RITESH SINGH ACIT CIRCLE 3 3 1 MUMBAI, MUMBAI vs. TREND ELECTRONICS LIMITED, MUMBAI

6 Th Ghans ITA n slate and is not flung wi rise claims. If that is permitted, t ulations on the basis of wh lution applicant submits its ld go haywire and the plan w orkable. We have no hesitation to say, t d "other stakeholders would s r the Central Government, an ernment or any local authoritie slature, noticing that on acco ous omission, certain tax aut e not abiding by the mandate of e and continuing with the proce brought out the 2019 amendmen declaratory and clarificatory in therefore retrospective in ope the said mischief. We therefor the 2019 amendment is dec clarificatory in nature and th ospective in operation. he Hon'ble Supreme Court in t hyam Mishra case concluded tha No. 5459 to 5461/MUM/2024 7 Trend Electronics Limited ith any the very hich the plans, would be that the squarely y State es. The ount of thorities f 1 & B eedings, nt so as nature eration." re hold, laratory herefore, the case of at,

7 As wherei appella Electro compa and purcha certific

A acquire order liquida Clean dues t author the app allowe 4. Before us, a Resolution Profe clarified that the ITA djudicating Authority grants it section 31 could be continued." per the order of the Hon'ble NC in it ordered for the liquidat ant company (Corporate Deb onics Limited, as going co ny was acquired by Mr. Jaiprak Mr. Nandkishore Baheti a asers, on Clean Slate Basis ate dated 07.08.202. ccordingly, as the appellant ed by the auction purchasers of the Hon'ble NCLT, Mumbai ation of the appellant as going Slate Basis, it's all dues includ to Central Govt any State Govt. rity, stands extinguished. In view peal of the appellant on additio d. appearances were entered on be essional and the new manag e resolution/liquidation process No. 5459 to 5461/MUM/2024 9 Trend Electronics Limited ts approval CLT, Mumbai tion of the btor) Trend oncern, the kash Bihani as auction by a sale company is following the i allowing for g concern on ding statutory , or any local w of the above, onal ground is ehalf of both the gement. It was s had concluded and the new m proceedings. The the assessee was and the binding proceedings in r approval of the contended that before the NCLT appellate proceed infructuous. Rele under:- “8. As satisfie law wh by ord binding membe Govern payme being i dues a the clea 9. Eluc was he ITA management was authorised e principal submission advance that, in view of sections 31 and precedents of the Hon’ble Sup respect of past tax dues could acquisition plan by the NCLT. the Revenue had already lod T, which stood admitted, and dings under the Income-tax Act evant part of his submission is s per Section 31 of the IBC, if ed that the CoC have met the re hile arriving at a draft resolution er, approve the resolution plan w g on the corporate debtor and i ers, creditors, including nment, to whom a debt in re ent of dues arising under any la in force, such as authorities to w are owed. This provision essenti an slate principle. cidating the objective of Section 3 eld in the case of Essar Steel In No. 5459 to 5461/MUM/2024 10 cally held that the resolution ap ase may be, the Auction Purch nly be faced with 'undecided' cla tion plan submitted by him is as it would lead to uncertainties nt would be payable by th ant (or, as the case may be, aser). Ghanashyam Mishra & Son weiss Asset Reconstruction Co 57, it was held that on the date tion plan (or, as the case ition Plan) by the NCLT, all claim , shall stand extinguished and be entitled to initiate or c edings in respect to a claim, of the said plan. Further, ing the statutory dues ow nment, if not part of the reso No. 5459 to 5461/MUM/2024 11 No. 5459 to 5461/MUM/2024 12 Vs e Tax (2022) the aim and ate Debtor by t it. Providing f 'no' claims in appears to be s liable to be Since claims the N contin 3.1 He further s its claim for AY present appeals submission is rep “14. A Revenu outstan 19 to t NCLT o Regula Board 2016, during admitte filed in 15. Ac relevan conside accord ITA the Revenue had already s for AY 2017-18 and AY 20 NCLT, the present appeals nued: submitted that since Revenue h 2017-18 and 2018-19, before cannot be continued. Releva produced as under:- t this juncture, it is relevant to ue had in fact intimated th nding demand for AY 2017-18 a the NCLT and the same was ad on 17.10.2019 during the CIRP ation 12(2) of the Insolvency an of India (Liquidation Process) here a stakeholder does not file the liquidation