2019 (5) TMI 558 - HC - Income Tax

Power to file Revised returns of income pursuant to the scheme of arrangement and amalgamation approved by the National Company Law Tribunal - applicability of limitation to file revised return - effect of circular issued u/s 119(2)(b) of the Income Tax Act namely Circular No. 9 of 2015 in light of scheme of amalgamation approved by the NCLT under Section 391 of the Companies Act ? - HELD THAT - Section 139(5) is not applicable in cases where revised returns of income have been filed pursuant to the scheme of arrangement and amalgamation approved by the National Company Law Tribunal. The circular No. 9 of 2015 issued by the Central Board of Taxes under Section 119(2)(b) of the Income Tax Act 1961 is not applicable in cases where revised returns of income have been filed pursuant to the scheme of arrangement and amalgamation approved by the Court. There is also no statutory bar under the Income Tax Act to disable the assessee from filing revised returns of income pursuant to the scheme of arrangement and amalgamation approved by the Court under Section 391 of the Companies Act. The rules of procedure are handmaid of justice. It should not be an obstruction in the aid of justice. As rightly observed by Krishna Iyer J. in the case of Sushil Kumar 1975 (3) TMI 137 - SUPREME COURT the procedure should be the handmaid not the mistress of legal justice which vests with residuary power in the Judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable. It is settled law that while dealing with the taxing provision when two interpretations are possible the Court would interpret the provisions in favour of the tax payer and against the revenue. In cases of doubt or dispute the construction should be made in favour of the tax payer and against the revenue. In the case on hand there is no express statutory bar in cases where revised returns of income have been filed belatedly pursuant to the scheme of arrangement and amalgamation approved by the Court. When there is no such express bar under the Income Tax Act 1961 or its Rules the respondent cannot override the approved scheme of arrangement and amalgamation which has a statutory force by rejecting the revised returns of income filed by the respective petitioners as invalid. Just because the website of the Income Tax Department does not entertain revised returns of income after the prescribed period as stipulated u/s 139(5) the respective petitioners cannot be rendered remediless. Procedures are handmaid of justice. They have to be interpreted to carry forward the objects of the enactment. If not for the website of the Income Tax Department s refusal to accept revised returns of income beyond the prescribed period as stipulated u/s 139(5) the respective petitioners in the normal circumstances would have been able to file the revised returns of income pursuant to the approval of the scheme of arrangement and amalgamation by the National Company Law Tribunal. Procedures aid the effective implementation of the Act of the legislature. Rule 12(3) of the Income Tax Rules stipulates that returns of income can be filed only electronically. But the case on hand is an exceptional case where it has necessitated the respective petitioners to file the revised returns of income manually since the website of the income tax department refuses to accept the returns of income which has been filed beyond the prescribed period under Section 139(5) of the Income Tax Act 1961. As already observed Section 139(5) of the Income Tax Act is not applicable for the facts of the instant case. Therefore this Court is of the considered view that the respondent ought not to have rejected the filing of the revised return of income by the respective petitioners on the ground that the same has been filed manually instead of electronically. Therefore Rule 12(3) of the Income Tax Rules 1962 will not bar the respective petitioners to file the revised returns of income manually as the revised returns of income have been filed only pursuant to the scheme of arrangement and amalgamation approved by the National Company Law Tribunal. For the foregoing reasons this Court answers the points for consideration framed at the outset in these Writ Petitions in the following manner a) The scheme of arrangement and amalgamation approved by the National Company Law Tribunal under Section 391 of the Companies Act gives statutory force to enable the respective petitioners to file the revised returns of income beyond the prescribed period and Section 139(5) of the Income Tax Act 1961 is not applicable for cases where revised returns of income have been filed pursuant to approval of scheme of arrangement and amalgamation by the Competent Court. b) The Circular issued under Section 119(2)(b) of the income tax act namely Circular No. 9 of 2015 is not applicable for filing of revised returns of income pursuant to a scheme of arrangement and amalgamation approved by the Court under Section 391 of the Companies Act. c) Rule 12(3) of the Income Tax Rules which requires filing of revised returns of income electronically is not applicable to cases where revised return of income has been filed by the assessee pursuant to scheme of arrangement and amalgamation approved by the Court. The impugned orders in all the writ petitions are hereby quashed and the respondent is directed to receive the revised returns of income filed by the respective petitioners pursuant to the scheme of arrangement and amalgamation approved by the National Company Law Tribunal Chennai and complete the assessment for the assessment years 2015-2016 and 2016-2017 in accordance with law within a period of twelve 12 weeks from the date of receipt of the revised returns of income from the respective petitioners.

