Bajaj Electricals Limited v. Assistant Commissioner Of Income-Tax-Circle 2(1)(1), Mumbai & Ors

Digitallysigned byTRUSHATRUSHATUSHARTUSHARMOHITEMOHITEDate:2023.08.0514:25:29+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.4155 OF 2022 Bajaj Electricals Limited ….. Petitioner Vs. Assistant Commissioner of Income-Tax-Circle 2(1)(1), Mumbai & Ors. ….. Respondents Mr.P.J. Pardiwalla, Sr.Advocate a/w Ms.Vasanti Patel for Petitioner Mr.Suresh Kumar for Respondents CORAM:K.R. SHRIRAM, J &FIRDOSH P. POONIWALLA, J.DATED :31[st] JULY 2023 P.C. 1.Petitioner is aggrieved by an order dated 3[rd] June 2022 passed byRespondent no.1 refusing to accept Petitioner’s manual revised returns forAssessment Year 2014-15 to Assessment Year 2021-22. Petitioner isseeking a writ of Mandamus to direct Respondent no.1 to accept andprocess Petitioner’s manual revised returns for Assessment Year 2014-15 toAssessment Year 2021-22 and treat the same as valid for all purposesunder the Act and to deal with the same including all claims made thereinin accordance with law. 2.Petitioner is a listed company and has vast business portfolio that spans Consumer Products and EPC. Petitioner’s business includesmanufacturing and marketing of electrical goods. 3.Petitioner entered into a scheme of arrangement with Hind LampsLimited (“Hind Lamps”) which was an unlisted company engaged in thebusiness of manufacturing of Glass bulbs, High Intensity Discharge bulbsetc. Hind Lamps also has a trading business in India. Prior to the effectivedate of the scheme of arrangement, in 2002, Hind Lamps was declared as asick industrial company within the meaning of section 3(1)(o) of the SickIndustrial Companies (Special Provisions) Act, 1985 (“SICA”) by the Boardof Industrial and Financial Reconstruction (“BIFR”). The Board ofDirectors of Petitioner and Hind Lamps at their respective board meetingsdecided to demerge the manufacturing business of Hind Lamps intoPetitioner with cut off date of 31[st] March 2014. Since Hind Lamps wasdeclared as a sick industrial company by BIFR, the scheme of arrangementwas required to be filed only with BIFR for its approval. The scheme wasfiled with BIFR on 22[nd] April 2016. By a notification dated 25[th] November2016 the Central Government brought the provisions of SICA Repeal Actinto force with effect from 1[st] December 2016, thereby repealing SICA.Section 4(b) of SICA Repeal Act provided that any proceedings of whatevernature pending before the BIFR shall stand abated and accordingly HindLamps’ case stood abated on 1[st] December 2016. After the abovenotification the provisions of Regulation 37 of the Securities and ExchangeMohite 2/12 Board of India (‘SEBI’) Listing Obligations and Disclosure Requirements(“LODR”) and SEBI circulars became applicable to the companies and thescheme of arrangement was required to be filed with NCLT. The schemeof arrangement was entered into for the transfer of the manufacturingundertaking of Hind Lamps on a going concern basis to Petitioner by wayof demerger in compliance with the conditions specified in section 2(19AA)of the Income Tax Act, 1961 (the Act). The scheme of arrangement wasfiled with the Mumbai and Allahabad benches of the NCLT. The schemeprovided an appointed date of 31[st] March 2014 and the effective date to bethe last date on which the certified copies of the orders of the respectiveNCLTs are filed with the Registrar of Companies at Mumbai and Allahabad.Various SEBI circulars had to be complied with by Petitioner and thescheme was also filed with the stock exchanges. NCLT at Mumbai, videorder dated 2[nd] November 2018 (read with a corrigendum order dated 26[th]December 2018), and NCLT at Allahabad, vide order dated 30[th] April2019, respectively, directed to convene a meeting of equity shareholders,secured creditors and unsecured creditors for the purpose of consideringand approving the scheme of arrangement. After Petitioner compliedwith all the legal requirements and the requirements of the Companies Act,2013 including issuance of notice and holding meetings, the order ofNCLT Mumbai admitting the scheme petitions, was filed with Respondentno.1 vide letter dated 13[th] December 2019. 4.Petitioner also filed copies of orders passed by BIFR and the opinionobtained from Justice S.N.Variava, Former Judge of Supreme Court ofIndia confirming the validity of the scheme approved by the Board whichwas sought for by Respondent no.1. NCLT finally approved the scheme ofarrangement and passed orders on 18[th] December 2019 (Allahabad) and21[st] May 2020 (Mumbai). 5.The scheme of arrangement approved by NCLT required Petitionerand Hind Lamps to file revised returns of income-tax, sales tax, valueadded tax, turnover tax, excise duty, service tax, customs and any otherreturns including revised returns to claim advance tax or withholding taxrefunds and credits giving effect to the demerger. The scheme ofarrangement also provided that all profit / income earned or accrued andexpenses / losses incurred by the manufacturing undertaking of HindLamps for the period between the appointed date and the effective dateshall be deemed to be treated as the profits / income earned or accruedand expenses / losses incurred by Petitioner. Further, the taxes deducted /tax paid in relation to the income of the demerged undertaking of HindLamps shall also belong to Petitioner. The scheme of arrangementprovided that the accounting treatment for tax purposes will beincorporated in the books and in the financials drawn up which shall beapproved by the board of directors of Petitioner and Hind Lamps andfurnished to the authorities after audit. The drawn-up financials was to be furnished along with returns / filings to be made with the tax authoritiesand was to form the basis of tax assessments and tax compliances. 6.As per the scheme of demerger and as per the directions of theNCLT, both petitioner and Hind Lamps have prepared the special purposefinancial statements and obtained revised tax audit reports for each of theyears. The preparation, however, got delayed due to the unprecedentedlockdown caused by Covid-19 pandemic as the offices of Petitioner andHind Lamps were closed and different geographic locations of both thecompanies added to the hardship on the management of the companies inpreparation and filing of these documents. furnished along with returns / filings to be made with the tax authoritiesand was to form the basis of tax assessments and tax compliances. 6.As per the scheme of demerger and as per the directions of theNCLT, both petitioner and Hind Lamps have prepared the special purposefinancial statements and obtained revised tax audit reports for each of theyears. The preparation, however, got delayed due to the unprecedentedlockdown caused by Covid-19 pandemic as the offices of Petitioner andHind Lamps were closed and different geographic locations of both thecompanies added to the hardship on the management of the companies inpreparation and filing of these documents. 7.Therefore, based on the above, Petitioner was required to file arevised return of income giving effect to the scheme of demerger from theappointed date, i.e., March 31, 2014, i.e., for AY 2014-15 to AY 2021-22.The Petitioner prepared and filed manual revised returns of income as thedue date to file the revised return of income under section 139(5) of theAct had expired for each of the years. Further, Hind Lamps also filedmanual revised returns of income for AY 2014-15 to AY 2021-22 with theassessing officer having jurisdiction over Hind Lamps and also paid theamount of tax liability arising out of the revised returns of income. 8.Petitioner filed a letter dated January 18, 2022 with RespondentNo.1 for filing of revised returns of income for AY 2014-15 to AY 2020-21as directed by the NCLTs vide its orders dated December 18, 2019 (Form CAA-7 dated January 7, 2020) and May 21, 2020 approving the scheme ofarrangement between Petitioner and Hind Lamps and their respectiveshareholders and creditors under section 230-232 of the Companies Act,2013 for the demerger of the manufacturing business of Hind Lamps intoPetitioner. Petitioner pointed out the factual background and thecircumstances necessitating the demerger of the manufacturing business ofHind Lamps with Petitioner. Petitioner pointed out that it will file revisedincome-tax returns in manual / physical form as there is no option toupload these revised income-tax returns electronically on the portal.Petitioner also placed reliance on the decision of the Hon’ble SupremeCourt in the case of Dalmia Power Limited v. ACIT (420 ITR 339)(SC) andof the Gujarat High Court in the case of Deep Industries Limited (ITA No.11916 of 2021) (Guj HC). Petitioner filed (i) revised computation of totalincome; (ii) notes to computation of total income; (iii) revised specialpurpose financial statements; (iv) revised Form 3CB and form 3CD and; (v)revised Income-tax returns for AY 2014-15 to AY 2016-17. Petitionerpointed out that similar revised income-tax returns for AY 2017-18 to AY2020-21 were under preparation and would be filed soon. Petitionerrequested Respondent No.1 to take the revised income-tax returns for AY2014-15 to AY 2016-17 on record and process them at the earliest. 9.Petitioner filed another letter dated February 3, 2022 withRespondent No.1 for filing of revised returns of income for AY 2017-18 toMohite 6/12 AY 2019-20. Petitioner filed (i) revised computation of total income; (ii)notes to computation of total income; (iii) revised special purpose purposefinancial statements; (iv) revised Form 3CB and Form 3CD and; (v) revisedIncome-tax returns for AY 2017-18 to AY 2019-20 and requestedRespondent No.1 to take the revised income-tax returns for AY 2017-18 toAY 2019-20 on record and process them at the earliest. 