stage, the cla ed during the CIRP is deemed n liquidation as well. ccordingly, once the Revenue's c nt years stood admitted and we ered by the liquidator for d ance with the waterfall mechan No. 5459 to 5461/MUM/2024 13 Trend Electronics Limited y lodged its 018-19 before s cannot be has already lost e the NCLT the ant part of his note that the he Assessee's and AY 2018- dmitted by the stage. As per nd Bankruptcy ) Regulations, e a fresh claim aim filed and to have been claims for the ere liable to be distribution in nism under the IBC, th through Witho canno of the IBC: 3.2 He further continued qua th liquidation under reduced as under “16. Re of IBC taken (i.c, th commit where a. un ch pe ma or ITA he same claims cannot now b h the present appellate proceedin ut prejudice, the instant ot be continued qua the new e Assessee pursuant to liquid submitted that instant procee he management of the assessee r IBC code. Relevant part of hi r:- ……. eference may also be made to S which inter alia states that no a against the property of the cor e Assessee herein) in relation tted prior to the commencemen such property is covered under: A resolution plan approved nder Section 31 of IBC, which ange in control of the corporat rson who was not a promot anagement or control of the cor a related party of such a person No. 5459 to 5461/MUM/2024 14 Trend Electronics Limited be re-agitated ngs. he objective of Sections 32A of mization of value of the Corpora ng a resolution applicant to tion plan/Acquisition Plan w ned about various impon cified liabilities. It entitles th ants to take over the corporate slate. ection 32A(2) of IBC ensures th be taken against any prop ate debtor in relation to any offe been committed by the erstwhile corporate debtor prior to the in It similarly extends that warrant roperties of the corporate de tion plan stands approved or in idation assets. held in Nitin Jain, Liquidator nforcement Directorate 287 No. 5459 to 5461/MUM/2024 15 Trend Electronics Limited a person who anagement or a related party of IBC ensure ate Debtor by o submit the without being nderables or he resolution e debtor on a hat no action perty of the ense that may e management nitiation of the ty in respect of ebtor once a case of a sale r PSL Limited (2022) DLT

3 Further, he against the asses plan by the NCLT para of his subm “22. It unequi Liquid of Ind 731 (S and 33 assess cannot sale/co ITA concern and clean slate ba hile management, is not in a posi quisite documentary evidence to aim for deductions. edings can continue a ssee only when moratorium ver, after approval of Acquisi the present proceedings mus e submitted that proceeding ssee however, after approval of T, the present proceeding must mission is reduced as under:- t is submitted that the Suprem ivocally held in Sundare dator of ABG Shipyard Vs Ce direct Taxes and Customs 202 SC), that when moratorium unde 3(5) of IBC is in force, tax author s/determine the quantum of cus t initiate recovery of dues b onfiscation. No. 5459 to 5461/MUM/2024 17 Trend Electronics Limited asis from the ition to furnish o substantiate against the is in force; ition Plan by st abate: could continue f the acquisition abate. Relevant me Court has esh Bhatt, entral Board 22 (381) ELT er Sections 14 rities can only toms duty but by means of 23. Ho the liq continu Mishra 24. In Assess NCLT proceed continu 2017-1 Adjudi procee 3.4 He further wishes to continu can continue with his submission is 25. It are dis initiate agains In this Radhe (2011) ITA owever, once the CIRP or as the quidation is concluded, no pro ue as held in the case of G a (supra). n the instant case, since liquid see on clean slate basis was app vide its order dated 26. dings in respect of past tax ued. Therefore, the instant proce 18 and Ay 2018-19) is liable to b ication proceedings and edings are independent in nat submitted that if the Income-t ue proceeding in relation to old hout adjudicating the appeals. R s reduced as under:- is submitted that even if the pr sposed of, there would be no e prosecution, if any, required u st the erstwhile management of s regard, reliance is placed on eshyam Kejriwal Vs State of ) 333 ITR 58 (SC) whe No. 5459 to 5461/MUM/2024 18 Trend Electronics Limited case may be, oceedings can Ghanashyam dation of the pproved by the 06.2023, no dues can be edings (for AY e dismissed. d criminal ture: ight of the above, it is submitted instant appeals would not come ntial launch of prosecution, if the law, against the