Assessment order quashed in amalgamation case for mixing standalone and consolidated returns improperly

HC quashed assessment order in amalgamation case where petitioner merged with another company under NCLT-approved scheme effective from 01.04.2020. Modified return was filed manually on 24.08.2022 after portal issues. Court held assessment should have been based solely on consolidated post-amalgamation return, not mix of standalone and consolidated returns. Assessing Officer's approach of considering pre-amalgamation standalone returns alongside consolidated returns was improper. Assessment order issued within 2 days of show cause reply for 59 additions was also problematic. Matter remanded for fresh assessment.

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Issues Involved:
1. Legality of the assessment order dated 31.12.2022.
2. Consideration of the consolidated/modified return post-amalgamation.
3. Procedural fairness in the issuance of the assessment order.

Summary:

1. Legality of the Assessment Order:
The petitioner, a private limited company, challenged the assessment order dated 31.12.2022 for the assessment year 2021-2022. The petitioner argued that the assessment should be based on the consolidated/modified return after the amalgamation with Cheran Synthetics, effective from 01.04.2020, as sanctioned by the NCLT Chennai on 18.04.2022. The petitioner filed a standalone return on 14.03.2022 due to the non-operational ITBA portal for filing the modified return.

2. Consideration of the Consolidated/Modified Return Post-Amalgamation:
The petitioner relied on Section 170A of the Income Tax Act, which allows six months from the end of the month of the NCLT order to file a modified return. The petitioner manually filed the modified return on 24.08.2022 since the portal was not enabled. The court noted that the assessment should be based on the consolidated return post-amalgamation, as the scheme became effective from 01.04.2020, transferring all assets and liabilities to the petitioner.

3. Procedural Fairness in the Issuance of the Assessment Order:
The petitioner contended that the assessment proceedings were concluded hastily, with the show cause notice issued on 27.12.2022 and the assessment order issued within two days after the petitioner's reply. The court observed discrepancies in the assessment order, such as incorrect references to financial statements and amounts, indicating a hasty assessment process. The court found that the assessment order was issued without adequate consideration of the consolidated return and procedural fairness.

Conclusion:
The court quashed the impugned assessment order dated 31.12.2022 and remanded the matter for reassessment based on the consolidated return of income. The respondents were directed to issue fresh notices and reassess accordingly. The writ petition was allowed, and the connected miscellaneous petition was closed with no order as to costs.

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