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TMI Blog2024 (5) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... jected. This appears to have been made on the prompting made by the Board because by a letter dated 30th November 2022 the Board called upon the PCCIT to submit once again the specific comments/recommendations on the merits of petitioner s application with reference to Board Circular No. 9 of 2015 dated 9th June 2015 governing condonation of delay under Section 119 (2) (b) of the Act. There is no explanation whatsoever why there was a change in the stand taken from what was taken earlier. We fail to understand when the order under Section 130 (2) of the Companies Act has been passed by the NCLT to recast the accounts on an application filed by the MCA, Government of India and the accounts have been recasted and accepted by the NCLT and also filed with the RoC under the Ministry of Corporate affairs, how could the Income Tax Department raise such frivolous objections that the delay in filing the returns of Income based on the recasted accounts should not be even condoned. This Hon'ble Court pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under article 226 of the Constitution of India directing the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, Respondent No. 5 ought to have exercised its powers under Section 119 (1) of the Act and condoned the delay in filing of the revised returns in its case? b. Whether petitioner is justified in urging genuine hardship if its application for condonation of delay in filing the revised returns of income is not allowed for the following reasons : i. that its income for the aforesaid assessment years be brought to tax based on correct financial position as reflected in the recasted books of account. ii. that for the assessment year 2018-19, petitioner has been made to undergo special audit of its accounts under section 142(2A) of the Act, in respect of its original books of account when admittedly, the said books of account would have no relevance after their recasting. iii. that petitioner's claim for write off of debts/advances under section 36 (1) (vii) of the Act or alternatively, as business loss under Sections 28 and 37 of the Act and further non-assessment of liabilities written back as per Section 41(1) of the Act has been denied in the draft assessment order dated 14.12.2023 passed for the assessment year 2021-22 inter alia on the basis that the recasted books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal (the NCLAT) and the other civil suits pending against the erstwhile promoter and his group companies to deny petitioner's applications for condonation of delay in filing of revised returns of income for the assessment years 2015-16 to 2020-21? f. Whether Respondent No. 5 erred in proceeding on the basis that they have to not only verify the fulfillment of the conditions in Section 119 of the Act but also the genuineness and validity of the claims contained in the revised returns of income which exercise can only be carried out by Respondent No. 1 when making an assessment of petitioner's income chargeable to tax? That such exercise has also been carried out on a random basis and findings given in the impugned order in a most casual and cursory manner without proper application of mind. 5. Around 2018 petitioner was contemplating raising of funds by way of loan from a consortium of international lenders. One of the conditions stipulated by them was that petitioner s statutory audit ought to be carried out by an internationally known and recognized Chartered Accountant firm. Though petitioner s audit for Financial Year (F.Y.) 2017-18 was to be carried out by one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 130 of the Companies Act, 2013 which is reproduced below : 130. Re-opening of accounts on court's or Tribunal's orders - (1) A company shall not reopen its books of account and not recast its financial statement, unless an application in this order is made by the Central Govt., the Income Tax Authorities, the Securities and Exchange Board, any other statutory regularity body or anorthosite or any person concern, and an order is made by a Court or competent jurisdiction or the Tribunal to the effect that - i. The relevant earlier account were prepared in fraudulent manner, or; ii. the affairs of the company were mis-managed during the relevant period, casting a doubt on the reliability of the financial statement : Provided that the Court or the Tribunal, as the case may be, shall give notice to the Central Govt, the Income-tax Authorities, the Securities and Exchange Board or any other statutory regulatory body or authority sanction and shall take into consideration the representation, if any, made by that Govt. or the authorities, Security and exchange Board or the Body or Authority concerned before passing any order under this Section. (2) Without prejudice to the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context, it appears that the Respondent No. 2 had been removed as the Chairman of the Board of Respondent No. 1 Company. The reason for the internal fight is yet to be established but however, the complainant in the whole episode is none other than the existing management. When there are serious differences existing between two parties, there are provisions in the Companies Act to seek