Successor to File Updated Return--Law and Procedure Regarding

CA. Manoj Gupta

1. Insertion of section 170A by the Finance Act, 2022

It is seen that post business reorganization, the affairs of the successor entity go through a complete change with effect from the date from which such reorganization takes place. However, due to the indefinite timeline involved in issuing such orders, there is a gap between the effectivity of such order and the date on which such order is issued by the competent authority. This also affects the final accounts of such entities as they are unable to modify their already filed returns in accordance with the reorganization. Hence, in order to remove this anomaly, a new section 170A has been inserted in the Act, to enable for the entities going through such business reorganization, for filing of modified returns for the period between the date of effectivity of the order and the date of issuance of final order of the competent authority.

In the case of Dalmia Power Ltd. & Anr. v. Asstt. CIT 2019 TaxPub(DT) 8388 (SC) : (2020) 420 ITR 339 (SC) : (2020) 269 Taxman 352 (SC) : (2020) 312 CTR (SC) 113 assessee's transferee companies manually filed revised return of income on 27-11-2018 after schemes of amalgamation were sanctioned and approval was granted by NCLT. The revised returns were based on the revised and modified computation of total income and tax liability of Transferor/Amalgamated Companies. In the revised returns of income, assessee claimed losses in the concerned year to be carried forward. Assessing officer relied on section 139(5) and 119(2)(b) read with Circular No. 9 of 2015 issued by CBDT and took the view that assessee ought to have made application for condonation of delay, and sought permission from CBDT, before filing revised returns beyond the statutory period of 31-3-2018 and, therefore, assessment could only be done on the basis of the original returns. It was held that on a plain reading of section 119(2)(b), it was found that this provision would not be applicable where an assessee has restructured business, and filed a revised return of income with prior approval and sanction of NCLT, without any objection from department. In the instant case, the predecessor companies/transferor companies had been succeeded by assessee's transferee companies who had taken over their business along with all assets, liabilities, profits and losses, etc. with prior approval of NCLT and without any objection from department. Accordingly, in view of section 170(1) assessing officer was required to assess income of assessee's after taking into account revised returns filed after amalgamation of companies.