2024 (5) TMI 502 - HC - Income Tax

Condonation of delay in filing of revised return of income - CBDT rejecting petitioner s application u/s 119 - delay in filing the returns of Income based on the recasted accounts - Resignation by the statutory auditors happened before completing their term and reference made to unauthorised and undisclosed transactions - order passed by which the NCLT was pleased to grant permission to applicant, i.e., MCA for reopening of the books of account and recasting of financial statements of Respondent No. 1, i.e., petitioner herein and its subsidiary companies for past five years HELD THAT - 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. 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 Respondent Nos. 1 to 5 to allow the Petitioner to file revised returns of income and revised computations of income prepared in accordance with/based on the re-casted/revised books of account and financial statements for assessment years 2015-16 to 2020-21 and to assess the Petitioner's income chargeable to tax based on the same. Petitioner shall file physical returns of income based on books of account, revised/recasted under Section 130 (2) of the Companies Act, 2013, as taken on record by the NCLT for A.Y. 2015-16 to A.Y. 2020-21 before the JAO within 30 days from the date this order is uploaded.

Summary

Issues Involved:
1. Levy of tax on correct income.
2. Genuine hardship due to delay in filing revised returns.
3. Relevance of finality attached to recasted books of account under Section 130 of the Companies Act, 2013.
4. Reliance on earlier findings by Respondent No. 5.
5. Impact of proceedings before SFIO, ED, NCLAT, and civil suits on condonation of delay.
6. Verification of genuineness and validity of claims in revised returns.

Summary:

1. Levy of Tax on Correct Income:
The petitioner challenged the order dated 29th February 2024 by the Central Board of Direct Taxes (CBDT) rejecting their application u/s 119 of the Income Tax Act, 1961 for condoning the delay in filing revised returns for A.Y. 2015-16 to 2020-21. The petitioner argued that the returns filed earlier did not reflect the correct financial position, and for proper administration of the Act, the CBDT should have condoned the delay.

2. Genuine Hardship Due to Delay:
The petitioner claimed genuine hardship if the delay was not condoned, citing:
- The need to tax income based on correct financial positions.
- The irrelevance of the original books of account post-recasting.
- Denial of claims for write-offs and non-assessment of liabilities.
- Denial of carry forward and set off of unabsorbed depreciation and brought forward losses.
- Other hardships in assessment/appellate proceedings. The court held that the CBDT did not appreciate the import of "genuine hardship" and should have considered it liberally.

3. Relevance of Finality Attached to Recasted Books:
The petitioner argued that the CBDT erred in holding that the finality attached to recasted books under Section 130 of the Companies Act, 2013 was not relevant under the Income-tax Act. The court found this stand difficult to accept, noting that the Income Tax Department should have allowed the filing of returns based on recasted books to examine their veracity.

4. Reliance on Earlier Findings by Respondent No. 5:
The petitioner contended that the CBDT erred in relying on earlier findings and overlooked the statement made by the Ld. ASG for denovo consideration. The court agreed, stating that the CBDT failed to appreciate the contentions raised by the petitioner.

5. Impact of Proceedings Before SFIO, ED, NCLAT, and Civil Suits:
The CBDT cited ongoing proceedings before SFIO, ED, NCLAT, and pending civil suits as grounds for denying the condonation application. The court found this reasoning flawed, stating that unless the revised returns based on recasted books were allowed, the Income Tax Department could not examine these aspects.

6. Verification of Genuineness and Validity of Claims:
The CBDT's stance that they needed to verify the genuineness and validity of claims in the revised returns was found baseless by the court. The court emphasized that such verification could only be done after allowing the filing of revised returns.

Court's Decision:
The court quashed the CBDT's order dated 29th February 2024 and directed the respondents to allow the petitioner to file revised returns based on recasted books of account for A.Y. 2015-16 to 2020-21. The court ordered that the assessments be framed considering the revised returns and clarified that accepting these returns would not absolve anyone from actions based on earlier accounts. The court also ensured that any ongoing investigations would proceed in accordance with the law.