a proper remedy under the law. But in a strange manner the present management had gone to the stock exchanges and declared about the so called irregularities purported to have taken place in the Respondent No. 1 Company. While this being the position, Government machinery cannot be used by either of the conflicting parties to settle their scores and instead a fair and impartial inquiry be allowed to be conducted by the government agencies to know the real facts. VI. Evidently the existing management had caused an inquiry into the matter through a Legal firm and also an Auditor s firm and the Vaish Report was released. Having seen the seriousness of the matter this Bench also is conscious of the fact that the Securities and Exchange Board of India (SEBI) is conducting inquiry into the matter independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial statements of CG Power and Industrial Solutions Limited and its subsidiary companies for 5 (Five) years ended as on 31st March 2019. XI. The Company Petition is allowed. (emphasis supplied) 7. What stands out from this order is the PCCIT did not even appear when the application was heard by the NCLT let alone filing any objections. 8. Subsequently, applicant, i.e., the MCA filed an application to the NCLT to take on record the recast/restated financial statements of petitioner and its subsidiaries. The MCA had appointed Kalyaniwala Mistry, LLP to reopen and recast the books of accounts of petitioner and its subsidiaries for a period of five years as ended on 31st March 2019. Similarly, CNK Associates, LLP was appointed by the MCA to audit recasted books of account of petitioner and its subsidiaries for a period of five years as ended on 31st March 2019. The applications came to be filed since both the Chartered Accountant firms completed their assignment and furnished the restated accounts for F.Y. 2014-15 to F.Y. 2018-19. Duly audited financial statements alongwith relevant audit report were also submitted by MCA to NCLT. The NCLT has recorded in its order dated 26th October ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereof shall be communicated at least seven working days in advance. (e) Personal hearing shall be given by the members of CBDT with the minimum quorum present as prescribed in law. (f) If after the personal hearing, the petitioner wishes to file any written submissions to record what transpired during the personal hearing, the petitioner may do so within five working days of the conclusion of the personal hearing. (g) The order to be passed by the CBDT and signed by the members, who heard the petitioner shall be a reasoned order dealing with all submissions of the petitioner and shall be passed on or before 29th February 2024. 2. Petition disposed. 3. We clarify we have not made any observation on the merits of the matter. 11. Following this, supplementary documents and written submissions were filed by petitioner and personal hearing was also granted to petitioner. By an order dated 29th February 2024, that is impugned in this petition, petitioner s application for condonation of delay was once again rejected on grounds which we find difficult to accept. The CBDT admits that the PCCIT had not even resisted the application that was filed by the MCA under Section 130 of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 5th March 2020, has in fact kept the rights of the Government to continue with the proceedings pending before the SFIO, ED and CBI. As regards point (b) is concerned unless the Income Tax Department permits filing of the ROI based on recasted books of accounts, it will not be able to examine the veracity or the genuineness and correctness of the claim of petitioner. So also for point (c) that unless the ROI based on recasted books of account are allowed to be filed, the Income Tax Department will not be able to examine the complicity of the former key managerial personnel and its impact on the assessment as well as other proceedings. As regards point (d) is concerned frankly it is non justiciable. The CBDT has not appreciated the import of the expression genuine hardship . As regards point (e), (f) and (g) are concerned once again unless the ROI based on recasted books of account are allowed to be filed, the Income Tax Department will not be able to examine. 13. Genuine Hardship used in Section 119(2)(b) of the Act came for consideration in K.S. Bilawala vs. Principal Commissioner of Income Tax (2024) 158 taxmann.com 658 (Bombay) where the court observed that the phrase genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t defeat the claim. We find support for this view in Sitaldas K. Motwani v. Director General of Income-tax (International Taxation), New Delhi 2010/87 taxmann.com (Bom.), xxxxxxxxxx 16. The term genuine as per the New Collins Concise English Dictionary is defined as under: Genuine means not fake or counterfeit, real, not pretending (not bogus or merely a ruse) . 