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Facts
A search and seizure operation was conducted on the assessee, leading to initiation of assessment proceedings u/s 153A. The assessee company approached NCLT under IBC, and a Resolution Plan was approved, settling all operational creditors' dues including Income Tax Department's claim for Rs. 5 crores, thereby extinguishing past liabilities. Despite this, the AO passed assessment orders u/s 153A, which the CIT(A) subsequently quashed.
Held
The Tribunal found that the Revenue had participated in and accepted the Resolution Plan before the NCLT, which approved the plan, extinguishing all outstanding liabilities. Therefore, the CIT(A) was justified in quashing the assessment orders. The Tribunal upheld the CIT(A)'s decision to dismiss the Revenue's application u/s 154.
Key Issues
Whether the CIT(A) was justified in quashing the assessment orders based on an NCLT-approved Resolution Plan which extinguished tax liabilities, and whether the CIT(A) correctly dismissed the Revenue's application u/s 154 for recall of its order.
Sections Cited
132, 153A, 30(6), 143(3), 154
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Income Tax Appellate Tribunal, “ A ” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Smt. Annapurna Gupta
"ी संजय गग", "ाियक सद" एवं "ीमित अ"पूण" गु"ा, लेखा सद" के सम&। ] ] Before Shri Sanjay Garg, Judicial Member And Smt. Annapurna Gupta, Accountant Member आयकर अपील सं / Year : 2019-20 The DCIT Diamond Power Infrastructure बनाम/ Central Circle-3 Ltd. v/s. Vadodara – 390 007 5/9-10, Essen House BIDC Gorwa Vadodara – 390 016 "थायी लेखा सं./PAN:AAACD 8043 K (अपीलाथ)/ Appellant) (*+ यथ)/ Respondent) Assessee by : Shri S.N. Soparkar, Sr.Advocate Revenue by : Shri B.P. Srivastava, Sr.DR सुनवाई की तारीख/Date of Hearing : 28/07/2025 घोषणा की तारीख /Date of Pronouncement: 29/07/2025 आदेश/O R D E R Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad [hereinafter referred to as ‘the CIT(A)’] dated 07/01/2025 passed for Assessment Year (AY) 2019-20. 2. There is a delay of 23 days in filing the appeal. An application for condonation of delay has been filed by the Department. Dy.CIT, CC-3 vs. Diamond Power Infrastructure Ltd. Asst. Year : 2019-20
The Ld.Sr.Counsel of the assessee has pleaded no objection to the condonation of delay. Accordingly, the delay in filing the present appeal is hereby condoned.
The Revenue, in this appeal, is aggrieved by the action of the Ld.CIT(A) in dismissing the application passed u/s.154 of the Act, for recalling the order No.CIT(A)/Ahdmedabad-12/10674/2018-19, dated 28/07/2022, whereby the Ld.CIT(A) quashed the assessment order passed by the AO u/s.143(3) of the Act.
The brief facts of the case are that a search a seizure operation was conducted u/s.132 of the Act by the Investigation Wing in the case of the assessee on 10/04/2018. Consequent to that, the assessment proceedings in respect of six assessment years were initiated u/s.153A of the Act. In the meantime, the assessee-company approached the `NCLT under section 30(6) of the Insolvency & Bankruptcy Code, 2016. The Department approached the NCLT and requested that, in this case, the Department may be permitted to complete the assessment for different assessment years u/s.153A of the Act, and the permission was granted. However, before the completion of the assessments u/s.153A of the Act, the Resolution Plan submitted by the Interim Resolution Professional was approved and, consequently, the application of the assessee was allowed by the NCLT. Under the Plan, the total dues of all operational creditors including Income-tax Department were proposed to settled at Rs.5 crores. Consequent to the order of the NCLT, all other past claims of the creditors stand extinguished. However, the Assessing Officer, passed the assessment orders u/s.153A of the Act, and Dy.CIT, CC-3 vs. Diamond Power Infrastructure Ltd. Asst. Year : 2019-20 made certain additions to the income of the assessee. The assessee, however, preferred appeals before the CIT(A).
