Dalmia Power Ltd. vs CIT

Civil Appeal Nos.9496­99 Of 2019 (Arising out of SLP (C) Nos.19678­681 of 2019)

M/S DALMIA POWER LIMITED & ANR. …APPELLANTS

Versus

THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, TRICHY …RESPONDENT

JUDGMENT

INDU MALHOTRA, J.

Leave granted.

1. The issue which arises for consideration in the present Civil

Appeals is whether the Department ought to have permitted

the assessee companies to file the revised Income Tax

Returns for the Assessment Year 2016­2017 after the expiry

Signature Not Verified Digitally signed by of the due date prescribed under Section 139(5) of the ARJUN BISHT Date: 2019.12.18 17:30:02 IST

Income Tax Act, 1961 on account of the pendency of Reason:

1

proceedings for amalgamation of the assessee companies

with other companies in the group under Sections 230­232

of the Companies Act, 2013.

2. The factual background of this case briefly stated, is that:

2.1 The Appellant No.1 ­ M/s Dalmia Power Limited and

Appellant No.2 ­ M/s Dalmia Cement (Bharat) Limited

are public limited companies, incorporated under the

Companies Act, 1956. The Appellants have their

registered offices at Dalmiapuram Lalgudi Taluk,

Dalmiapuram, District Tiruchirappalli, Tamil Nadu.

2.2 The Appellant No.1 is engaged in the business of

building, operating, maintaining, and investing in

power and power related businesses, directly or

through downstream companies. The Appellant No.2 is

engaged in the business of manufacturing and selling

of cement, generation of power, maintaining and

operating rail systems and sold waste management

system which provide services to the cement business.

2.3 The Appellant No.1 filed its original Return of Income

under Section 139 (1) of the Income Tax Act on

30.09.2016 for A.Y. 2016­2017 declaring a loss of Rs.

2 6,34,33,806/­. Similarly, Appellant No.2 filed its

original Return of Income under Section 139 (1) of the

Income Tax Act on 30.11.2016 for A.Y. 2016­2017

declaring NIL income (after setting off Brought Forward

Loss amounting to Rs. 56,89,83,608/­ against Total

income of Rs. 56,89,83,608/­).

2.4 With a view to restructure and consolidate their

businesses, and enable better realisation of the

potential of their businesses, which would yield

beneficial results, and enhanced value creation for

their shareholders, better security to their creditors

and employees, the Appellants (also referred to as

“Transferee Companies” or “Amalgamated Companies”)

entered into 4 interconnected Schemes of Arrangement

and Amalgamation with 9 companies viz. DCB Power

Ventures Ltd., Adwetha Cement Holdings Ltd., Odisha

Cement Ltd., OCL India Ltd., Dalmia Cement East

Ltd., Dalmia Bharat Cements Holdings Ltd., Shri

Rangam Securities & Holdings Ltd., Adhunik Cement

Ltd., Adhunik MSP Cement (Assam) Ltd. (also referred

to as “Transferor Companies” or “Amalgamating

3 Companies”) and their respective shareholders and

creditors.

The Appointed Date of the Schemes was

01.01.2015, and would come into effect from

30.10.2018.

2.5 The Transferor and Transferee Companies filed

Company Petitions under Sections 391 to 394 of the

Companies Act, 1956 before the Madras and Guwahati

High Courts.

On the coming into force of the Companies Act,

2013, the Company Petitions were transferred to

NCLT, Chennai and NCLT, Guwahati.

2.6 The Schemes were duly approved and sanctioned by

the NCLT, Guwahati vide Orders dated 18.05.2017 and

30.08.2017. NCLT, Chennai sanctioned the Schemes

vide Orders dated 16.10.2017, 20.10.2017,

26.10.2017, 28.12.2017, 10.01.2018, 20.04.2018 and

01.05.2018.

