VIJAYGROUP HOUSING PRIVATE LIMITED,MUMBAI vs. NFAC CIT(A), MUMBAI

It is further noticed that, CA Sanjay Shah has arranged accommodation entries for his clients from the entities being run and operated by Shri. Rajesh Mehta viz. Anericap limited and VRB Capital Services Limited. On perusal of list of beneficiaries and fund trader, it is seen that the assessee i.e. M/s. Vijaygroup Housing Limited is one of the beneficiaries during the year under consideration with the transaction of Rs.1,53,06,493/-. Accordingly, as per above information received, the case of assessee was reopened by issue of notice u/s. 148 dated 31.03.2023 after taking the approval of principle CCIT, Mumbai. The case was assigned to NFAC for completion of assessment, however, the case was reassigned to the jurisdictional assessing officer u/s. 144B(8) of the Act for completion of assessment. In response to the notice issued u/s. 148 of the Act, the assessee vide Email dated 24.11.2023 has stated certain facts, the relevant part of which is as below: “i. As you are aware, Vijaygroup Housing Private Limited (Corporate Debtor) is presently undergoing a Corporate Insolvency Resolution Process (CIRP), with my appointment as the Resolution Professional (RP) having been established by the Hon'ble National Company Law Tribunal (NCLT) via an order dated March 15, 2023 These particulars have been previously communicated to you vide letter July 10, 2017 ii. Regarding tax claims and proceedings by tax authorities for the enforcement or recovery of tax claims during the CIRP, it has been legally established that the moratorium under Section 14 of the IBC applies to such 3 & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. tax claims (please refer to CIT vs. Monnet Ispat & Energy Ltd., 2018) (18 SCC 786) Therefore, in compliance with the IBC framework, for dues pertaining to periods before the insolvency commencement date, creditors, including tax departments, cannot seek repayment during the CIRP due to the imposed moratorium The Income Tax Department has the option to file their claim with the RP, which will be processed under the IBC under an approved resolution plan or during liquidation"

Considering the reply of the assessee company, a letter vide DIN No. ITBA/COM/F/17/2023-24/1059452492(1) has been issued to rebut the stand of the assessee company. The relevant part of the same is as under: "In this regard it is submitted that as per Hon ble Kerala High Court Order in the case of PLATINO CLASSIC MOTORS INDIA PVT. LTD. in WP(C) NO. 7997 OF 2023 dated 26.10.2023 has made the following observations/directions which is as under "From perusal of Section 14 of the IBC and several Judgments of the other High Courts as well as the Supreme Court, it is well settled that Section 14 of the IBC does not create a bar for finalisation of the assessment and adjudication proceedings in respect of the taxes." In view of the above your contentions filed in this office on 24.11.2023 is not acceptable. Therefore it is requested to submit the details as per the requirement of this office for completion of Assessment proceedings in the case of M/s VijayGroup Housing Pvt Ltd PAN AADCN1474D for A Y 2019- 20."

Notice u/s. 142(1) of the Act was sent on 12.02.2024 requesting the assessee to file details in regard to the transaction of Rs. 1,53,06,493/- as mentioned above on or before 25.01.24. In response, it was submitted on behalf of assessee that Corporate Insolvency Resolution Process, (CIRP) in respect of assessee was initiated by Hon’ble NCLT, Mumbai vide order dated 30.12.2022 and vide replacement order dated 15.03.2023, IRP was replaced and Mr. Prakash V. Kukreja was appointed as Resolution Professional for the assessee (corporate Debtor). In respect of & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. transaction entered into of Rs.1,53,06,493/-, the Resolution Professional of the assessee had submitted that due to limited information available with the Resolution Professional as he has not been able to get from the ex-promoter any information because the ex-promoters have not responded to him, therefore the Resolution Professional (RP) could submit nothing.