Summary

Issues Involved:
1. Binding nature of the scheme of amalgamation approved by the National Company Law Tribunal (NCLT) on income tax authorities for filing revised returns beyond the period stipulated under Section 139(5) of the Income Tax Act, 1961.
2. Applicability of Circular No. 9 of 2015 issued under Section 119(2)(b) of the Income Tax Act, 1961 in overriding the scheme of amalgamation approved by the NCLT.
3. Mandatory nature of Rule 12(3) of the Income Tax Rules for electronic filing of revised returns and the possibility of exceptions.

Issue-wise Detailed Analysis:

1. Binding Nature of Scheme of Amalgamation:
The court examined whether the scheme of amalgamation approved by the NCLT under Section 391 of the Companies Act is binding on income tax authorities for filing revised returns beyond the stipulated period under Section 139(5) of the Income Tax Act, 1961. The court noted that the scheme of amalgamation, which was approved by the NCLT, permitted the petitioners to file revised returns even beyond the prescribed period. This was supported by paragraph 64(c) of the scheme, which allowed the filing of revised returns without incurring any liability on account of interest, penalty, or any other sum. The court held that Section 139(5) of the Income Tax Act, which deals with the discovery of omissions or wrong statements in the original return, is not applicable in this case since the revised returns were filed pursuant to the scheme of amalgamation. The court referenced the Supreme Court’s decision in Marshall Sons & Co. (India) Ltd. Vs. ITO, which established that once a scheme is sanctioned by the court, it comes into effect retrospectively from the appointed date and has statutory force. Therefore, the court concluded that the income tax authorities are bound to act according to the scheme approved by the NCLT.

2. Applicability of Circular No. 9 of 2015:
The court analyzed whether Circular No. 9 of 2015 issued under Section 119(2)(b) of the Income Tax Act overrides the scheme of amalgamation approved by the NCLT. The court observed that the circular was issued to avoid genuine hardship in cases where applications or claims for exemptions, deductions, refunds, or other reliefs are made after the expiry of the period specified by the Income Tax Act. However, in the present case, the revised returns were filed pursuant to the scheme of amalgamation approved by the NCLT, which has statutory force. The court held that the circular is not applicable in this context as it deals with cases of genuine hardship, whereas the revised returns in this case were necessitated by the amalgamation order. The court referenced the Supreme Court’s decision in J. K. Bombay (P) Ltd. Vs. New Kaiser-I Hind Spinning & Weaving Co., which established that a scheme sanctioned by the court has statutory force and overrides any administrative circulars issued by the Central Board of Direct Taxes (CBDT).

3. Mandatory Nature of Rule 12(3) of the Income Tax Rules:
The court examined whether Rule 12(3) of the Income Tax Rules, which mandates the electronic filing of revised returns, is applicable in this case. The court noted that the petitioners were unable to file the revised returns electronically due to the Income Tax Department’s website not allowing such filings beyond the prescribed period under Section 139(5) of the Income Tax Act. The court held that the petitioners cannot be rendered remediless due to the procedural requirements of electronic filing, especially when the revised returns were filed pursuant to the scheme of amalgamation approved by the NCLT. The court emphasized that procedural rules should serve the cause of justice and should not obstruct it. The court referenced the Supreme Court’s decision in Kailash Vs. Nanhku, which held that procedural laws are meant to aid justice and should not be interpreted in a manner that causes injustice. Therefore, the court concluded that Rule 12(3) does not bar the filing of revised returns manually in this exceptional case.

Conclusion:
The court quashed the impugned orders and directed the income tax authorities to receive the revised returns filed by the petitioners pursuant to the scheme of amalgamation approved by the NCLT and complete the assessment for the relevant assessment years within twelve weeks. The court allowed the writ petitions without any order as to costs.