2.7 The Appellants/ Transferee Companies manually filed

revised Returns of Income on 27.11.2018 with the

Department after the Schemes were sanctioned and

4 approval was granted by the NCLT. The revised

Returns were based on the revised and modified

computation of total income and tax liability of the

Transferor/Amalgamated Companies. In the revised

Returns of Income, the Appellant No.1 claimed losses

in the current year to be carried forward amounting to

Rs.2,44,11,837/­; whereas Appellant No.2 claimed

losses in the current year, to be carried forward,

amounting to Rs.1105,93,91,494/­.

2.8 The Appellants submit that the revised Returns were

filed after the due date for filing revised Returns of

Income u/S. 139(5) for the Assessment Year 2016­

2017 since the NCLT passed the final Order on

01.05.2018. Consequentially, it was an impossibility to

file the revised Returns before the prescribed date of

31.03.2018.

2.9 A summary of the dates relevant to the case of

Appellant No.1 are tabulated as under:

Sl. No. Particulars A.Y. 2016-17 1. Appointed Date of the 01.01.2015 Scheme 2. Filing of original Return of 30.09.2016 Income under Section 139 (1)

5 3. Due date for filing revised 31.03.2018 Return of Income u/s 139(5) 4. Effective Date of the Scheme 30.10.2018

5. Date of filing revised Return 27.11.2018 of Income to give effect to approval of the scheme

2.10 A summary of the dates relevant to the case of

Appellant No.2 are tabulated as under:

Sl. No. Particulars A.Y. 2016-17 1. Appointed Date of the 01.01.2015 Scheme 2. Filing of original Return of 30.11.2016 Income 3. Due date for filing revised 31.03.2018 Return of Income u/s 139(5) 4. Effective Date of the Scheme 30.10.2018

5. Date of filing revised Return 27.11.2018 of Income to give effect to approval of the scheme

2.11 On 04.12.2018, the Department issued a Notice under

Section 143(2) of the Income Tax Act to give effect to

the approval of the Scheme.

2.12 On 05.12.2018, the Department recalled the Notice

dated 04.12.2018 on the ground that the Appellants

had belatedly filed their revised Returns without

obtaining permission from the Central Board of Direct

Taxes (“CBDT”) for condonation of delay under Section

6 119(2)(b) of the Income Tax Act, 1961 read with CBDT

Circular No. 9/2015 dated 09.06.2015.

2.13 On 28.12.2018, the Department passed an

Assessment Order u/S. 143(3) of the Income Tax Act,

stating that in view of the Scheme of Arrangement and

Amalgamation, the notice issued under Section 143(2),

and the assessment proceedings for A.Y. 2016­2017

had become infructuous with respect to Appellant

No.2.

2.14 The Appellants filed Writ Petitions before the Madras

High Court praying for quashing of the Order dated

05.12.2018, and for a direction to the Department to

complete the assessment for A.Y. 2015­2016 and A.Y.

2016­2017 after taking into account the revised

Income Tax Returns filed on 27.11.2018, as well as the

Orders dated 20.04.2018 and 01.05.2018 passed by

the NCLT, Chennai approving the Schemes of

Arrangement and Amalgamation.

2.15 The learned Single Judge of the Madras High Court

vide common Judgment and Order dated 30.04.2019

allowed the Writ Petitions filed by the Appellants, and

7 quashed the Order dated 05.12.2018 passed by the

Department. The Single Judge held that Clause 64 (c)

of the Scheme enabled the Appellants to file their

revised Returns of Income beyond the prescribed

period under the Income Tax Act. The Department

could not override an approved Scheme of

Arrangement and Amalgamation, which has statutory

force, by rejecting the revised Returns of Income filed

by the Appellants as being invalid.

The Department did not object to the Schemes

notified under Section 230(5) of the Companies Act,

2013. Sections 139(5) and 119(2)(b) of the Income Tax

Act as well as the Circular No. 9/2015 issued by the

CBDT are not applicable to a case where a revised

Return of Income has been filed pursuant to a Scheme

of Arrangement and Amalgamation, which has been

approved and sanctioned by the NCLT.

