Revised return can be filed even though it is time barred if it is pursuant to a scheme of amalgamation

Situation:

1.  The assessee filed its original return of income for AY 2004-05 on 30-10-2004 declaring loss. Order u/s 143(3) was passed on 28-12-2006.

2.  The scheme of amalgamation, arrangement and compromise was approved by Hon’ble Madras High Court vide order dated 29-11-2007 with appointed date being 01-01-2004.

3.  Pursuant to said order, the assessee filed its revised return of income on 27-12-2007. The AO rejected the revised return since it was time barred as per Sec. 139(5).

Did this stand of the AO pass the legal scrutiny?

Legal precedence:

1.  This case is similar to the facts of the case of Pentamedia Graphics Ltd. -vs.- ITO (2010) 236 CTR 204 (Mad), where Hon Madras High Court held that:

2.  The Revenue is bound to take note of the state of affairs as on the appointed date and a return reflecting such state of affairs cannot be ignored on the basis of a statutory limitation placed on filing of revised returns.

3.  The AO cannot ignore the order of High Court and thus, assessment has to follow the scheme sanctioned by High Court.

4.  Hon Supreme Court in the case of Marshall Sons & Co. (India) Ltd. – vs. – ITO (1997) 223 ITR 809 (SC), has held as under:

Firstly, an assessment can always be made and is supposed to be made on the transferee company taking into account the income of both the transferor and transferee companies.

Secondly, and probably the more advisable course from the point of view of the Revenue would be to make one assessment on the transferee company taking into account the income of both the transferor or transferee companies and also to make separate protective assessments on both the transferor and transferee companies separately.