erstwhile m sessee-Company.” d Departmental Representative that appellate proceedings und ned to determination of tax liab No. 5459 to 5461/MUM/2024 19 Trend Electronics Limited oceedings and t in nature to e adjudication prosecution is for criminal SK Perumal, 149 ITR 696 ion of success er the IT Act titution of the e, in principle, Act would not criminal court n the evidence d that disposal in the way of any, required management of e, on the other der the Income- bility and do not amount to recove Bench in Doshia 78/Mum/2018 it the IBC to contin embargo under s against coercive appeals. He subm result in refund favour of the ass basis of the co management of t such an evasion of prosecution in these appeals sho 4. We have ca perused the reco ground that, up transfer of the c basis, no tax pro proceeded on th proceedings them 4.1 This appro unsustainable. T Doshion Veolia ITA ery. Relying upon the decision of an Water Solutions Private Lim t was argued that there is no nuation of appellate proceeding sections 14 and 33(5) of the IB recovery and not for contin mitted that appeals before the L of the tax collected, if any, if essee company. Further submi oncealment or evasion of tax the company, and confirmation before the ITAT, becomes basis n respect of the old management ould be decided to their logical e arefully considered the rival su rd. The CIT(A) allowed the appe on completion of the insolven ompany to new management o oceedings could survive. In doin he assumption that continuati mselves was impermissible unde oach, in our considered vi The Coordinate Bench of th Water Solutions Pvt. Ltd.(su No. 5459 to 5461/MUM/2024 20 Trend Electronics Limited f the Coordinate mited in ITA no. legal bar under gs, and that the C operates only nuing with the Ld. CIT (A) might f matter goes in tted that on the x by the then n of the order of s for considering t, and therefore, end. ubmissions and eal solely on the ncy process and on a clean slate ng so, the CIT(A) ion of appellate er the IBC. iew, is legally his Tribunal in upra), after an exhaustive exami precedents, inclu 1972 SC 878), S CBIC, and PCIT unequivocally he merely quantify o the character o therefore, do not f sections 14 or 33 4.2 The Hon’ble distinction betwe or recovery the Act in matters o not denude the determine the co proceedings. The the claims to b waterfall mechan 4.3 The princip Mishra & Sons (P and recovery of applicant or a adjudication or ITA ination of the statutory framewo uding S.V. Kondaskar v. V.M. D Sundaresh Bhatt, Liquidator of A T (Customs) v. Rajendra Pra eld that assessment and appell or determine the tax liability and of recovery proceedings. Suc fall within the mischief of the m (5) of the IBC. e Supreme Court has consistent een determination of dues an ereof. While the IBC overrides f recovery and prioritisation of tax authorities of juri ictio orrect tax liability, including th quantified dues, if any, thereaf e dealt with strictly in accord nism under section 53 of the IBC le of “clean slate”, as explained (P.) Ltd., operates at the stage o past claims against the succe auction purchaser. It does determination of such claim No. 5459 to 5461/MUM/2024 21 Trend Electronics Limited ork and binding Deshpande (AIR ABG Shipyard v. asad Tak, has late proceedings d do not partake ch proceedings, moratorium under ly drawn a clear nd enforcement the Income-tax f claims, it does n to assess or hrough appellate fter form part of dance with the C. d in Ghanshyam of enforceability essful resolution not prohibit ms, particularly where such dete consequences. 4.4 The relevan Water Solutions P “13. It appear the committee corporate inso committee of application for which was a take further passed by a Court in Civi Liquidator of A and Customs, & 54, has held "43, In the S.V. Konda extremely expoundin Companies Income Tax "7 Loo scheme particu as a w "other the exp (2) con in both approp court. comple respec of inc concer ITA ermination may also have coll nt finding of the Tribunal in Pvt. Ltd.