A notice u/s. 133(6) was also sent to M/s. VRB Capital Services Limited on 12.03.2024 requesting to furnish details of the above said transaction of Rs.1,53,06,493/- along with supporting documents/evidence. The said notice has been duly delivered through email but no response has been filed. Even the assessee has failed to submit any documentary evidence and supporting documents about the transaction and accordingly show cause notice dated 28.02.2024 was issued to the assessee for explaining about the transaction. In response vide letter dated 04.03.2024, the Resolution Professional on behalf of assessee simply stated that, neither the Resolution Professional is privy to the alleged transaction under taken out of books of accounts nor he is aware of the alleged transaction because the information pertains to unexplained credit u/s. 68 of the Income Tax Act, to which Resolution Professional has no knowledge as about there has been no response from the ex-promoters of the assessee. Further the & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. financial for AY 2015-16 were prepared by the ex-management and audited by auditor’s appointed by ex-management. The assessee in response vide letter dated 04.03.2024 has submitted its response as under: “i. As you are aware, the Corporate Insolvency Resolution Process (CIRP) in respect of Vijaygroup Housing Private Limited (Corporate Debtor) was initiated by Hon'ble NCLT Mumbai Bench vide its Order dated 30th September 2022 and thereafter vide its replacement order dated 15th March, 2023 (uploaded on 24th Mar 23) erstwhile (RP was replaced and Mr. Prakash V. Kukreja was appointed as the Resolution Professional (RP) for the Corporate Debtor. ii Upon commencement of CIRP, the RP takes charge of the affairs of the Company since the powers of the Board of Directors of the Corporate Debtor stand suspended on commencement of the CIRP by virtue of Section 17(1)(b) of the Code; and such powers are exercised by the RP iii. Your good office has proposed to make addition to income of Rs. 20,34,000/- in respect of transaction stated to have undertakeri during FY 2018-19 le pre-cirp period. In this regard, RP would like to point out that during the concerned period, the Company affairs were looked after by Board of Directors/Ex-Promoters and RP was appointed by the Hon'ble NCLT, wef. 15th March 2023. Thus, neither RP is privy to the alleged transaction undertaken out of books of accounts nor he is aware about the alleged transaction. iv. Please note that the RP, upon receiving this SCN, also reached out to the ex-promoter to assist in sharing any relevant and available information to appropriately share with the ITO, Since the information pertains to unexplained cash credits u/s 68 of the Income Tax Act, to which RP has no knowledge about. There has been no response from the ex-promoter v. Further, the financials for FY 2018-19 were prepared by the RP based on very limited available information and data provided by the erstwhile management. Hence suitable assumptions and best judgement, alongwith applicable assumptions were taken to complete the financials and the audit. All the relevant documents available with the RP have already been shared in the response to your notice u/s 142(1) issued dated 10th Jan 2024. vi. As an additional information, it may also be noted that the RP is duty bound to form an opinion and accordingly file an application for the avoidance transactions with the Hon'ble NCLT. Hence, RP based on a Transaction Audit conducted for the Corporate Debtor, has filed an avoidance application against the transactions categorised as Fraudulent Transactions u/s 66 of the IBC and the with the Hon'ble NCLT”.

The above submission of the assessee were considered. However, it was noticed that the assessee had failed to submit any supporting document or evidence in support of unsecured loan of Rs. 1,53,06,493/- including interest @12% i.e. Rs.2,71,233/- and brokerage of Rs. 35,260/- from VRB Capital Services Limited. The assessee has failed to produce any documents/evidence to prove the identity, credit worthiness of the parties alongwith genuineness of transaction concerned as stated above. Accordingly, the receiving of the loan amount by the assessee of Rs.1,50,00,000/- was added back to the total income of the assessee as unexplained credits u/s. 68 of the Income Tax Act. The interest of amount of Rs. 2,71,233/- and brokerages of Rs. 35,260/- paid to Mr. Sanjay Shah is also added to the total income of the assessee as unexplained expenditure u/s. 69(C) of the Act. The proceeding u/s. 271(C) were also initiated.