The Department was not justified in rejecting the

revised Return of Income on the ground that it had

been filed manually, instead of being filed

electronically. Rule 12(3) of the Income Tax Rules

8 requires filing of revised Returns of Income

electronically, which is not applicable where revised

Returns of Income are filed by the assessee pursuant

to a Scheme of Arrangement and Amalgamation

approved and sanctioned by the NCLT.

Accordingly, the Single Judge directed the

Department to receive the revised Returns filed

pursuant to the approval of the Schemes of

Arrangement and Amalgamation by the NCLT, Chennai

and complete the assessment for A.Y. 2015­2016 and

A.Y. 2016­2017 in accordance with law within a period

of 12 weeks.

2.16 The Department filed Writ Appeals under Clause 15 of

the Letters Patent Act challenging the Judgment &

Order dated 30.04.2019 passed by the Single Judge.

A Division Bench of the Madras High Court vide

the impugned Judgment dated 04.07.2019 allowed the

Writ Appeals, and reversed the Judgment of the Single

Judge. The Division Bench directed the Appellants to

comply with the procedure for filing belated revised

Returns of Income, and held that Clause 64 of the

9 Scheme can only be construed as an enabling clause.

It cannot be inferred that the Department agreed to

consider the revised Returns of Income, irrespective of

whether it complies with the procedural and statutory

requirements under the Income Tax Act, merely

because Clause 64 of the Scheme was not objected to

the Department. The NCLT, while sanctioning the

Schemes, clarified that the Appellants would be

required to approach the relevant statutory authorities

for obtaining necessary permissions and compliances.

The Department did not consent to waive the

procedures or statutory requirements prescribed under

S.139(5) and 119(2)(b) of the Income Tax Act in respect

of filing of revised Returns of Income.

2.17 The Department vide letter dated 11.07.2019 informed

the Appellants that in case they fail to file the revised

Returns before the expiry of the limitation period

prescribed for completion of assessment in accordance

with Explanation 1 to Section 153 r.w. Proviso (1) i.e.

60 days from the date of the impugned Judgment, the

10 assessment for A.Y. 2016­2017 would be conducted on

the basis of the original Returns filed by them.

2.18 The Appellants made a representation on 22.07.2019

stating that subsequent to the approval and sanction

of the Scheme of Arrangement and Amalgamation, the

income of the Transferor companies merged in the

hands of the Appellants w.e.f. 01.01.2015, being the

Appointed Date as the “date of succession” under S.

170 of the Act. Accordingly, the Appellants requested

the Department to give cognizance to the Scheme, and

accept the revised Return of Income filed on

27.11.2018, while completing the assessment for the

A.Y. 2016­2017.

2.19 The Department informed the Appellants on

05.08.2019 that since the revised Returns were not in

accordance with Sections 139(5), 139(3) of the Act r.w.

Rule 12(3) of the Income Tax Rules, 1962, the revised

Returns were invalid, and could not be considered in

view of the procedural requirement under Section

119(2)(b) read with CBDT Circular No. 9 of 2015.

11 2.20 Aggrieved by the Judgment of the Division Bench, the

Appellants have filed the present common Civil

Appeals on 09.08.2019 before this Court.

3. We have heard Mr. S. Ganesh, Senior Counsel appearing for

the Appellants, and Mr. Arijit Prasad, Senior Advocate

appearing for the Department. We have perused the

pleadings and written submissions filed by the parties.

4. Discussion and Analysis

4.1 A perusal of Clause 63 (c) of the Scheme of

Arrangement and Amalgamation between DCB Power

Ventures Ltd., Adwetha Cement Holdings Ltd.,

Appellant No.1 and Appellant No.2 and their respective

shareholders and creditors, as approved and

sanctioned by the NCLT, Chennai vide Orders dated

16.10.2017, 20.10.2017 and Corrigendum dated

26.10.2017 shows that the Appellants were entitled to

file revised Returns of Income, after the prescribed

time limit for filing or revising the returns had lapsed,

without incurring any liability on account of interest,

penalty or any other sum.