The Ld.CIT(A) considering the aforesaid order of the NCLT, quashed the assessment orders passed u/s.153A of the Act. The Revenue in relation to Assessment Years 2013-14 to 2018-19 vide IT(SS) A Nos.54 to 59/Ahd/2023 filed appeals before the Tribunal against the order of the CIT(A) quashing the assessment orders in view of the order of the NCLT. The Tribunal vide consolidated order dated 04/07/2024 held that since the Resolution Plan had been accepted by the Revenue before the NCLT and thereafter the order of the NCLT was passed, therefore, there was no infirmity in the order of the NCLT quashing the impugned assessment orders. The relevant portion of the order of Tribunasl is reproduced hereunder:
“8. We have heard both the parties and perused all the relevant material available on record. Since the Resolution plan has been accepted by the Revenue after approval of the same in 20.06.2022 as the Department represented their stand on 22.02.2022 before the NCLT it becomes categorically clear that overriding effect of Insolvency and Bankruptcy, 2016 will prevail over other Statutory Acts and, therefore, the decision taken by the CIT(A) is just and proper as per law of the land. In fact, the Revenue as well as the assessee are at this juncture bound by the Resolution Plan accepted by the NCLT after hearing and giving opportunity to all the parties including Income Tax Department cannot contest the statutory liabilities before the Income Tax Appellate Tribunal at this juncture. Thus, all the appeals filed by the Revenue are dismissed.“
So far as the assessment year under consideration is concerned, the Revenue moved an application before the Ld.CIT(A) u/s.154 of the Act for recalling the order on identical grounds, which application of the Revenue was dismissed by the Ld.CIT(A). Thus, the Revenue is in appeal before us by raising following grounds of appeal: Dy.CIT, CC-3 vs. Diamond Power Infrastructure Ltd. Asst. Year : 2019-20 “1) On the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred in rejecting the application u/s 154 of the IT. Act against the order no. CIT(A)/Ahmedabad-12/10674/2018-19 dated 28/07/2022 quashing the assessment order passed u/s 143(3) of the Act without appreciating the facts that the Hon'ble National Company Law Tribunal (NCLT), Ahmedabad vide its order no. IA No. 672 of 2019 in C.P. (I.B.) No. 137/NCLT/AHM/2018 dated 27.05.2020 allowed permission to the Department to continue the assessment proceedings for A.Y. 2013- 14 to 2019-20 in the case of the assessee company and also directed the Resolution Professional to extend his full cooperation to the Department in their assessment of tax of the Respondent assessee Company 2) On the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred in rejecting the application u/s 154 of the I.T. Act against the order no. CIT(A)/Ahmedabad-12/10674/2018-19 dated 28/07/2022 quashing the assessment order passed u/s 143(3) of the Act in view of the order of the NCLT approving the "Resolution Plan" submitted by GSEC Ltd in consortium with Shri Rakesh Shah under the IBC, 2016 without appreciating the facts that even after its own permission to carry the assessment proceedings, the Hon. NCLT passed the order before finalizing the assessment proceedings u/s 153A of the I.T. Ac t, for A.Y. 2013-14 to 2019-20 and therefore, without considering the claim of the Department.
3) On the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred in rejecting the application u/s 154 of the I.T. Act against the order no. CIT(A)/Ahmedabad-12/10674/2018-19 dated 28/07/2022 quashing the assessment order passed u/s 143(3) of the Act in view of the order of the NCLT approving the "Resolution Plan" submitted by GSEC Ltd in consortium with Shri Rakesh Shah under the IBC, 2016 without appreciating the fact that the Hon'ble NCLT grossly erred in not allowing an opportunity of being heard to the Department if the Hon'ble Tribunal was to pass the order prior to the finalization of the assessments in the case of the assessee.
4) On the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred in rejecting the application u/s 154 of the I.T. Act against the order no.CIT(A)/Ahmedabad-12/10674/2018-19 dated 28/07/2022 quashing the assessment order passed u/s 143(3) of the Act without appreciating the facts that the assessment order so passed could not be termed as bad in law especially when they were passed in accordance with law and with express permission of the NCLT, where is department was allowed to continue the assessment proceedings for A.Y. 2019-20 in the case of the assessee company and also directed the Resolution Professional to extend his full cooperation to the Department in their assessment of tax of the Respondent assessee Company 5) On the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred in rejecting the application u/s 154 of the I.T. Act against the order no. Dy.CIT, CC-3 vs. Diamond Power Infrastructure Ltd. Asst. Year : 2019-20 5 CIT(A)/Ahmedabad-12/10674/2018-19 dated 28/07/2022 quashing the assessment order passed u/s 143(3) of the Act in view of the order of the NCLT dated 20.06.2022 which was passed without considering the fact that the assessment proceedings for the year under consideration was underway as allowed by the Hon'ble NCLT and subsequently Assessment Orders have been passed on 01.07.2022, and thereby without considering such huge liability on the assessee.
6) On the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred rejecting the application u/s 154 of the I.T. Act against the order no. CIT(A)/Ahmedabad-12/10674/2018-19 dated 28/07/2022 quashing the assessment order passed u/s 143(3) of the Act in view of the order of the NCLT approving the "Resolution Plan" submitted by GSEC Ltd in consortium with Shri Rakesh Shah under the IBC, 2016 without appreciating the facts enumerated in judgment of the Hon'ble Supreme Court in the case of State Tax Officer Vs. Rainbow Papers Limited in its order dated 06.09.2022, wherein the Hon'ble Supreme Court held that if the Resolution Plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the Adjudicating Authority is bound to reject the Resolution Plan.
7) It is, therefore, prayed that the order of the Ld. CIT (A) may be set aside and that the AO may be restored to the above extent.”
We have heard the rival submissions and gone through the record. This issue is squarely covered in the case of the assessee by consolidated order of the Tribunal dated 04/07/204 in relation to other assessment years. The Ld.CIT(A) after considering the facts on the file has observed that though the assessment for the assessment year under consideration were pending before the passing of the order of the NCLT, however, the Revenue duly participated in the proceedings before the NCLT and also accepted Resolution Plan and thereafter the NCLT approved the plan vide order dated 20/06/2022. Consequently, all the liabilities outstanding against the assessee stand extinguished, therefore no useful purpose will be served by continuing assessment proceedings against the assessee and, therefore, the Ld.CIT(A) was justified in quashing the assessment order consequent to the approval of Dy.CIT, CC-3 vs. Diamond Power Infrastructure Ltd. Asst. Year : 2019-20 the Resolution Plant by the NCLT. We, therefore, do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld.