In a recent landmark ruling, the Hon’ble Supreme Court in the case of Dalmia Power Ltd. vs ACIT* has allowed the assessee company to file revised return after due date specified under section 139(5) as the delay was occurred due to sanction of scheme by NCLT.

Dalmia Power Limited and Dalmia Cement Limited (here-in-after referred to as ‘DPL’ and ‘DCL’ respectively) had entered into a scheme of arrangement and amalgamation with nine other companies.

The appointed date of the said scheme was 01.01.2015. However, the Hon’ble NCLT passed the final order on 01.05.2018.

Pursuant to the aforesaid order, DPL and DCL  filed revised tax returns for AY 2016-17 manually on 27.11.2018, since the time limit for filing revised return u/s 139(5) of the Income-tax Act, 1961 had expired on 31.03.2018.

However, the department rejected the revised return mainly on following grounds:-

1. The time limit for filing revised return under section 139(5) had expired.

2. Instead of filing of revised return directly, the assessee should have first of all made an application for condonation of delay under section 119(2)(b) of the Act.

Aggrieved by the aforesaid action, the assessee  filed a Writ Petition before the Hon’ble Madras High Court which was allowed by the Ld. Single Judge but was subsequently reversed by the Division Bench. Thereafter, the assessee  filed a Special Leave Petition before the Hon’ble Supreme Court.

The Hon’ble Apex Court allowed the assessee to file the  revised return.

Issues:

Whether assessee could file revised return after the expiry of stipulated time under section 139(5)?

Whether since the department did not object to the clause in the scheme for compromise or arrangement providing for filing of revised returns after due date, the scheme was binding on the Department as well?

Whether the assessee was required to file an application for condonation of delay under section 119(2)(b)?

Key Observations of the Hon’ble Apex Court

  1.  The revised Returns were not filed on account of an omission or wrong statement or omission contained therein. Hence,the time   limit stipulated under Section 139(5) of the Income Tax Act was held to be not applicable.
  2.  It was impossible for the assessee companies to have filed the revised Returns of Income for the A.Y. 2016-2017 before the due date of 31.03.2018 as the delay occurred on account of the time taken to obtain sanction of the Schemes of Arrangement and Amalgamation from the NCLT
  3. The Department having not objected within the period of 30 days as specified under section 230(5) of the Companies Act, 2013  was bound by the whole scheme of compromise and arrangement including the clause which pertained to belated filing of revised returns.
  4. The Schemes attained statutory force not only inter se the Transferor and Transferee Companies, but also in rem and hence became binding on tax authorities as well.
  5. The assessee company was not obliged to comply with procedural conditions of section 119(2)(b) and the said section was held to be inapplicable.

For a deeper discussion as to how this issue might affect your business, please revert

*[(2019) 418 ITR 242]