12 Clause 63 (c) of the said Scheme is set out

hereinbelow for ready reference:

“(c) DCBL [Appellant No.2] shall be entitled to, amongst others, file/or revise its income tax returns, TDS/TCS returns, wealth tax returns, service tax, excise duty, sales tax, value added tax, entry tax, cess, professional tax or any other statutory returns, if required, credit for advance tax paid, tax deducted at source, claim for sum prescribed under Section 43B of the Income Tax Act on payment basis, claim for deduction of provisions written back by DCBL previously disallowed in the hands of (i) DCB Power pertaining to Power Undertakings and (ii) ACHL and/or pertaining to Amalgamating Undertaking 1, under the Income Tax Act, credit of tax under Section 115JB read with Section 115JAA of the Income Tax Act, credit of foreign taxes paid/withheld etc. if any, as may be required consequent to implementation of this Scheme and where necessary to give effect to this Scheme, even if the prescribed time limits for filing or revising such returns have lapsed without incurring any liability on account of interest, penalty or any other sum. DCBL shall have the right to claim refunds, tax credits, set­offs and/or adjustments relating to its income or transactions entered into by it by virtue of this Scheme with effect from Appointed Date I and Appointed Date II, as applicable. The taxes or duties paid by, for, or on behalf of the Power Undertakings and Amalgamating Undertaking 1 relating to the period on or after Appointed Date I and Appointed Date II respectively shall be deemed to be the taxes or duties paid by DCBL, and accordingly DCBL shall be entitled to claim credit or refund for such taxes or duties.

DPL [Appellant No.1] shall be entitled to, amongst others, file/or revise its income tax returns, TDS/TCS returns, wealth tax returns, service tax, excise duty, sales tax, value added tax, entry tax, cess, professional tax or any other statutory returns, if required, credit for advance tax paid, tax deducted at source, claim for sum prescribed under Section 43B of the Income Tax Act on payment basis, claim

13 for deduction of provisions written back by DPL previously disallowed in the hands of DCB Power pertaining to Amalgamating Undertaking 2 under the Income Tax Act, credit of tax under Section 115JB read with Section 115JAA of the Income Tax Act, credit of tax under Section 115JB read with Section 115 JAA of the Income Tax Act, credit of foreign tax paid/withheld etc., if any, pertaining to Amalgamating Undertaking 2 as may be required consequent to implementation of this Scheme and where necessary to give effect to this Scheme, even if the prescribed time limits or revising such returns have lapsed without incurring any liability on account of interest, penalty or any other sum. DPL shall have the right to claim refunds, tax credits, set­ offs and/or adjustments relating to its income or transactions entered into by it by virtue of this Scheme with effect from Appointed Date I. The taxes or duties paid by, for, or on behalf of the Amalgamating Undertaking 2 relating to the period on or after Appointed Date I shall be deemed to be the taxes or duties paid by DPL, and accordingly DPL shall be entitled to claim credit or refund for such taxes or duties.” [emphasis supplied]

4.2 Similarly, Clause 64 (c) of the Scheme of Arrangement

and Amalgamation between Odisha Cement Ltd., OCL

India Limited, Dalmia Cement East Ltd., Shri Rangam

Securities & Holdings Ltd., Dalmia Bharat Cement

Holdings Ltd., Appellant No.1 and Appellant No.2 and

their respective shareholders and creditors, as

approved and sanctioned by the NCLT, Chennai on

20.04.2018 and 01.05.2018, shows that provisions

were incorporated to enable the Appellants to file

14 revised Returns even after the prescribed time limit for

filing or revising such Returns had lapsed, without

incurring any liability on account of interest, penalty

or any other sum.