The Ld. AR on behalf of the assessee has submitted in writing that no factual details could be filed before the Ld. AO and the Ld. CIT(A) by the Resolution Professional, owing to the fact that the appellant company was undergoing CIRP and ex-promoters did not provide any factual details to the Resolution Professional of the appellant company. It is further, stated that the appellant also confirms that factual details are not available even now.

The Ld. DR on the other hand submitted that it is an admitted fact that no document/material/submission has been made by the assessee, or on behalf of the assessee against the additions made by the Ld. AO. The assessee has totally failed to establish identity, credit worthiness of the parties and genuineness of the transaction which resulted into the addition by the Ld. AO as unexplained & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. credits u/s. 68 of the Act, unexplained expenditure u/s. 69(C) of the Act, unexplained investment u/s. 69 of the Act and addition as income from other sources respectively.

With regard to the legal ground raised against the right of the revenue/income tax department for initiating proceeding despite the insolvency proceedings against the assessee, the Ld. DR has relied upon the order of the Ld. coordinate bench in AY 2017-18 order dated 27.05.2025 where similar ground was raised with respect to income tax assessment proceeding during CIRP under IBC, 2016. It is argued by the Ld. DR that there is no bar for completing the assessment by the income tax department with respect to assessee/corporate debtor under the CIRP, as only recovery of the due tax is restrained against the corporate debtor undergoing insolvency proceeding under the IBC 2016. It is therefore, submitted that there is no merit in the appeal and the same be dismissed.

We have considered the rival submissions and examined the material available on record. Ground No.1 to 4 (Lead Case) 18. These grounds pertains the addition of Rs.1,50,000/- as unexplained credit u/s. 68 of the Act, an addition of Rs.3,06,493/- as unexplained expenditure u/s. 69(C) of the Act which included & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. on account interest paid and brokerage paid by the appellant; addition as unexplained investment of Rs.2,08,06,040/- is on account of purchase of immovable property u/s. 69 of the Income Tax Act and addition of Rs.12,00,000/- is made as income from other sources because assessee had failed to submit details in respect of difference of rental income received from Vijay Surksha Reality LLP. Admittedly no document or material had been submitted by the assessee or on behalf of the assessee by the Resolution Professional before the Ld. AO as well as Ld. CIT(A) which has resulted into the addition of the relevant amount mentioned by the Ld. AO and confirmation by the first appellant authority Ld. CIT(A). With respect to the addition made u/s 68 of the Act it was incumbent upon the assessee to satisfy the revenue authority by proving the identity, credit worthiness of the partes and the genuineness of the transaction. With respect to the addition made u/s. 69(C) of the Act, the assessee has failed to offer any explanation about the sources of the funds to the satisfaction of the Ld. AO. With respect to the addition u/s. 69 of unexplained investment, admittedly the assessee has failed to offer explanation about the nature and source of investment to the satisfaction of the revenue authorities. The assessee has failed to furnish any document or material before the Ld. AO as well as before the Ld. & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. CIT(A) and it has been submitted before us in writing that no such material is available with the Resolution Professional for submitting on behalf of the assessee even before this Tribunal.

We have noticed that the Ld. CIT(A) has examined the submissions with respect to the various additions made and has dismissed the appeal of assessee and based his decision on sound legal principles and settled legal precedents. It is to be noticed that the resolution professional on behalf of the assessee has also submitted in writing before us that he has no material/evidence/submissions to be made on behalf of the assessee with respect to the additions to the total income challenged in this appeal. Thus, the assessee has totally failed to bring any material against the additions made by Ld. Assessing Officer and confirmed by the Ld. CIT(A). For the above reasons, we find no legal infirmity in the impugned order which may warrant interference by this Tribunal. The ground no. 1 to 4 are accordingly rejected.