17. ****** 18. The ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, another well-known principle, namely, a person cannot take advantage of his own wrong, may also have to be borne in mind..... (p. 624). xxxxxxxxxx 16. Whether the refund claim is correct and genuine, the authority must satisfy itself that the applicant has a prima facie correct and genuine claim, does not mean that the authority should examine the merits of the refund claim closely and come to a conclusion that the applicant's claim is bound to succeed. This would amount to prejudging the case on merits. xxxxxxxxxx At this stag, the authority is not expected to go deep into the niceties of law. xxxxxxxxxx xxxxxxxxxx 23. In light of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the company s case is covered by and in compliance to the Circular No. 9 of 2015 dated 9th June 2015. The ACIT has correctly recorded as under : a. The Company's case is covered by and in compliance to the Circular No. 9 of 2015 dated 09.06.2015, which provides guidelines to deal with the applications for condonation of filing refund claim and carry forward of losses under Section 119 (2) (b) of the Act. Further, six years from the end of the assessment year viz. AY 2017-18 for which such application/claim for refund/loss is made has not lapsed. This condition is also satisfied by the Company. b. The books of accounts of the Company have been statutorily restated by MCA appointed auditors. Therefore, in order to disclose true and fair position of taxable income it is imperative to recompute the correct taxable income for AY 2017-18 based on the restated books of accounts, and make appropriate disclosures in the income tax return form. c. Allowing the Company to file revised return of income based on the restated books of accounts will entail the Company to claim correct refund and/or carry forward the business loss for AY 2017-18. d. Without revised return of income based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 addressed to the CBDT has also recommended that it is a fit case for condonation of delay. Paragraph Nos. 4 and 5 of the said letter read as under : 4. The Pr. CIT-6, Mumbai vide letter dated 16.02.2023 has opined that considering the facts and factual reports of the JAO, the assessee petition for both the years is genuine for condonation of delay in filing Revised Income Tax Returns . However, without prejudice to the above, I am also directed to forward a copy of the factual report in the prescribed format furnished by the PCIT-6, Mumbai, for your kind perusal. Further the CCIT-3, Mumbai also concurres with the findings of the jurisdictional PCIT. 5. In view of the above, I am directed to endorse the comments of CCIT-3, Mumbai that this is a fit case for condonation of delay. (emphasis supplied) 20. Strangely, the Deputy Commissioner of Income Tax (O.S.D.) on instructions from a Member (TPS of CBDT), by a letter dated 23rd June 2022 addressed to the PCCIT called upon the PCCIT to do the following : 7. The report on the above inquires, along with Pr. CCIT, Mumbai s comments/recommendations may kindly be sent by 9th July 2022 so that the application of the petitioner can be proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal assessing officer to make necessary inquiries or scrutinize the case in accordance with the provisions of the Act to ascertain the correctness of the claim. (emphasis supplied) 22. This letter has been forwarded by the PCCIT to the CBDT vide letter dated 14th July 2022. The PCCIT has forwarded a letter to the CBDT with his recommendations. By a letter dated 2nd December 2022 the PCCIT strangely advised that the condonation of delay application be rejected. This appears to have been made on the prompting made by the Board because by a letter dated 30th November 2022 the Board called upon the PCCIT to submit once again the specific comments/recommendations on the merits of petitioner s application with reference to Board Circular No. 9 of 2015 dated 9th June 2015 governing condonation of delay under Section 119 (2) (b) of the Act. There is no explanation whatsoever why there was a change in the stand taken from what was taken earlier. 23. We fail to understand when the order under Section 130 (2) of the Companies Act has been passed by the NCLT to recast the accounts on an application filed by the MCA, Government of India and the accounts have been recasted and accepted by the NC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not survive. So also consequential notices, if any, issued or orders, if any, passed. 27. We clarify that accepting returns of income on recasted accounts will not absolve anybody from any action that may be taken on the basis of earlier accounts based on investigation which are on going. If after investigation, if these recasted accounts are required to be relooked or reworked, the company shall not raise issue of limitation for a period of three years from the date on which the assessment order is passed. 28. In view of the peculiar facts and circumstances of this case, the time to calculate the period provided in Section 149 of the Act will commence from the date the assessment orders are passed for each of the five assessment years. 29. It was submitted on behalf of the Revenue that in view of the appeals which are filed by Mr. Gautam Thapar and Mr. Madhav Acharya against the NCLT s order dated 26th October 2021 in the NCLAT, in the event the NCLAT reverses the order passed by NCLT on 26th October 2021, the time permissible for reopening of assessment on the returns originally filed should be extended. We are not making any observations on this. Suffice to say it is open to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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