2024 (2) TMI 465 - HC - Income Tax

Filling of Modified return after amalgamation - Effect of order of tribunal or court in respect of business reorganisation u/s 170A - assessment order came to be issued within 2 days - Under the said scheme of amalgamation, the petitioner states that Cheran Synthetics was merged with the petitioner and dissolved without being wound up - petitioner states that the modified return was filed manually since the portal was not enabled for filing such return electronically - petitioner assails the assessment order primarily on the ground that the consolidated / modified return of the petitioner, after the amalgamation, should have been the sole basis of scrutiny assessment - as argued assessment order refers to the pre-amalgamation standalone financial statement of the petitioner at certain places and also refers to the consolidated return of income at others - whether the impugned assessment order calls for interference because the assessment was not entirely based on the modified return after amalgamation? HELD THAT - A successor of a business reorganization is required to furnish the modified return within six months from the end of the month in which the order of the court or tribunal sanctioning such business reorganization is issued. The order of the NCLT Chennai in 2022 (4) TMI 1591 - NATIONAL COMPANY LAW TRIBUNAL CHENNAI is on record. This order was issued on 18.04.2022. Since the order of the NCLT Chennai was issued on 18.04.2022, the petitioner had six months from 30.04.2022 to file the modified return. The petitioner has placed on record an email dated 22.06.2022 which indicates that the option to file the modified return under Section 170A of the Income Tax Act had not been enabled in the portal. In those circumstances, it appears that the petitioner submitted a physical copy of such modified return on 24.08.2022. Since the last date for filing the return was expiring earlier, the petitioner previously submitted the return of the company on standalone basis on 14.03.2022. From the list of dates and events, it is clear that the first notice to the petitioner under Section 143(2) of the Income Tax Act was issued on 28.06.2022, which is subsequent to the effective date of merger. All other notices culminating in the impugned assessment order were issued later. In view of the scheme of amalgamation having become effective and thereby operational from 01.04.2020, the petitioner's consolidated return of income, after its amalgamation, should have been the basis for assessment based on the scrutiny. Respondents contended that the assessment order discloses that the consolidated returns were also taken into consideration - On examining the impugned assessment order, it is noticeable that the Assessing Officer has taken into account the standalone returns of the petitioner, the standalone returns of Cheran Synthetics company merged and the consolidated returns of the merged entity for different purposes. Such approach cannot be countenanced. Even without going into any of the other contentions, in my view, the impugned assessment order calls for interference on this sole ground. From the list of dates and events, it is also conspicuous that the show cause notice dated 27.12.2022 was followed by the assessment order in a matter of about 5 or 6 days. Discrepancies in the assessment order were also pointed out. The issuance of an assessment order within about two days from the receipt of the reply to the show cause, in a matter relating to about 59 additions to income, constitutes a further reason to interfere with the impugned order. Therefore, the impugned assessment order is quashed and the matter is remanded.

Summary

Issues Involved:
1. Legality of the assessment order dated 31.12.2022.
2. Consideration of the consolidated/modified return post-amalgamation.
3. Procedural fairness in the issuance of the assessment order.

Summary:

1. Legality of the Assessment Order:
The petitioner, a private limited company, challenged the assessment order dated 31.12.2022 for the assessment year 2021-2022. The petitioner argued that the assessment should be based on the consolidated/modified return after the amalgamation with Cheran Synthetics, effective from 01.04.2020, as sanctioned by the NCLT Chennai on 18.04.2022. The petitioner filed a standalone return on 14.03.2022 due to the non-operational ITBA portal for filing the modified return.

2. Consideration of the Consolidated/Modified Return Post-Amalgamation:
The petitioner relied on Section 170A of the Income Tax Act, which allows six months from the end of the month of the NCLT order to file a modified return. The petitioner manually filed the modified return on 24.08.2022 since the portal was not enabled. The court noted that the assessment should be based on the consolidated return post-amalgamation, as the scheme became effective from 01.04.2020, transferring all assets and liabilities to the petitioner.

3. Procedural Fairness in the Issuance of the Assessment Order:
The petitioner contended that the assessment proceedings were concluded hastily, with the show cause notice issued on 27.12.2022 and the assessment order issued within two days after the petitioner's reply. The court observed discrepancies in the assessment order, such as incorrect references to financial statements and amounts, indicating a hasty assessment process. The court found that the assessment order was issued without adequate consideration of the consolidated return and procedural fairness.

Conclusion:
The court quashed the impugned assessment order dated 31.12.2022 and remanded the matter for reassessment based on the consolidated return of income. The respondents were directed to issue fresh notices and reassess accordingly. The writ petition was allowed, and the connected miscellaneous petition was closed with no order as to costs.