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Facts
The assessee filed two appeals against additions made by the CIT(A) related to unexplained share application money (Section 68) and alleged bogus purchases (Section 69C), and reassessment under Section 147 of the Income Tax Act. During the hearing, it was revealed that the assessee company was undergoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016, and a moratorium under Section 14 of the IBC was in effect.
Held
The Tribunal, relying on various judicial pronouncements, including those of the Supreme Court, held that once CIRP has commenced and a moratorium is in place under Section 14 of the IBC, all proceedings against the corporate debtor, including income tax proceedings, become infructuous. The IBC has an overriding effect on other laws, and any claims not part of an approved resolution plan are extinguished, allowing the corporate debtor to start with a "clean slate". Thus, the appeals were dismissed as infructuous, with liberty for the assessee to revive them if the resolution process fails.
Key Issues
Whether appeals against income tax additions (under Section 68, Section 69C, and reassessment under Section 147 of the Income Tax Act) can continue when the assessee company is undergoing Corporate Insolvency Resolution Process (CIRP) and a moratorium is in effect under the Insolvency and Bankruptcy Code, 2016.
Sections Cited
68, 147, 143, 148, 69A, 69C, 142, 250, 178, IBC 9, IBC 14, IBC 31, IBC 238, IBC 60, Companies Act 433
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
These two appeals filed by the assessee are against the separate orders of the Commissioner of Income Tax (Appeals)-21, Kolkata [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 2012-13 dated 31.03.2022, which have been passed against the assessment orders u/s 143(3) and 147/143(3) of the Act, dated 29.03.2015 and 24.12.2019, respectively. Since both the appeals were heard together, they are being decided vide this common order for the sake of convenience and brevity.
The assessee is in appeal before the Tribunal raising the following grounds of appeal: I. ITA No. 292/KOL/2022: I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. “1. That, on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in upholding the addition of Rs.35 crores u/s.68 of the Act on account of share application money received from four promoter group companies and two non-promoter group companies solely on the ground of the appellant's alleged failure to establish the genuineness of transaction, although he did not dispute the identity and creditworthiness of those share investors.
That, the Ld. CIT(A) purely on suspicion has upheld the treatment of share application money of Rs.35 crores as unexplained cash credit u/s 68 of the Act on the alleged ground that the assessee could not establish with evidence the unreasonable action on the part of the A.O. when he himself admitted that issue of 1.75 crores equity shares on preferential basis approved by the Board's Resolution was supported by postal ballot notice, Forms-2 & 5 filed with ROC and the names, address, PAN, networth of each of the investors were filed.
That, the Ld. CIT(A) while upholding the addition u/s - 68 of the Act erred in not having admitted the evidences filed before him in support of the allotment of shares for want of any rationale in spite of the fact that as per Rule 46A(4) of the Rules, he should have exercised his power to admit the additional evidence filed before him for purposeful and effective adjudication of the dispute in appeal and hence the order passed in violation of principle of natural justice is liable to be quashed.
That, the Ld. CIT(A) further erred in upholding the addition of Rs.35 crores u/s.68 of the Act alleging reluctance of the assessee or the parties involved to give or cause to give a personal attendance before him or the A.O. when the basic documents were already on record to hold that the share application moneys received by the appellant against issuance of shares were genuine and hence mere failure to appear before him cannot be the basis to make addition u/s.68 of the Act.
That, the Ld. revenue authorities without bringing any cogent material that the money belonged to the appellant has invoked provisions of sec.68 and made addition of Rs.35 crores in spite of the fact that all the three conditions as laid down in sec.68 of the Act have been fully satisfied in this case.
That, as the order of Ld. CIT(A) on the above issues suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for.
That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.” I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. II. ITA No. 293/KOL/2022:
“1. That, on the facts and circumstances of the case, the Ld. C.I.T.(A) has erred in law in having upheld the reassessment order passed u/s 143(3) r.w.s. 147 of the Act dated 24.12.2019 in spite of the fact that the reopening u/s 147 of the Act was based on change of opinion and hence not sustainable in law, inasmuch as on the same set of facts and documents, the assessment was completed u/s 143(3) on 29.03.2015 and the notice u/s. 148 was not based on any new material or evidence which had come on record.
That, the Ld. C.I.T.(A) further erred in having upheld the reassessment proceeding initiated on the basis of some inputs received from the Investigation Wing alleging bogus purchase and sale by the assessee through shell entities in spite of the fact that entire details of purchases and sales from the parties through banking channel were also supported by respective books of accounts, ledgers, bank statements, invoices etc. and the transactions were also recorded in the assessee's audited books, leaving no scope of escapement of income.
That, the Ld. C.I.T.(A) further erred in not holding that the reassessment order passed u/s 147/143(3) of the Act without meeting the valid objections raised against the reasons recorded was contrary to binding principle of law as decided in the case of GKN Driveshafts (India) Ltd., 259 ITR 19 (SC) and that being so the arbitrary and uncalled for additions of Rs.56,86,08,759/- and Rs.32,85,37,970/- respectively u/s 68 and 69A of the Act made in such an invalid assessment are liable to be deleted.
That, the Ld. CIT(A) further erred in having upheld the addition of Rs.56,86,08,759/- as unexplained cash credit u/s 68 of the Act alleging bogus sales made to Pahadi Steel P. Ltd. (Rs.1,91,83,840), Baykuntha Sales Corpn. (Rs.53,15,63,350) and Baba Steel Corpn. (Rs.1,78,61,569) in spite of the fact that the appellant-company being a manufacturer of ferro alloys, iron & steel products had sold various items in its normal course of business to those parties and the same were duly supported by proper bills/vouchers and audited accounts of both the assessee and the parties.