(supra), is reproduced as rs that since no resolution plan was e of creditors of corporate debtor olvency resolution process. On the dir creditors, the Resolution Professiona r initiating liquidation process of corp allowed by adjudicating authority as guidance from the judgment dated nother three judges bench of Hon'b l Appeal No. 7667 of 2021, Sunda ABC Shipyard V. Central Board of In wherein Hon’ble Apex Court, vide pa d as under”: e above context, the judgment of this askar v. V.M. Deshpande, AIR 1972 S relevant. In that case, this Cou ng the interplay of Section 446 s Act 1956 (bankruptcy provision) ax Act, 1961, held as follows: oking at the legislative history and e of the Indian Companies ularly the language of Section 446, r whole, it appears to us that the expres legal proceeding" in sub-section (1) pression "legal proceeding" in sub-sec nvey the same sense and the proceed h the sub-sections must be such as priately be dealt with by the winding The Income Tax Act is, in our opinio ete code and in is particularly so t to the assessment and re- assessm come tax with which alone we ned in the present case. The fact No. 5459 to 5461/MUM/2024 22 Trend Electronics Limited ateral statutory Doshion Veolia s under: approved by r within the rection of the al moved an porate debtor, s above. We 26.08.2022 ble Supreme aresh Bhatt, ndirect Taxes aras 43,44,45 s Court in SC 878, is rt, while of the with the the Act, read ssion and ction dings can g up on, a with ment are that after th has realiza govern payabl 78/MU P. Ltd. rank p compa procee must b as can leave o of the cannot Officer payabl be the the Co Officer reasse appeal Tax Ac to the decisio Court a by the lead to up cou the a assess argum Desai empow transfe case b Section that co expedi argum so con conseq ITA he amount of tax payable by an asses been determined or quantified ation from a company in liquidation ned by the Act because the income le also being a debt has to ITA UM/2018 Doshion Veolia Water Solu pari passu with other debts due from any does not mean that the assessm dings for computing the amount of be held to be such other legal proceed n only be started or continued with of the liquidation court under Section Act. The liquidation court, in our opin t perform the functions of Income rs while assessing the amount of le by the assessees even if the assess e company which is being wound up ourt. The orders made by the Income r in the course of assessment essment proceedings are subject l to the higher hierarchy under the Inc ct. There are also provisions for refere High Court and for appeals from ons of the High Court to the Supr and then there are provisions for revi e Commissioner of Income Tax. It w o anomalous consequences if the win urt were to be held empowered to tran assessment proceedings to itself s the company as income tax. ent on behalf of the appellant by is that the winding up court wered in its discretion to decline er the assessment proceedings in a g but the power on the plain languag n 446 of the Act must be held to ves ourt to be exercised only if consid ient. We are not impressed by ent. The language of Section 446 mus nstrued as to eliminate such star quences as investing the winding up c No. 5459 to 5461/MUM/2024 23 Trend Electronics Limited ssee its n is tax A no ution m the ment f tax dings h the 446 nion, Tax tax sees p by Tax or t to come ence the reme ision ould ding nsfer and The Shri t is e to given ge of st in ered this st be rtling court with t conferr becaus have in 8. The assess which continu is also, Income been liquida power determ compa liquida scrutin tax ha deman to the under determ accepte compa Veolia liquida can f compa Inciden Bar no notice were h court. decisio (In Liqu and t Liquida not se that th of the ITA the powers of an Income Tax Off red en him by the income Tax se in our view the legislature could ntended such a result. e argument that the proceedings sment or re-assessment of a comp is being wound up can only be starte ued with the leave of the liquidation c , on the scheme both of the Act and of e Tax Act, unacceptable. We have shown any principle on which ation court should be vested with to stop assessment proceedings mining the amount of tax payable by any which is being wound up. ation court would have full power nise the claim of the revenue after inc as been determined and its paym nded from the liquidator. It would be o liquidation court thee is decide how the law the amount of income mined by the Department should ed as a lawful liability on the funds of any in ITA no. 78/MUM/2018 Dos Water Solution P. Ltd. ation. At that stage the winding up c fully safeguard the interests of any and its creditors under the ntally, it may be pointed out that at o English decision was brought to under which the assessment proceed held to be controlled by the winding On the view that we have taken, ons in the case of Seth Spinning Mills L uidation) (1962) 46 ITR 193 (Punj) (Su the Mysore Spun Silk Mills Ltd., ation) (1968) 68 ITR 295 (Mys) (supra em to lay down the correct rule of he Income Tax Officers must obtain le winding up court for commencing No. 5459 to 5461/MUM/2024 24 Trend Electronics Limited fficer Act, d not for pany ed of court f the not the the for y the The r to come ment open w far tax be f the hion court the Act. t the our dings g up the Ltd., upra) (In a) do law eave g of continu procee 44. Therefore can only take fines or any authority can levy of intere of moratoriu above ratio between the context. 