How to Navigate Modified ITR for Business Reorganization: A Guide Until June 30, 2024

Section 170A was inserted vide the Finance Act, 2022 with effect from April 1, 2022, to make provisions for giving effect to the order of business reorganization issued by a tribunal, court or an Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. Section 170A(1) of the Income-tax Act, 1961 provides as follows –

Effect of order of tribunal or court in respect of business reorganisation

170A. (1) Notwithstanding anything to the contrary contained in section 139, in a case of business reorganisation, where prior to the date of order of a High Court or tribunal or an Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter referred to as order in respect of business reorganisation), as the case may be, any return of income has been furnished by an entity to which such order applies under the provisions of section 139 for any assessment year relevant to the previous year to which such order applies, the successor shall furnish, within a period of six months from the end of the month in which the order was issued, a modified return in such form and manner, as may be prescribed, in accordance with and limited to the said order.

The Board, through its order u/s 119 dated 26.09.2022, permitted successor companies, if the business reorganization order was issued between 01.04.2022 to 30.09.2022, to submit modified returns under section 170A of the Act by March 31 2023.

However, the permission was pending for entities to submit income returns following business reorganization through amalgamation, merger, or demerger, sanctioned by a competent authority under the Insolvency and Bankruptcy Code, 2016, before 01.04.2022. In respect of such entities, the Apex Court, in the case of Dalmia Power Ltd. v. ACIT, held that the Department was to consider revised returns filed beyond the prescribed timeline after taking into account the scheme of amalgamation as sanctioned by NCLT.

Therefore, the entities whose scheme of business reorganization was sanctioned by the competent authority vide orders dated prior to 01.04.2022 were outside the purview of section 170A. Consequently, these entities could not file modified returns of income under section 170A of the Act. To address the challenges faced by these entities and ease their genuine difficulties, the CBDT has now issued an order allowing successor companies to submit modified returns for the relevant assessment year. This can be done through the e-filing portal functionality. The order outlines a three-step process for entities to follow, including communication with the Jurisdictional Assessing Officer (JAO), verification of the return’s compliance with the reorganization order, and electronic filing within specified timelines as follows