Clause 64 (c) of the said Scheme is extracted

hereinbelow for ready reference:

“(c) Amalgamated Company and Transferee [Appellant Nos. 1 and 2 ] Company shall be entitled to, amongst others, file/or revise its income tax returns, TDS/TCS returns, wealth tax returns, service tax, excise duty, sales tax, value added tax, entry tax, cess, professional tax or any other statutory returns, if required, credit for advance tax paid, tax deducted at source, claim for sum prescribed under Section 43B of the Income Tax Act on payment basis, claim for deduction of provisions written back by Amalgamated Company and Transferee Company previously disallowed in the hands of Amalgamating Company and Transferor Company (relating to the Transferred Undertaking) respectively under the Income Tax Act, credit of tax under section 115JB read with section 115JAA of the Income Tax Act, credit of foreign tax paid/withheld, if any, pertaining to Amalgamating Company and Transferor Company (relating to the Transferred Undertaking) as may be required consequent to implementation of this Scheme and where necessary to give effect to this Scheme, even if the prescribed time limited for filing or revising such returns have lapsed without incurring any liability on account of interest, penalty or any other sum. Amalgamated Company and Transferee Company shall have the right to claim refunds, tax credits, set­offs and/or adjustments relating to the income or transactions entered into by them by virtue of this Scheme with effect from Appointed Date. The taxes or duties paid by, for, or on behalf of, Amalgamating Company and Transferor Company (pertaining to Transferred Undertaking)

15 relating to the period on or after Appointed Date, shall be deemed to be the taxes or duties paid by the Amalgamated Company and Transferee Company respectively and Amalgamated Company and Transferee Company shall be entitled to claim credit or refund for such taxes or duties.” [emphasis supplied]

4.3 In compliance with Section 230(5) of the Companies

Act, 2013, notices under Form No. CAA. 3 under sub­

Rule (1) of Rule 8 of the Companies (Compromises,

Arrangements and Amalgamations) Rules,2016 were

sent to the Department.

Sub­Section (5) of Section 230 of the Companies

Act, 2013 provides as under:

“(5) A notice under sub-section (3) along with all the documents in such form as may be prescribed shall also be sent to the Central Government, the income-tax authorities, the Reserve Bank of India, the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition Commission of India established under sub-section (1) of section 7 of the Competition Act, 2002, if necessary, and such other sectoral regulators or authorities which are likely to be affected by the compromise or arrangement and shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that they have no representations to make on the proposals.” [emphasis supplied]

Sub­section (5) of Section 230 requires that a

notice of the meeting under sub­section (3) of Section

16 230 along with all the documents pertaining to the

scheme, shall be sent to the Central Government, and

statutory authorities such as the Income Tax

Department, RBI, SEBI, ROC etc. and such other

sectoral regulators or authorities which are likely to be

affected by the compromise or arrangement. The

statutory authorities could raise objections within 30

days from the date of receipt of the notice, failing

which, it would be presumed that they had no

representation to make on the proposed schemes of

compromise, arrangements and amalgamations.

4.4 Similarly, Rule 8(3) of the Companies (Compromises,

Arrangements and Amalgamations) Rules, 2016

provides that any representation made to the statutory

authorities notified under Section 230(5), shall be sent

to the NCLT within a period of thirty days from the

date of receipt of such notice, and a copy of such

representation shall simultaneously be sent to the

concerned companies. In case no representation is

received within thirty days, it shall be presumed that

the statutory authorities have no representation to

17 make on the proposed scheme of compromise or

arrangement.

Rule 8 of the Companies (Compromises,

Arrangements and Amalgamations) Rules, 2016 is set

out hereinunder for ready reference:

“(3) If the authorities referred to under sub-rule (1) desire to make any representation under sub-section (5) of section 230, the same shall be sent to the Tribunal within a period of thirty days from the date of receipt of such notice and copy of such representation shall simultaneously be sent to the concerned companies and in case no representation is received within the stated period of thirty days by the Tribunal, it shall be presumed that the authorities have no representation to make on the proposed scheme of compromise or arrangement.” [emphasis supplied]

4.5 The Department did not raise any objection within the

stipulated period of 30 days despite service of notice.

