2022 (8) TMI 1555 - AT - Income Tax

Assessment of income as reported in the original return v/s revised return - A.O while passing the assessment order found that, in response to notice u/s 139(9) intimating the assessee of one of the defects, that, the tax payable had not been deposited by the assessee but in response, the assessee has filed another return completely replacing the documents, based on which the original return was filed . - Effect of amalgamation on assessment - HELD THAT - AO has committed an error by passing assessment order based on standalone basis despite fact that he had full knowledge of amalgamation while making the addition. A.O should have considered the effect of amalgamation more so in view of the specific mandate of the Hon'ble High Court. A.O has ignored the above facts. Further, as per the decision of Penta media Graphics Ltd. 2010 (1) TMI 753 - MADRAS HIGH COURT which is also followed by the Delhi Bench of the Tribunal in the case of Bharti Airtel Limited 2011 (2) TMI 1634 - ITAT DELHI the only course open to the Revenue would be to act as per the scheme sanctioned effective from 01/04/2013 which means that the tax authorities are bound to take note of the state of affairs of the assessee as on 01/04/2013 and a return filed reflecting the same cannot be ignored on the strength of section 139(9) of the Act. The merits otherwise on the return field have never been challenged by the A.O. Therefore, in our opinion the assessed income as per the return field by the appellant u/s 139(9) of the Act on the basis of consolidated Balance sheet should have been accepted by the A.O. CIT (A) has rightly allowed the Appeal filed by the Assessee by setting aside the Assessment Order.Appeal filed by the Revenue is dismissed.

Summary

Issues:
Assessment based on revised return instead of original return, Effect of amalgamation on assessment, Interpretation of Section 139(9) of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the orders of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The Revenue contended that the Commissioner erred in allowing the assessee to completely revise its return in response to a notice under Section 139(9) of the Income Tax Act, instead of rectifying the defect as required. The assessment order was passed against the assessee on 31/12/2016, and the Commissioner of Income Tax (Appeals) allowed the appeal filed by the assessee on 15/10/2018.

The Department argued that the Commissioner's decision to allow the appeal was incorrect as the assessee revised its return instead of rectifying the defect identified under Section 139(9) of the Act. On the other hand, the assessee's counsel highlighted the High Court's approval of the amalgamation scheme, which was not considered by the Assessing Officer (AO) during the assessment proceedings. The counsel argued that the AO based the assessment on the standalone financials of a company that no longer existed due to the amalgamation.

The Tribunal found that the AO erred in assessing the income based on standalone financials despite being aware of the amalgamation. The Tribunal referred to judicial pronouncements and the specific mandate of the High Court regarding the effect of amalgamation on assessment. It was noted that the AO failed to consider the impact of the amalgamation and should have accepted the return filed by the appellant based on the consolidated balance sheet. The Tribunal cited relevant case law to support its decision that the AO should have acted in accordance with the sanctioned scheme of amalgamation.

Ultimately, the Tribunal concluded that the Commissioner of Income Tax (Appeals) rightly allowed the appeal filed by the assessee and set aside the assessment order. The Tribunal dismissed the grounds of appeal filed by the Revenue, upholding the decision of the Commissioner. The order was pronounced on 12/08/2022, dismissing the Revenue's appeal.