10.Petitioner filed another letter dated February 24, 2022 withRespondent No.1 for filing of revised return of income for AY 2020-21.Petitioner filed (i) revised computation of total income; (ii) notes tocomputation of total income; (iii) revised special purpose financialstatements; (iv) revised Form 3CB and Form 3CD and; (v) revised Income-tax return for AY 2020-21 and requested Respondent No.1 to take therevised income-tax return for AY 2020-21 on record and process it at theearliest. 10.Petitioner filed another letter dated February 24, 2022 withRespondent No.1 for filing of revised return of income for AY 2020-21.Petitioner filed (i) revised computation of total income; (ii) notes tocomputation of total income; (iii) revised special purpose financialstatements; (iv) revised Form 3CB and Form 3CD and; (v) revised Income-tax return for AY 2020-21 and requested Respondent No.1 to take therevised income-tax return for AY 2020-21 on record and process it at theearliest. 11.Petitioner filed another letter dated April 28, 2022 with RespondentNo. 1 pointing out that it has already filed the original return of income forAY 2021-22 on March 14, 2022 and filed a revised return of income onlineon March 31, 2022. Petitioner pointed out that at the time of filing therevised return of income, the tax audit of the company after giving effect tothe scheme of demerger as per the directions of the NCLT was not finalizedand the same was finalized only on April 20, 2022. Petitioner pointed outthat after finalization of the tax audit report it was observed that for the year ended March 31, 2020 after giving effect to the scheme of demergerPetitioner was eligible for carry forward and set off of the business lossaggregating to Rs.22,30,60,283/- as detailed in clause no. 32 of the taxaudit report. In order to claim set off of the business loss of AY 2020-21amounting to Rs. 22,30,60,283/- Petitioner filed a manual return ofincome. Post set off of business loss, the refund due to Petitioner increasedfrom Rs. 4,86,19,710/- to Rs. 10,47,57,307/-. Petitioner pointed out thatas the time to file the revised return of income under section 139(5) of theAct had lapsed and hence, Petitioner filed a manual return of income alongwith (I) revised computation of total income; (ii) revised special purposefinancial statements and; (ii) revised Form 3CB and Form 3CD after givingeffect to the scheme of demerger and requested Respondent No.1 to takethe revised income-tax return for AY 2021-22 on record and process it atthe earliest. 12.Respondent no.1 passed the impugned order dated 3[rd] June 2022rejecting the revised returns of income to be processed manually on theground that Petitioner has not followed the provisions of section 119 ofthe Act. Respondent no.1 accepted the submissions of Petitioner thatthere is no income-tax portal functional as the due date to file the revisedreturn has elapsed and hence, Petitioner could not file returnselectronically. Respondent no.1 relied on section 119(2)(b) read withCircular No.9 of 2015 dated 9[th] June 2015 to state that Petitioner can file its application before the respective authority in granting relief. Petitionerwas advised to file revised returns before CBDT since the amount of refundclaimed exceeded Rs.50 lakhs. Respondent no.1 referred to board’sinstructions. Respondent no.1 accepted that the Apex Court judgment inthe case of Dalmia Power Ltd. vs. Assistant Commissioner of Income Tax,Circle-1, Trichy[1] was applicable but according to Respondent no.1 he wasbound by CBDT instructions. In the impugned order, Respondent no1states as under: its application before the respective authority in granting relief. Petitionerwas advised to file revised returns before CBDT since the amount of refundclaimed exceeded Rs.50 lakhs. Respondent no.1 referred to board’sinstructions. Respondent no.1 accepted that the Apex Court judgment inthe case of Dalmia Power Ltd. vs. Assistant Commissioner of Income Tax,Circle-1, Trichy[1] was applicable but according to Respondent no.1 he wasbound by CBDT instructions. In the impugned order, Respondent no1states as under: “Without resorting to such procedure by placing the relianceon the Apex Court has filed the application before theundersinged. It is important to mention here that theundersinged has not been authorized to accept the manualreturns relating to the company as such returns have to be filed‘electornically’, whose control vests with the CentralizedProcessing Centre, Bangalore under the administrative control ofPrincipal Director General of Income-tax )System) or DirectorGeneral of Income-tax (System). Therefore, the undersigned hasno role in accepting such manual returns. Though