With respect to legal ground no. 5 we are of the considered opinion that the issue is covered by the order of the Ld. Coordinate bench in order dated 27.05.2024 (supra) and we proceed to quote the following extracts relevant to the issue involved before us as under:

Learned representative for the assessee has submitted that since liquidator was appointed on 4th December, 2018 by NCLT, no legal proceedings could be initiated subsequent there to. He has referred Deutsche Bank vs S.P.Kala Official Liquidator of Sea, [1990]67COMPCAS474(BOM). The relevant para 6 reads as under: "..........Section 446 of the Companies Act provides that, when a winding up order is made or the official liquidator is appointed as provisional liquidator, no suit or legal proceedings should be commenced or if pending on the date of the winding, winding-up order, shall be proceeded with, against the company, Except with the leave of the court and subject to such terms as may be imposed. Sub- section (2) further lays down that the court which is winding-up the company shall, notwithstanding anything contained in any other law in force, have jurisdiction to entertain or dispose of, inter alia, any suit or proceeding by or against the company, whether such suit or proceeding has been instituted or is instituted. A careful examination of these provisions of law makes it clear that once a winding-up order is made or the official liquidator is appointed as provisional liquidator, no proceedings can continue or be instituted against the company without the permission of the court......

Learned Representative for the revenue department has submitted that no leave of the adjudicating authority is necessary to be obtained by the Revenue Department in respect of assessment proceedings. He has referred Official Liquidator, High Court,...Vs Commissioner of Income Tax, West Bengal, AIR 1970 CAL349, in support of his arguments. The relevant para 49a read as under:

It is true that the IBC is more recent statute. Section 238 of IBC reads as under: "238. Provision of this Code to override other laws.- The Provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."

The non-obstante clause in the above referred Section 238 clarifies that the IBC Code shall have the effect of overriding the provisions of other laws. Section 178 of the Act makes provision in respect of the 'company in liquidation'. The relevant Section 178(6) of the Income Tax Act reads as under: "(1) ……….. (2) ……….. (3) ……….. (4) ……….. (5) ……….. (6) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force [except the provisions of the Insolvency and Bankruptcy Code, 2016]."

Above referred Sub Section 6 of Section 178 of the Act was amended by Section 247 r/w 3rd schedule of IBC with effect from 01.11.2016. This provision makes it clear that IBC code will override the provisions of Income Tax Act 1961. The three judges bench of Hon'ble Supreme Court in Civil Appeal No. 7667 of 2021, Sundaresh Bhatt, Liquidator of ABC Shipyard V. Central Board of Indirect Taxes and Customs, vide order dated 26.08.2022, has held that the respondent could only initiate assessment or re-assessment of the duties and other levies, once a moratorium is imposed in terms of Section 14 or 33(5) of the IBC as the case may be, the respondent authority, only has limited jurisdiction to assess/determine the quantum of the customs & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. duty and other levies. The respondent authority does not have the power to initiate recovery of dues. Liquidator has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any assessment if he finds the same to be excessive. 13.We accordingly, on the basis of aforesaid binding precedent, hold that the provisions of IBC 2016 would prevail over the Income Tax Act. However, Income Tax authorities have limited jurisdiction to assess/determine the quantum of Income Tax dues but have no authority to initiate recovery of such dues at its own during the period of moratorium in violation of Section 14 or 33(5) of the IBC. The Income Tax Authorities are like any other creditor, may stake their claim before liquidator in the statutory limitation period provided under the IBC. The first point is accordingly determined in positive in favour of the assessee.

We respectfully, follow the judgment of the, Ld. Coordinate bench extracted above and also find ourselves in agreement with the finding of the ld. Coordinate bench to the effect that the income tax authorities have limited jurisdiction to assess/determine the income tax due but have no authority for immediate recovery of such due at its own during the period of moratorium in violation of Section 14 or 33(5) of IBC, 2016. We respectfully, agree with the coordinate bench that the income tax authorities are like any other creditor, may stake their claim before the liquidator in the statutory limitation period provided under the IBC 2016. The Revenue authorities are within their powers against the assessee who is undergoing CIRP under the IBC, 2016, for adjudicating the matter with respect to determination of tax only. For these & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. reasons, the ground no. 5, which is the legal ground is also rejected.