4.6 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 force1 not only inter se the

Transferor and Transferee Companies, but also in rem,

1 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;

18 since there was no objection raised either by the

statutory authorities, the Department, or other

regulators or authorities, likely to be affected by the

Schemes.

4.7 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.2

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.

ITO3 held that where the Court does not prescribe any

specific date but merely sanctions the scheme

2 Pr. Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Limited, Civil Appeal No 5409 of 2019, decided on 25.07.2019 3 Marshall Sons & Co. (India) Ltd. v. ITO (1997) 2 SCC 302

19 presented, it would follow that the date of

amalgamation/date of transfer is the date specified in

the scheme as “the transfer date”. It was held that:

“14. Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide viz. 1-1-1982. It is true that while sanctioning the scheme, it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the Court does not prescribe any specific date but merely sanctions the scheme presented to it — as has happened in this case — it should follow that the date of amalgamation/date of transfer is the date specified in the scheme as “the transfer date”. It cannot be otherwise. It must be remembered that before applying to the Court under Section 391(1), a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take some time; indeed, they are bound to take some time because several steps provided by Sections 391 to 394-A and the relevant Rules have to be followed and complied with. During the period the proceedings are pending before the Court, both the amalgamating units, i.e., the Transferor Company and the Transferee Company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation.”

It was further held that pursuant to the Scheme of

Arrangement and Amalgamation, the assessment of

the Transferee Company must take into account the

20 income of both the Transferor and Transferee

Companies. The Court observed as follows:

“15. The counsel for the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basis for this apprehension. Firstly, an assessment can always be made and is supposed to be made on the Transferee Company taking into account the income of both the Transferor and Transferee Companies. Secondly, and probably the more advisable course from the point of view of the Revenue would be to make one assessment on the Transferee Company taking into account the income of both of Transferor or Transferee Companies and also to make separate protective assessments on both the Transferor and Transferee Companies separately. There may be a certain practical difficulty in adopting this course inasmuch as separate balance-sheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balance-sheet. In certain cases, best judgment assessment may also be resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for consideration in these cases directly.”

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 2017.

The Schemes were finally sanctioned and approved by

the NCLT, Chennai vide final orders dated 20.04.2018

21 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.

01.01.2015.

Accordingly, the Appellants filed their Revised

Returns on 27.11.2018. The re­computation would

have a bearing on the total income of the Appellants

with respect to the A.Y. 2016­2018, 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

22 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. 2016­2017, 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 sub­section (1) or sub­section (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 sub­section (1) or sub­section (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

23 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. 2016­2017 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

24 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 income­tax 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.4 The purpose of assessment

proceedings is to assess the tax liability of an assessee

correctly in accordance with law.5

4 Kailash v Nankhu (2005) 4 SCC 480; State of Punjab v Shamlal Murari (1976) 1 SCC 719 5 National Thermal Power Co. Ltd. v. Commissioner of Income Tax, (1997) 7 SCC 489 25

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.”

Sub­section (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

26 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. We

accordingly set aside the impugned Judgment and Order

dated 04.07.0219 passed by the learned Division Bench, and

restore the judgment dated 30.04.2019 passed by the learned

Single Judge. Accordingly, the Civil Appeals are allowed.

The Department is directed to receive the revised

Returns of Income for A.Y. 2016­2017 filed by the Appellants,

and complete the assessment for A.Y. 2016­2017 after taking

into account the Schemes of Arrangement and Amalgamation

as sanctioned by the NCLT.

12. Pending Applications, if any, are accordingly disposed of.

Ordered accordingly.

…..……...........................J. (UDAY UMESH LALIT)

..….……..........................J. (INDU MALHOTRA) New Delhi December 18, 2019

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