Corporate taxpayers are required to file their return of income on or before the due date prescribed under section 139(1) (30th September/30th November of the subsequent year). Further, after filing of the said return, if the taxpayer discovers any omission or any wrong statement therein, then a revised return can be filed only within the time limit prescribed under section 139(5) of the Income-tax Act, 1961 (“Act”).

Facts of the case:

In case of Dalmia Power Ltd. and another v. Assistant Commissioner of Income Tax* , the appellants had filed the original return of income for financial year 2015-16 in year 2016 within the due date.

Subsequently, with a view to restructure their business, the appellants entered into a scheme of amalgamation with transferor companies which was duly approved by the National Company Law Tribunal (‘NCLT’) with effect from 30.10.2018. The appointed date of the said scheme was 01.01.2015 and on this date, the assets and liabilities of the transferor company vested in, and stood transferred to the transferee company. The scheme of amalgamation came into effect from this appointed date. The scheme also incorporated provisions for filing the revised return of income beyond the prescribed time limit since the scheme would have come into force retrospectively.

Consequently, the appellants filed their revised return of income for financial year 2015-16 on 27.11.2018 after re-computing the income and considering the brought forward losses and depreciation. However, the due date for filing of revised return as provided under section 139(5) of the Act for financial year 2015-16 had already expired on 31.03.2018.

Contention of the Revenue:

The income tax officer refused to accept such revised return on the ground that the same was filed after the due date prescribed under section 139(5) of the Act. The Revenue contended that the correct course of action would have been to make an application to the Central Board of Direct Taxes (‘CBDT’) for condonation of delay under section 119 while filing the revised return.

The Revenue further argued that merely because the scheme of amalgamation was not objected before the NCLT, it cannot be implied that the Revenue consented to waive the procedures or statutory requirements under the Act.

Contentions of the appellant:

The appellants contended that the revised returns were filed belatedly since the order approving the scheme of amalgamation itself was passed by NCLT beyond the last date provided under section 139(5) of the Act. Consequently, it was impossible for the appellants to file return of income on or before 31.03.2018, as required under the said section.

Further, the scheme of amalgamation clearly provided that the amalgamated entity shall be permitted to file revised return of income even after the expiry of period prescribed for the same, without incurring any additional interest or penalty. The appellants argued that the Revenue could not override an approved scheme of arrangement and amalgamation, which has statutory force, by rejecting the revised returns as invalid. Further, the department could not reject the return on the ground that the same had been filed manually, instead of being filed electronically.

Decision of the court:

The Hon’ble Supreme Court of India held that once a scheme of amalgamation has been approved by NCLT, it attains statutory force not only inter se between the parties to amalgamation but also in rem in absence of any objections from the statutory authorities.

It further held that the revised returns filed by the appellants are beyond the scope of section 139(5) since the same were not filed as a result of any omission or incorrect statement. It noted that the delay occurred on account of the time taken to obtain sanction of the scheme of amalgamation from the NCLT. It was an impossibility for the applicants to have filed the revised returns before the due date, that is, 31.03.2018.

As regards, the issue of obtaining approval from CBDT for condonation of delay under section 119, the Court held that the provisions shall not be applicable where an assessee has restructured the business and then filed a revised return of income with the prior approval and sanction of NCLT, without any objection from the Revenue. The Court also observed that rules of procedure are handmaiden of justice and the purpose of assessment proceedings by the Revenue is to assess the tax liability of an assessee correctly in accordance with law.

The Court directed that in view of section 170 of the Act, the Revenue should assess the income of the appellant after taking into consideration the revised returns filed after amalgamation of the companies.

Observations and comments:

The decision of the Hon’ble Supreme Court has conclusively provided clarity on the course of income tax compliance for amalgamated entities post an approved scheme of amalgamation. The said decision has more relevance in current times where the time limit to file revised return under section 139(5) has been further shortened till 31st March of the year immediately following the relevant financial year.
Consequent to this decision, modified rules laying down the procedure for e-filing of revised return by the surviving entity post the due date for filing revised return, from CBDT, shall be a welcome move.

* Civil Appeal nos 9496-9499 of 2019 [112 taxmann.com 252]