In view of the above, findings on the grounds, the appeal of the assessee is accordingly dismissed.

The assessee has filed its return of income for AY 2019-20 on 29.09.20 declaring total taxable income as Rs. NIL. The return was proceed u/s. 143(1) of the Act. However on the basis of information from DDIT/ADIT investigation, the assessment was reopened u/s. 148 of the Act after completing all formalities.

Brief facts shows that CA Sanjay Shah had arranged the accommodation entries of unsecured loan for the assessee from VRB Capital Services Limited for which the assessee has allegedly made payment of interest of Rs.20,34,000/-. The assessee has failed to submit any documents in support of its claims of payment/cash and to establish unsecured loan from M/s. VRB Capital Services Limited. Even the M/s. VRB Capital Services Limited has not responded to the notice u/s. 133(6) dated 12.03.2024 issued by the Ld. AO and has not filed any reply. Hence, the sum of Rs. 20,34,000/- was added to the total income of the assessee as unexplained cash expenditure u/s. 69(C) of the & 5281/Mum/ 2024 Vijaygroup Housing Pvt. Ltd. Act because the assessee failed to produce any documents/evidence to prove the identity, credit worthiness and genuineness of the transaction as mentioned above.

Aggrieved by the assessment order, the assessee filed appeal before the Ld.CIT(A) who dismissed the same and confirmed the additions on the ground that assessee/appellant had failed to substantiate the transaction as no document/material was produced before the Ld. AO or before the Ld. CIT(A).

The ground no. 4 before the Ld.CIT(A) was raised and disposed of as under: “APPELLATE DEICSION W.R.T GROUND NO.-4: The appellant states that, the ".... On the facts and in law the AO has erred in considering income of Rs.6.64,40,138/- as per intimation u/s. 143(1) as against Nil Income as per Return of income fled without appreciating the fact that there is mistake in the Intimation issued u/s. 143(1) while processing the return of income wherein Business income is considered at Rs.5.29,71,920/- against Nill Business Income declared in the IT Return fled and set off of Current year business loss against Income from other sources Rs 1,34,68,218/- is not allowed in the Intimation. The appellant is seeking to challenge the AO's order passed u/s. 143(1) of the Act and whereas this appeal filed by the appellant vide no. NFAC/2018- 19/10363805, dated 22/04/2024, against the assessment order dated 26.03.2024 passed u/s 147 of the Income Tax Act, 1961, for this AY 2019-20. Thus, it is evident that, the grounds of appeal

We have heard the Ld. AR and Ld. DR with respect to the grounds raised in the present appeal. Admittedly no document has been produced before the revenue authority or before the Tribunal with respect to the unexplained expenditure of Rs.20,34,000/- added u/s. 69(C) of the Act, therefore, the finding recorded in with respect to ground no. 1 to 4 therein shall mutatis mutandis apply to the ground no.1 of the present appeal. Accordingly, the ground no, 1 stands dismissed.

With the respect to the ground no.2, we have examined the finding of the Ld. CIT(A) on ground no.4 before him as extracted in the preceding para no. 28 by us and we find no illegality in the findings of the Ld. CIT(A) on the ground no.4 before him and which is ground no.2 before us. Nothing contrary to the finding returned by the Ld. CIT(A) with respect to the ground no. 4 before the Ld. CIT(A) has been submitted before us. Accordingly, the ground no.2 in the present appeal also stands rejected.

The ground no.3 is legal ground and the finding returned by us in (Lead Case) with respect to ground no.5 therein shall mutatis mutandis apply to the ground no.3 herein and the same is accordingly rejected.

In the result, appeal of the assessee is dismissed. 33. For the above reasons both the appeals in for AY 2019-20 and are dismissed. Order pronounced on 29.04.2025 Sd/-Sd/- Sd/- (OM PRAKASH KANT) (RAJ KUMAR CHAUHAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai / Dated 29.04.2025 Divya R. Nandgaonkar, (Stenographer)