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Facts
The Revenue filed an appeal against the CIT(A)'s order for AY 2011-12, which had partly allowed the assessee's appeal against disallowances made by the AO under Section 14A and for delayed ESI/club expenses. During the hearing, the assessee informed the Tribunal that a Corporate Insolvency Resolution Process (CIRP) had been instituted, and its resolution plan had been approved by the NCLT.
Held
The Tribunal condoned the 140-day delay in the Revenue's appeal. Citing various judicial precedents, it held that once a resolution plan under Section 31 of the IBC is approved, all pre-CIRP claims, including statutory dues not part of the plan, are extinguished, and IBC provisions override the Income Tax Act. Consequently, the Revenue's appeal was deemed infructuous and dismissed.
Key Issues
Whether a tax appeal by the Revenue becomes infructuous upon the approval of the assessee's resolution plan under the Insolvency and Bankruptcy Code (IBC), and if pre-CIRP tax claims not part of the plan are extinguished, given the overriding effect of IBC provisions.
Sections Cited
250, 14A, 148A, 148, 13(6), 31, 14, 238, 60(6), 178(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the Revenue is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2011-12 dated 21.07.2023. 1.1 The Registry has informed that the appeal is delayed, although the number of days of delay is not mentioned. However, along with the appeal memo, the Assessing Officer (“the Ld. AO”) has filed an application seeking condonation of delay. The reasons mentioned are that the ASR was submitted for approval of the PCIT for filing the appeal before the Tribunal but was submitted without record and the assessment order, the PCIT asking for clarification on the ASR, the ASR being re-submitted, necessary hard copies of documents/papers/details required to file the 2nd appeal being collected ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited. and prepared etc. It is further submitted that the appeal could not be filed on or before the due date due to huge workload relating to time barring assessments, penalties and writs filed by various assessees on the proceedings under section 148A of the Act. It is also mentioned that his charge was created by the merger of four circles and, therefore, the workload became unmanageable, creating huge backlog which had now somewhat normalised. Moreover, after merger, records were very difficult to trace out and the relevant record was found on 26/12/2023. Therefore, it has been requested to condone the delay of 140 days in filing appeal before the Tribunal for the sake of substantial justice. On going through the application, we are satisfied that the Revenue had sufficient and reasonable cause for the delay, the delay is condoned and the appeal is admitted for adjudication.
The Revenue is in appeal before the Tribunal raising the following grounds of appeal:
“1. Whether on the feats and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition of Rs 4,74,22,91l/- (3,94,98,436 +7924473) made u/s 14A of the Act read with Rule 8D of the Income Tax Rules, 1962. 2. Whether on the facts and circumstances of the case the CIT(A) was justified in deleting the addition of Rs 3,94,98,436/- made u/s 14A rw Rule 8D(2)(ii) on the ground that the assessee had own funds in the form of share capital and reserves without appreciating the fact that the real test for allowing relief is actual availability of interest free owned funds for making investments and not mere reserves.
Whether on the facts and circumstances of the case the CIT(A) was justified in deleting the addition of Rs 79,24,475/- made u/s 14A rw Rule 8D(2)(iii) and in directing to consider only the opening and closing value of investments which actually yielded dividend income for the purpose of computation of disallowance u/s 14A of the Act ignoring the Boards Circular and the newly inserted Explanation to Section 14A which has been incorporated to remove doubts. ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited.
That the appellant crave, leave to add to and/or alter, amend, modify or rescind the grounds herein above before or hearing of this appeal.”
Brief facts of the case are that the return declaring total income of ₹ 1,01,21,34,588/- was filed on 29.09.2011 and during assessment, the Assessing Officer (“the Ld. AO”) disallowed a sum of Rs 474.22 lakhs by invoking provisions of section 14A r/w rule 8D(2)(ii) and 8D(2)(iii), Rs 3.94 lakhs on account of delayed deposit of employee’s contribution to ESI and club expenses of Rs 0.23 lakhs as personal expenditure. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who partly allowed the appeal. Aggrieved with the order of the Ld. CIT(A), the Revenue has filed the appeal before the Tribunal.
