Case: M/S DALMIA POWER LTD Vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

books of the Appellants/ Transferee Companies/Amalgamated Companies. The Schemes incorporated provisions for filing the revised Returns beyond the prescribed time limit since the Schemes would come into force retrospectively from the Appointed Date i.e. 01.01.2015. Accordingly, the Appellants filed their Revised Returns on 27.11.2018. The re-computation would have a bearing on the total income of the Appellants with respect to the A.Y. 2016-2018, particularly on matters in relation to carrying forward losses, unabsorbed depreciation etc. 5. The counsel appearing for the Department relied on Section 139(5) and 119(2)(b) of the Income Tax Act r.w. Circular No.9 of 2015 issued by the CBDT to contend that the Appellant ought to have made an application for condonation of delay, and sought permission from the CBDT, before filing the revised Returns beyond the statutory period of 31.03.2018. The Appellants having belatedly filed their revised Returns on 27.11.2018, which was beyond the due date of 31.03.2018 for A.Y. 2016-2017, the assessment could only be done on the basis of the original Returns filed by the Appellants. 6. Section 139(5) of the Income Tax Act, as it stood at the relevant time, makes it clear that where an assessee furnishes a return under sub-section (1) or sub-section (4) of Section 139, and later discovers an omission or mistake therein, he may furnish a revised Return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Section 139(5) of the Income Tax Act is set out hereinunder for ready reference: 139(5). If any person, having furnished a return under sub-section (1) or sub-section (4) of Section 139, discovers an omission or wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier 7. In our view, this provision is not applicable to the facts and circumstances of the present case since the revised Returns were not filed on account of an omission or wrong statement or omission contained therein. The delay occurred on account of the time taken to obtain sanction of the Schemes of Arrangement and Amalgamation from the NCLT. 8. In the facts of the present case, it was an impossibility for the assessee companies to have filed the revised Returns of Income for the A.Y. 2016-2017 before the due date of 31.03.2018, since the NCLT had passed the last orders granting approval and sanction of the Schemes only on 22.04.2018 and 01.05.2018. 9. The counsel appearing for the Department submitted that the Appellants ought to have made a representation to the Board under Section 119(2)(b) of the Income Tax Act for condonation of delay while filing the revised Returns. A perusal of Section 119(2)(b) shows that it is applicable in cases of genuine hardship to admit an application, claim any exemption, deduction, refund or any other relief under this Act after the expiry of the stipulated period under the Income Tax Act. Section 119(2)(b) of the Income Tax Act is reproduced hereinunder for ready reference: 119. Instructions to subordinate authorities. (2) Without prejudice to the generality of the foregoing power,— … (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income-tax authority, not being a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law. On a plain reading of Section 119(2)(b), we find that this provision would not be applicable where an assessee has restructured their business, and filed a revised Return of Income with the prior approval and sanction of the NCLT, without any objection from the Department. Rules of procedure have been construed to be the handmaiden of justice. Kailash v Nankhu (2005) 4 SCC 480 ; State of Punjab v Shamlal Murari (1976) 1 SCC 719 The purpose of assessment proceedings is to assess the tax liability of an assessee correctly in accordance with law. National Thermal Power Co. Ltd. v. Commissioner of Income Tax, (1997) 7 SCC 489 10. Section 170(1) of the Income Tax Act, provides that the successor of an assessee shall be assessed in respect of the income of the previous year after the date of succession. S.170(1) of the Income Tax Act provides as under: 170. Succession to business otherwise than on death. (1) Where a person carrying on any business or profession (such person hereinafter in this section being referred to as the predecessor) has been succeeded therein by any other person (hereinafter in this section referred to as the successor) who continues to carry on that business or profession,- (a) the predecessor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession; (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. Sub-section (1) of Section 170 makes it clear that it is incumbent upon the Department to assess the total income of the successor in respect of the previous assessment year after the date of succession. In the present case, the predecessor companies/transferor companies have been succeeded by the Appellants/transferee companies who have taken over their business along with all assets, liabilities, profits and losses etc. In view of the provisions of Section 170(1) of the Income Tax Act, the Department is required to assess the income of the Appellants after taking into account the revised Returns filed after amalgamation of the companies. 11. In light of the aforesaid discussion, we find that the learned Single Judge had rightly allowed the Writ Petitions.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]4.9 In the present case, Appellant Nos.1 and 2/Transferee Companies filed their original Returns of Income on 30.09.2016 and 30.11.2016 respectively. Thereafter, they entered into Schemes of Arrangement and Amalgamation with 9 Transferor Companies in 2017The Schemes were finally sanctioned and approved by the NCLT, Chennai vide final orders dated 20.04.2018 and 01.05.2018. The Appointed Date as per the Schemes was 01.01.2015. Consequently, the Transferor/ Amalgamating Companies ceased to exist with effect from the Appointed Date, and the assets, profits and losses etc. were transferred to the books of the Appellants/ Transferee Companies/Amalgamated Companies. The Schemes incorporated provisions for filing the revised Returns beyond the prescribed time limit since the Schemes would come into force retrospectively from the Appointed Date i.e. 01.01.2015Accordingly, the Appellants filed their Revised Returns on 27.11.2018. The re-computation would have a bearing on the total income of the Appellants with respect to the A.Y. 2016-2018, particularly on matters in relation to carrying forward losses, unabsorbed depreciation etc6. Section 139(5) of the Income Tax Act, as it stood at the relevant time, makes it clear that where an assessee furnishes a return under sub-section (1) or sub-section (4) of Section 139, and later discovers an omission or mistake therein, he may furnish a revised Return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier7. In our view, this provision is not applicable to the facts and circumstances of the present case since the revised Returns were not filed on account of an omission or wrong statement or omission contained therein. The delay occurred on account of the time taken to obtain sanction of the Schemes of Arrangement and Amalgamation from the NCLT8. In the facts of the present case, it was an impossibility for the assessee companies to have filed the revised Returns of Income for the A.Y. 2016-2017 before the due date of 31.03.2018, since the NCLT had passed the last orders granting approval and sanction of the Schemes only on 22.04.2018 and 01.05.20189. The counsel appearing for the Department submitted that the Appellants ought to have made a representation to the Board under Section 119(2)(b) of the Income Tax Act for condonation of delay while filing the revised Returns. A perusal of Section 119(2)(b) shows that it is applicable in cases of genuine hardship to admit an application, claim any exemption, deduction, refund or any other relief under this Act after the expiry of the stipulated period under the Income Tax ActSub-section (1) of Section 170 makes it clear that it is incumbent upon the Department to assess the total income of the successor in respect of the previous assessment year after the date of successionIn the present case, the predecessor companies/transferor companies have been succeeded by the Appellants/transferee companies who have taken over their business along with all assets, liabilities, profits and losses etcIn view of the provisions of Section 170(1) of the Income Tax Act, the Department is required to assess the income of the Appellants after taking into account the revised Returns filed after amalgamation of the companies11. In light of the aforesaid discussion, we find that the learned Single Judge had rightly allowed the Writ Petitions4.5 The Department did not raise any objection within the stipulated period of 30 days despite service of notice4.6 Pursuant thereto, the Schemes were sanctioned by the NCLT, Chennai vide Orders 16.10.2017, 20.10.2017, 26.10.2017, 28.12.2017, 10.01.2018, 20.04.2018 and 01.05.2018; and, vide Orders dated 18.05.2017 and 30.08.2017 by the NCLT, Guwahati. Accordingly, the Schemes attained statutory force J.K. (Bombay) (P) Ltd. v. New Kaiser-I-Hind Spg. and Wvg. Co. Ltd., (1969) 2 SCR 866   : AIR 1970 SC 1041   : (1970) 40 Comp Cas 689; not only inter se the Transferor and Transferee Companies, but also in rem, since there was no objection raised either by the statutory authorities, the Department, or other regulators or authorities, likely to be affected by the Schemes4.7 As a consequence, when the companies merged and amalgamated into another, the amalgamating companies lost their separate identity and character, and ceased to exist upon the approval of the Schemes of Amalgamation. (Pr. Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Limited, Civil Appeal No 5409 of 2019, decided on 25.07.2019)4.8 Every scheme of arrangement and amalgamation must provide for an Appointed Date. The Appointed Date is the date on which the assets and liabilities of the transferor company vest in, and stand transferred to the transferee company. The Schemes come into effect from the Appointed Date, unless modified by the Court. This Court in Marshall Sons & Co. (India) Ltd. v. ITO Marshall Sons & Co. (India) Ltd. v. ITO (1997) 2 SCC 302  held that where the Court does not prescribe any specific date but merely sanctions the scheme presented, it would follow that the date of amalgamation/date of transfer is the date specified in the scheme as the transfer dateOn a plain reading of Section 119(2)(b), we find that this provision would not be applicable where an assessee has restructured their business, and filed a revised Return of Income with the prior approval and sanction of the NCLT, without any objection from the DepartmentRules of procedure have been construed to be the handmaiden of justice. Kailash v Nankhu (2005) 4 SCC 480  ; State of Punjab v Shamlal Murari (1976) 1 SCC 719    The purpose of assessment proceedings is to assess the tax liability of an assessee correctly in accordance with law. National Thermal Power Co. Ltd. v. Commissioner of Income Tax, (1997) 7 SCC 489