2025 (6) TMI 1229 - HC - Income Tax

Application to condone delay for filing revised return under the provisions of section 119(2)(b) - HELD THAT - The petitioner had made the application u/s 119(2)(b) of the Act on 15.06.2020 before the PCIT who has also recommended for condonation of delay for all the three years for filing the revised return. In view of the above facts emerging from the record as the petitioner was not in position to file revised return of income for A.Y. 2019-20 in absence of the condonation of delay to file revised return for the earlier two years by the respondent the application of the petitioner to condone delay in filing revised return of income for A.Y. 2019-20 could not have been rejected on the ground that the petitioner ought to have filed revised return on or before the extended date upto 30.11.2020. Petition succeeds and impugned order dated 05.09.2023 so far as the application to condone delay for filing revised return for A.Y. 2019-20 is rejected is hereby quashed and set aside and the matter is remanded to the respondent to pass fresh de novo order to condone delay in filing revised return of income for A.Y. 2019-20. Such exercise shall be completed within 12 weeks from the date of receipt of copy of this order.

Summary

Issues Presented and Considered

The core legal questions considered by the Court in this matter are:

1. Whether the delay in filing the revised income tax return for Assessment Year (A.Y.) 2019-20 by the petitioner-company can be condoned under section 119(2)(b) of the Income Tax Act, 1961, given the circumstances of amalgamation and the extended time allowed for filing returns due to the Covid-19 pandemic.

2. Whether the respondent authority's rejection of the application for condonation of delay for A.Y. 2019-20, while condoning delay for earlier years (A.Y. 2017-18 and 2018-19), was justified and legally sustainable.

3. The applicability and interpretation of the principles laid down by the Apex Court in the case of Dalmia Power Ltd. vs ACIT regarding the condonation of delay in filing revised returns in the context of amalgamation.

Issue-wise Detailed Analysis

Issue 1: Condonation of delay in filing revised return for A.Y. 2019-20 under section 119(2)(b) of the Income Tax Act

The relevant legal framework is section 119(2)(b) of the Income Tax Act, which empowers the Commissioner of Income Tax to condone delay in filing returns beyond the prescribed time limit if sufficient cause is shown. The petitioner-company sought condonation of delay for filing revised returns for three assessment years consequent to the amalgamation order passed by the National Company Law Tribunal (NCLT).

The petitioner's case was that the amalgamation order dated 09.01.2020 fixed the appointed date as 01.04.2016, requiring revision of books and filing of revised returns for A.Y.s 2017-18, 2018-19, and 2019-20. The petitioner filed the application for condonation on 15.06.2020. The respondent condoned delay for the first two years but rejected it for A.Y. 2019-20, reasoning that the petitioner had more than 10 months (January 2020 to November 2020) to file the revised return, especially since the due date was extended to 30.11.2020 due to the Covid-19 pandemic.

The Court noted that the petitioner could not file the revised return for A.Y. 2019-20 without first revising and obtaining condonation for the earlier years' returns. The respondent's rejection was based on a rigid timeline approach, ignoring the interdependence of the returns for the three years due to the amalgamation scheme.

The Court emphasized that the petitioner's inability to file the revised return for A.Y. 2019-20 within the extended time was not due to lack of diligence but due to the procedural necessity of first revising the earlier years' returns.

Issue 2: Justification of partial condonation and rejection for A.Y. 2019-20

The respondent's impugned order partially condoned delay for A.Y.s 2017-18 and 2018-19 but rejected it for A.Y. 2019-20. The respondent held that since the petitioner had more than 10 months after the NCLT order and the extended due date, there was no genuine hardship.

The petitioner contended that this approach was pedantic and ignored the practical realities of preparing revised accounts and returns for multiple years in the context of an amalgamation. The petitioner also pointed out that the Principal Commissioner of Income Tax (PCIT) had recommended condonation for all three years, relying on the Apex Court's decision in Dalmia Power Ltd., which permits condonation of delay in filing revised returns in amalgamation cases beyond prescribed time limits.

The Court agreed with the petitioner's contention, observing that the respondent failed to consider the PCIT's recommendation and the binding precedent. The Court found the rejection of the application for A.Y. 2019-20 to be inconsistent and lacking in proper appreciation of the facts and law.

Issue 3: Application of Apex Court precedent in Dalmia Power Ltd. vs ACIT

The Apex Court in Dalmia Power Ltd. held that in cases of amalgamation, both the transferor and transferee companies are entitled to file revised returns beyond the prescribed time limit, and such delay can be condoned if sufficient cause is shown.

The petitioner relied on this precedent to argue for condonation of delay for all three assessment years. The PCIT also recommended condonation for all three years based on this precedent.

The respondent's partial acceptance and partial rejection were thus contrary to the legal principle established by the Apex Court. The Court held that the precedent mandates a liberal and purposive approach to condonation in amalgamation cases, recognizing the complexities involved.

Significant Holdings

The Court held that:

"The petitioner was not in position to file revised return of income for A.Y. 2019-20 in absence of the condonation of delay to file revised return for the earlier two years by the respondent, the application of the petitioner to condone delay in filing revised return of income for A.Y. 2019-20 could not have been rejected on the ground that the petitioner ought to have filed revised return on or before the extended date upto 30.11.2020."

The Court quashed and set aside the impugned order to the extent it rejected condonation for A.Y. 2019-20 and remanded the matter for fresh consideration in accordance with law and the principles laid down in Dalmia Power Ltd.

The core principle established is that in amalgamation cases, the condonation of delay for filing revised returns must be considered holistically for all relevant years, and delay for later years cannot be rejected merely because of extended timelines if earlier years' returns are pending revision and condonation.

The Court directed the respondent to pass a fresh de novo order on condonation for A.Y. 2019-20 within 12 weeks, ensuring consistency with the condonation granted for earlier years and adherence to the Apex Court's precedent.