Rival submissions were heard and the record and the submissions made have been examined. The Ld. AR, at the outset stated that Corporate Insolvency Resolution Process (CIRP) was instituted and moratorium was imposed earlier which had been informed earlier to the Tribunal. The resolution plan has since been approved and a copy of the order in I.A. (IB)(Plan) No. 16/KB/2025 in Company Petition (IB) N.369/KB/2020 dated 14.08.2025 was filed and reliance was placed upon Clauses 9.1, 9.26 9.33 of para 93 of the order of the NCLT, Division Bench (Special), Court No. II, Kolkata. It was therefore, submitted that the appeal of the Revenue has become infructuous. Reliance was also placed upon the order of the coordinate Bench in the case of M/s. Ultra Tech Nathdwara Cement Ltd. (Earlier known as M/s. Central Circle-XXVIII, Kolkata Now CC-2(2), Kolkata in ITA No. 1726/Kol/2014 order dated 28.05.2025. The Ld. DR relied upon the order of the Ld. AO and requested that the same may be upheld. ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited.
We have considered the submission made by the Ld. AR as well as the Ld. DR. It has been held in the case of Maruti Koatsu Cylinders Ltd. v. Deputy Commissioner of Income-tax [2024] 165 taxmann.com 332 (Gujarat) that when the NCLT has approved the application filed under section 13(6) of IBC, 2016 and resolution plan submitted by the applicant was approved, the Assessing Officer would not have any juri iction to reopen the assessment with regard to the assessment year 2019-20. [Para 6]
It has also been held in Asian Colour Coated Ispat Ltd. v. Asstt. Commissioner of Income-tax. [2024] 165 taxmann.com 641 (Delhi) as under:
Suffice it to observe that it is not the case of the respondents that the NCLT has been moved for the purposes of recall of its order according approval to the Resolution Plan. It is also not their case that the Resolution Plan insofar as it rings in a closure in respect of any claim or demand that may be said to exist in respect of the corporate debtor is liable to be set aside. In fact, the respondents do not appear to have questioned the validity of the Resolution Plan at any stage. We thus find ourselves unable to appreciate how the decision in Rainbow Papers could come to their aid.
Viewed in the aforesaid light, it is manifest that it is the view taken by this Court in M Tech Developers, Sree Metaliks and Rishi Ganga Power Corporation which would prevail and lead us to the inevitable conclusion that the reassessment action would not sustain.
We, accordingly, allow the instant writ petition and quash the impugned notice under Section 148 for A.Y. 2014-15 dated 31 March 2021. 7. In Uttam Value Steels Ltd. v. Assistant Commissioner of Income-tax [2024] 166 taxmann.com 493 (Bombay) it has also been held as under: ■ Even a plain reading of section 31(1) would show that once the NCLT approves the resolution plan, it would be binding on, among others, the Central Government and its agencies in respect of payment of any statutory dues arising under any law for the time being in force. It is now trite law that the effect of resolution of a ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited. corporate debtor is that the terms of resolution bind tax authorities and their enforcement actions – a position in law declared in numerous judgments of the Supreme Court. While it is not necessary to extract from a long line of decisions of the Supreme Court to note the effect of approval of the resolution plan under Section 31 of the IBC, as rightly pleaded by the Petitioner-corporate debtor the judgment in Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited (Ghanshyam Mishra) comprehensively summaries the import of various judgments on the point. [Para 12] ■ It is therefore crystal clear that once a resolution plan is duly approved under section 31(1), the debts as provided for in the resolution plan alone shall remain payable and such position shall be binding on, among others, the Central Government and various authorities, including tax authorities. All dues which are not part of the resolution plan would stand extinguished and no person would be entitled to initiate or continue any proceedings in respect of any claim for any such due. No proceedings in respect of any dues relating to the period prior to the approval of the resolution plan can be continued or initiated. [Para 15] ■ In this clear view of the matter, there can be no manner of doubt that the Impugned Proceedings initiated by the revenue and sought to be defended as if they relate to liabilities that somehow emerge after the CIRP, are wholly misconceived and untenable. The resolution plan, upon its approval, brought a quietus to all claims pursued or capable of being pursued by the revenue against the petitioner for any operation prior to the CIRP. The stance of the revenue in the reply affidavit, namely, that if the tax claim amount had not been crystallised, would be future dues and not past dues, is totally untenable. Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited 2021 SCC OnLine SC 313 makes it clear that the continuation of existing proceedings and the initiation of new proceedings, as they relate to operations prior to the CIRP, are totally prohibited after the approval of the resolution plan. Consequently, nothing would survive insofar as the Impugned Proceedings relate to the petitioner. [Para 16] ■ The Ghanshyam Mishra and Sons Private Limited (supra) squarely applies to the facts of the instant case, and necessitates quashing the Impugned Proceedings. Evidently and admittedly, the tax proceedings against the VJ Group pre-date the CIRP and no matter when the liabilities are purported to get crystallised, even if they are allowed to get crystallised, they would relate to the period prior to the approval of the resolution plan of the petitioner, and therefore stand extinguished. This is why the Supreme ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited. Court has clearly ruled that initiation and continuation of proceedings relating to the period prior to the approval of the resolution plan cannot be indulged in. Upon completion of the CIRP, the petitioner has completely changed hands and has begun on a clean slate under new ownership and management. [Para 18] {emphasis supplied}
Further, the Coordinate Bench of the Tribunal in the ITAT KOLKATA BENCH 'C' in the case of Kohinoor Steel (P.) Ltd. v. Income- tax Officer [2024] 159 taxmann.com 571 (Kolkata - Trib.) have also held as under: ■ It was observed that the operational creditor of assessee has filed the petition before the NCLT and as per the assessee's own case for its CRIP as per rule 4 of Insolvency & Bankruptcy Code (IBC), 2016 no proceedings can continue against the corporate debtor i.e. the assessee after the order of the NCLT. In view of this and drawing further force from the order of co-ordinate bench of Tribunal in the case of Palogix Infrastructure (P.) Ltd. v. Asstt. CIT [2022] 135 taxmann.com 73/193 ITD 329 (Kol. - Trib.) 2021 (10) TMI 1255-ITAT - KOLKATA, dated 27-10-2021 all the appeals before the Tribunal filed by the assessee is to be dismissed as infructuous. [Para 9] ■ It is pertinent to note that as per the provisions of section 14 of the IBC Code institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority shall be prohibited during the moratorium period. [Para 9.1] ■ Further, it is found that section 31 of the IBC relates to approval of the resolution plan and in terms of section 31(1) of the IBC on approval, the resolution plan becomes binding on corporate debtor and its employees, members, creditors including the Central Government, any State Government or any local authority to whom a debt in respect of payment of dues arising under any law for the time being in force. The Supreme Court in the matter of Ghanashyam Mishra & Sons (P.) Ltd. v. Edelweis Asset Reconstruction Co. Ltd. [2021] 126 taxmann.com 132/166 SCL 237 (SC) [2021] 9 SCC 657 has considered the scope of section 31 (1) of the IBC and has held that once the resolution plan is sanctioned under section 31(1) of the IBC, the claims provided in the plan will stand frozen and all such claims which are not part of the plan will stand extinguished. [Para 9.2] ■ The law is well settled that on the approval of the resolution plan in terms of section 31 of the IBC, the dues including the statutory dues of the Government or local authority, if not part of the ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited. resolution plan, gets extinguished and no proceedings in respect thereof for a period prior to the date of approval under section 31 would continue. The decision of the Calcutta High Court in West Bengal State Electricity Distribution