12 to 2017-18, in effect thereof the AO passed giving effect order for AY 2016-17 determining the total income at Nil vide his order dated 09.07.2021. We find, as matter stood thus, the AO issued notice on 30.03.2023 initiating the reassessment proceedings for AY 2016-17, which was concluded, inter alia, making additions determining income of the assessee at Rs.80,32,28,371/- which is challenged before the ld.CIT(A) and by its order dated 21.05.2026 remanded the matter to the file of AO. In these circumstances, the question before us as to whether the ld.PCIT rightly invoked the jurisdiction u/s. 263 of the Act in treating the reassessment order dated 29.03.2024 is erroneous and prejudice to the interest of the revenue or not. In the same set of facts and circumstances, the ITAT in the case of Shri Bhanwarlal Jain held the giving effect proceedings in pursuance of section 263 of the Act is parallel, where the AO has to refer the same to settlement commission. Therefore, we find the facts and circumstances before the Tribunal in the case of Shri Bhanwarlal Jain are similar to the facts on hand and in view of the same, we hold the jurisdiction exercised by the ld.PCIT u/s. 250 of the Act in treating the reassessment order dated 29.03.2024 is erroneous and prejudice to the interest of revenue, is not justified, thus, is set aside. In view of our findings in following the order of ITAT in the case of Shri Bhanwarlal Jain, arguments of ld.DR are rejected and grounds raised by the assessee are allowed.
6. In the result, appeal filed by the assessee is allowed.
Order pronounced on 14th October, 2026 at Chennai.