That, the Ld. CIT(A) also erred and committed a mistake apparent 5. from the record in having taken the sales made to Baykuntha Sales Corpn. at an erroneous figure of Rs.53, 15,63,350/-, whereas as per audited books and bills the actual sales made to the said party was to the tune of Rs.15,07,40,226/- and the same was brought to the notice of the Ld. C.I.T.(A).
That, the Ld. revenue authorities being prejudiced by the report of the Investigation Wing and without considering the details of purchases made, I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. bank statement, audited accounts etc. filed before them erred in having treated the purchase of Manganese Ore from Lake Trading Pvt. Ltd. of Rs.32,85,37,970/- as not genuine and disallowed u/s 69C of the Act only on the supposition that the pattern of transactions found in the bank account of the said party suggested that the transactions were not meant for any genuine purposes.
That the Ld. C.I.T.(A) further erred in upholding the disallowance of Rs.32,85,37,970/- u/s 69C of the Act without considering that sec. 69C applies only to unexplained expenditure and admittedly in this case the payments against purchases were made from the assessee's bank account, source of such payment was fully explained and hence such authentic business expenditure cannot be treated as unexplained.
That, as the order of Ld. CIT(A) on the above issues suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for.
That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.”
Brief facts of the case are that the assessee filed its return of income for the AY 2012-13 on 29.09.2012 showing total income of ₹1,44,86,170/-. The case was selected for scrutiny and a notice u/s 143(2) of the Act was issued and served upon the assessee. The notices u/s 142(1) of the Act along with questionnaire were also issued. In response to the notices, the assessee filed various details, documents and explanations which were examined on a test check basis. The Assessing Officer (hereinafter referred to as Ld. 'AO') noticed that during the year the assessee company had received share application money from the followings: Sr.No. Name of the applicants Amount received in Rs.
M/s AparajitaVanijya Pvt Ltd. 4,00,00,000/-
M/s Cube Fintex Pvt Ltd. 3,00,00,000/-
M/s Invesco Finance Pvt Ltd. 8,05,00,000/-
M/s Poddar Mech tech services Pvt ltd. 10,00,00,000/-
M/s Suanvi trading and investment Co Pvt Ltd. 5,40,00,000/-
M/s Vasupujya Enterprises Pvt Ltd. 4,55,00,000/- Total- 35,00,00,000/- I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd.
The Ld. AO found that the assessee company had entered into a sham transaction with the investors to introduce its unaccounted income in form of share application/allotment and did not have any regular business transaction or regular acquaintance with the investor. The investor had no reason to invest such huge amount in the business of the assessee. Moreover, the investor had no business transaction with the assessee company in the past except this one-time entry and also, the assessee was unable to prove that the investor company was a group company with proper evidence. Hence, the Ld. AO added the entire share application/allotment money to the total income of the assessee as undisclosed cash credits u/s 68 of the Act and also added a sum of ₹9,89,506/- as share issue expenses deducted by the assessee company. The Ld. AO assessed the total income of the assessee at ₹36,54,75,680/- u/s 143(3) of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who examined the entire material on record, the impugned assessment order, the assessee’s submission, the remand report and also the proceedings in which the appeal had been filed u/s 147 of the Act. The Ld. CIT(A) has discussed several judicial pronouncements and dismissed the appeal of the assessee vide order dated 31.03.2022. 5. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
None appeared on behalf of the assessee; therefore, the case was heard with the assistance of the Ld. DR. It was submitted by the Ld. DR that in this case, the NCLT has passed an order and the Interim Resolution Professional has also been appointed. A copy of the order of the NCLT was also filed earlier for the CIRP process started on I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. 02.05.2024. A perusal of para 8(b) at page 14 of the order in TP 17/KB/2022 in the matter of Auroma Coke Limited vs. Impex Ferro Tech Pvt. Ltd. order dated 02.05.2024 which is in the context of the petition filed u/s 9 of the Insolvency and Bankruptcy Code, 2016 and section 433(e)/433(f) of the Companies Act, 1956 shows that the Corporate Insolvency Resolution Process (CIRP) had been initiated on the petition filed u/s 9 of IBC, 2016 by Auroma Coke Limited and as per para 8(b), it has been ordered that there shall be a moratorium u/s 14 of the IBC. Since in this case, the petition u/s 9 of IBC, 2016 has been admitted and the CIRP has commenced and moratorium u/s 14 of the IBC, 2016 has been enforced, therefore, the appeal before the Tribunal becomes infructuous.
In a similar case, the Coordinate Bench of the Tribunal of the ITAT, Kolkata 'C' Bench 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 CIRP 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 I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. 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 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 I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. 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 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 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 appeals of the Revenue or the assessee cannot continue as only the claims which are I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. made part of the resolution plan can be enforced. Hence, both these appeals become infructuous and are hereby dismissed. In the event of the resolution plan not being accepted at any stage or being rejected for any reason, the assessee shall be at liberty to get the appeals revived before the Tribunal by filing an appropriate application within the limitation permissible.
In the result, both the appeals filed by the assessee are dismissed as infructuous. Order pronounced in the open Court on 8th September, 2025. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 08.09.2025 Bidhan (Sr. P.S.) I.T.A. Nos.: 292 & 293/KOL/2022 Assessment Year: 2012-13 M/s. Impex Ferro Tech Ltd. Copy of the order forwarded to:
M/s. Impex Ferro Tech Ltd., 35, Chittaranjan Avenue, 4th Floor, Kolkata, West Bengal, 700012. 2. DCIT, Cir.-3(1), Kolkata.
CIT(A)-21, Kolkata.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order