Company Ltd. v. Sri Vasavi Industries Ltd. [2022] 143 taxmann.com 96/174 SCL 199 2022 (7) TMI 580 - CALCUTTA HIGH COURT makes it clear that any claim not made during the course of CIRP and before approval of resolution plan shall automatically be extinguished and the corporate debtor is deemed to start its operations with a clean slate after the resolution plan is approved. [Para 9.5] ■ The provisions of section 238 of the IBC 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. It has been consistently held by the Supreme Court that the IBC is a complete Code in itself and in view of the provisions of section 238 of the IBC, the provisions of the IBC would prevail notwithstanding anything inconsistent therewith contained in any other law for the time being in force. [Para 9.7] ■ As per section 31 of the Code, resolution plan as and when approved by the Adjudicating Authority shall be binding on the corporate debtor and its employees, members, creditors, guarantors, and other stakeholders involved in the resolution plan. Thus, this will prevent State authorities and Regulatory bodies including Direct & Indirect Tax Departments from questioning the resolution plan. Thus, in view of the above, no proceedings can be initiated against the corporate debtor, that is, assessee-company including income tax proceedings and recovery of demand or giving effect of any order. It is well settled now that IBC has an overriding effect on all the acts including Income-tax Act which has been specifically provided under section 178(6) as amended with effect from 1-11-2016. [Para 9.8] ■ A reading of the provisions under sections 13 and 14 of the Code along with the decision in Ghanashyam Mishra & Sons (supra), clearly shows that once the proceedings have commenced by institution of application under section 7 or 9 or 10 of the Code, the continuance of the pending proceedings is prohibited and when once they reach the logical conclusion with due approval of the resolution plan by the Adjudicating Authority under sub-section (1) of section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. At any rate, for the time being, this appeal cannot be proceeded with during the continuation of the ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited. proceedings under the Code. [Para 9.9] ■ However, depending upon the result of such proceedings before the adjudicating authority in respect of the corporate debtor, appropriate steps if any, may be taken by the assessee. Therefore, the leave is to be granted to the assessee to seek the restoration of the appeal, if necessitated by the orders in the CIRP. [Para 9.10] ■ The issue of limitation in filing fresh appeal, if need be, has already been dealt with by the Supreme Court in NDMC v. Minosha (India) Ltd. [2022] 138 taxmann.com 73/172 SCL 675/8 SCC 384 wherein on consideration of section 60(6) of the Insolvency and Bankruptcy Code, 2016, it was held that the entire moratorium period will be excluded in computing limitation in respect of proceedings at the hand of a corporate debtor. However, the Assessing Officer is at liberty to make an application for re-institution of the instant appeal if resolution process ends in IBC, 2016. Accordingly, the appeal of the assessee is to be dismissed as infructuous. [Para 9.11] {emphasis supplied}
Since the provisions of IBC override the provisions of the IT Act, 1961 and as is held in the judicial pronouncements cited above that the resolution applicant has to start on a clean slate and all litigations come to a stop, therefore, as is held in the decision of the Coordinate Bench in the case of Kohinoor Steel (P.) Ltd. (supra), the appeal of the Revenue cannot continue as only the claims which are made part of the resolution plan can be enforced. Hence, this appeal becomes infructuous and is hereby dismissed.
In the result, the appeal of the Revenue is dismissed as being infructuous. Order pronounced in the open Court on 31st December, 2025. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 31.12.2025 Bidhan (Sr. P.S.) ITA No.: 338/KOL/2024 Assessment Year: 2011-12 Hindusthan National Glass And Industrieslimited. Copy of the order forwarded to:
DCIT, Circle-5(1), Kolkata.
Hindusthan National Glass And Industrieslimited, 2, Red Cross Place, BBD Bagh, Kolkata, West Bengal, 700001. 3. CIT(A)-
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order