the ApexCourt decided the issue against the Department, however,considering the Board’s Instruction No.9 of 2015 and section119(2)(b) of the Act the undersigned has left with no option justto reject the application on the ground that the undersigned hasnot been empowered to accept the manual returns as per Rule12(3) of the Act. It is again imperative to state that in the present scheme ofthe Income-tax Act, only returns electronically filed by theassessee is processed by the Central Processing Centre-ITR,Bangalore. Therefore, there is no scope under the provisions ofthe Act to process any manual return of income by this office.There is no other mechanism available with the office of theundersigned to allow the assessee to file such return of incomeelectronically on the income-tax portal.” 13.We are surprised that Respondent no.1 is relying on Board Circular 1(2019) 112 taxmann.com 252 (SC) which has been considered by the Apex Court in the case of Dalmia PowerLtd. (Supra) and still states that he will be bound only by the BoardCircular and not the Apex Court Judgment. 14.In fact even in the affidavit in reply filed through one P.K.VinodKumar, Assistant Commissioner of Income Tax – 2(1)(1) affirmed on 26[th]July 2023, Respondents are relying on section 170A which has beeninserted in the statute by the Finance Act, 2022, w.e.f., 1[st] April 2022.Respondent no.1 states that in view of this provision read with CBDTnotification dated 19[th] September 2022 since six months period in the caseof Petitioner from NCLT orders has already lapsed, Petitioner to takerecourse by making an application before CBDT for consideration of itsapplication based on the facts of the case. This ground of defence is totallyunacceptable to us since Petitioner had filed a revised returns dated 18[th]January 2022, 3[rd] February 2022, 24[th] February 2022 and 28[th] April 2022.Since the Finance Act, 2022 will be applicable only for Assessment Year2022-23 whereas Petitioner’s case is for Assessment Year 2014-15 and2021-22, therefore newly inserted section 170A read with CBDT Circular19[th] September 2022 will not be applicable in the case of Petitioner. 15.In the case of Dalmia Power Ltd.(Supra), the issue before the ApexCourt was whether the Income Tax Department ought to have permittedthe Assessee to file revised Income-tax returns for the Assessment Year2016-17 after the expiry of the due date prescribed under section 139(5) of 15.In the case of Dalmia Power Ltd.(Supra), the issue before the ApexCourt was whether the Income Tax Department ought to have permittedthe Assessee to file revised Income-tax returns for the Assessment Year2016-17 after the expiry of the due date prescribed under section 139(5) of the Act on account of the pendency of proceedings for amalgamation of theAssessee companies with other companies under section 230-232 of theCompanies Act 2013. In that case the scheme of amalgamation wasapproved and sanctioned by NCLT after the due date of filing revisedreturn for Assessment Year 2016-17. The Apex Court referred to section139(5) of the Act that the said provision would not be applicable in a casewhere revised return could not be filed on account of the time taken togrant sanction of the Schemes of Arrangement and Amalgamation by NCLTand section 139(5) of the Act only deals with filing of revised return withina period of one year upon discovery of an omission or wrong statementmade in the initial return of income. In the facts and circumstances of that case, Apex Court directedIncome-tax department to receive the revised return of income forAssessment Year 2016-17 filed by appellants therein and to completeassessment for the said Assessment Year after taking into account schemeof amalgamation as sanctioned by NCLT.16.We are also of the view that the decision of the Apex Court in thecase of Dalmia Power Ltd.(Supra) would be applicable to the facts andcircumstances of the present case. In fact in the impugned order,Respondent no.1 also accepts this but states that he is bound by CBDTCircular. In the circumstances, we set aside the impugned order dated 3[rd]June 2022 and direct Respondents to accept and process Petitioner’sMohite 11/12 manual revised return of income for Assessment Year 2014-15 toAssessment Year 2021-22 and pass within 12 weeks an Assessment Orderin accordance with law. 17.If the jurisdictional AO requires any clarification, he may give notice to Petitioner and if he proposes to make any variation which is prejudicialto the case of Petitioner he may give notice and also give a personalhearing to Petitioner notice whereof shall be communicated atleast 7working days in advance. 18.Petition disposed. 19.We hasten to add that we have not made any observation on themerits of the revised returns being filed. (FIRDOSH P.POONIWALLA, J.) (K.R. SHRIRAM, J.)