45. From the respondent c assessment cannot trans initiate recov 33(5) of th Professional, liquidator, as to ensure th been provide any assessm excessive. 54. On the following are i) Once m of Section case may only has assess/de customs responden power to means of under the ii) After s authority (concerning in terms of ITA uing assessment or re-assessm dings." e, this Court held that the authorities e steps to determine the tax, interest, penalty which is due. However, the nnot enforce a claim for recovery or est on the tax due during the period um. We are of the opinion that the squarely applies to the interplay e IBC and the Customs Act in this e above discussion, we hold that the could only initiate assessment or re- of the duties and other levies. They gress such boundary and proceed to very in violation of Sections 14 or he IBC. The interim Resolution Resolution Professional or the s the case may be, has an obligation hat assessment is legal and he has ed with sufficient power to question ment, if he finds the same to be e basis of the above discussions e our conclusions: moratorium is imposed in terms ns 14 or 33(5) of the IBC as the y be, the respondent authority s a limited juri iction to etermine the quantum of duty and other levies. The nt authority does not have the initiate recovery of dues by f sale/confiscation, as provided e Customs Act uch assessment, the respondent has to submit its claims g customs dues operational debt) f the procedure laid down, in strict No. 5459 to 5461/MUM/2024 25 Trend Electronics Limited ment compliance 78/MUM Solution P before the iii) In any immediate responden appropriat 14. Hon’ble A 2023, princip Prasad Tak an explicitly held indirect taxes be paid in ac provided u/s. 2016. This di dues of the c revenue. 15. In view of Apex Court in provisions of I Act. However juri iction Income Tax recovery of s of moratoriu the IBC as th are like any o liquidator in under the IB accordance w 53 of IBC. As treated as the appeals wou revenue's tax impediment IT Solution P. Lt amount to det what has bee to decide the i ITA e of the time periods ITA no. 2018 Doshion Veolia Water P. Ltd. prescribed under the IBC, adjudicating authority. case, the IRP/RP/liquidator can ely secure goods from the nt authority to be dealt with tely, in terms of the IBC.” Apex Court in Civil appeal no. 6432-6 pal commissioner of custom V. Ra nd others, vide order dated 30.10.202 d that the dues of the central bo and custom department of revenue, ccordance with the waterfall mechani 53 of the insolvency and bankruptc ctum is equally applicable in respect entral board of direct taxes, departm f aforesaid discussion and law laid do n Sundaresh Bhatt (Supra), we hold th IBC 2016 would prevail over the Incom r, Income Tax authorities have li to assess/determine the quantu dues but have no authority to in such does at its own during the p um in violation of Section 14 or 3 he case may be. The Income Tax Auth other creditor, may stake their claim the statutory limitation period pr BC. Such claims can be consider with the waterfall mechanism provide s in the case of civil litigation, an app e continuation of a suit, the outcome of uld also result in the determinat x dues only. There is thus no TA no. 78/MJM/2018 Doshion Veolia td. in deciding these appeals, which termination of tax dues only. In the l en held by us hereinabove. We now p instant matter on merit. No. 5459 to 5461/MUM/2024 26 Trend Electronics Limited 6433 of ajendra 23, has ard of are to ism as cy code t of the ment of own by hat the me Tax imited um of nitiate period 3(5) of horities before rovided red in ed u/s. peal is f these tion of legal a Water would light of proceed

5 In the prese declining to adju allowing the app insolvency procee 4.6 In view of binding decision Water Solutions P the CIT(A) and adjudication on m reasonable oppor 5. The facts an also identical and and restored to th 6. In the res statistical purpos