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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD
Before: SHRI RAMA KANTA PANDA & SHRI LALIET KUMAR
PER BENCH : Appeal in ITA No.1039/Hyd/2018 filed by the Revenue is directed against the order dated 12-02-2018 of the Ld.Commissioner of Income Tax (Appeals)-1, Guntur relating to the AY.2006-07. Appeal in ITA No.1963/Hyd/2018 filed by the Revenue is directed against the order dated 05-07-2018 of
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the CIT(Appeals)-Kurnool, relating to the AY.2009-10. Assessee has filed Cross-Objection No.41/Hyd/2018 against the appeal filed by the Revenue for the AY.2009-10. For the sake of convenience, both the appeals of Revenue and the Cross-Objection of the assessee were heard together and are being disposed-of by this common order.
ITA No.1039/Hyd/2018 (AY.2006-07):
Facts of the case, in brief, are that the assessee filed its return of income for the AY.2006-07, declaring loss of Rs.33,19,28,249/-, Short Term Capital Gains of Rs.3,48,886/- and Long Term Capital Gains of Rs.20,71,49,940/-. Finally, the assessee admitted net business loss of Rs.12,44,29,420/. The return was processed u/s.143(1) of the Income Tax Act, 1961 [Act]. Subsequently, the Assessing Officer re-opened the assessment u/s.147 of the Act on the ground that income chargeable to tax in the form of Long Term Capital Gains has escaped assessment. Accordingly, notice u/s. 148 of the Act was issued. In response to the same, the assessee submitted that the return already filed may be treated as return filed in response to notice u/s.148 of the Act. Subsequently, the Assessing officer issued statutory notices u/s.143(2) of the Act, to which the assessee filed requisite details from time to time. Thereafter, the Assessing Officer completed the assessment determining the total income of the assessee at Rs.74,58,05,465/-, wherein he determined the Long Term Capital Gains at Rs.107,69,25,428/-.
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Assessee filed appeal before the Ld.CIT(A), who deleted the addition made by the AO. Aggrieved by the order of the Ld.CIT(A) the Revenue is in appeal before the Tribunal by raising the following grounds:
“1. The order of the Learned CIT(Appeals) is bad both in law and on facts. 2. Whether the CIT(A) is right in deleting the addition made by the AO under the facts and circumstances of the case. 3. Whether the CIT(A) was right in ignoring the binding decision of the Andhra Pradesh High Court in the case of Potla Nageswara Rao Vs DCIT in ITTA No.245 of 2014 wherein it was held that payment of consideration on the date of agreement of sale is not required, it may be deferred to future date. The element of factual possession and agreement are contemplated as transfer and if transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into account for the purpose of assessment of income for the assessment of income for the assessment year when the agreement was entered into. 4. Whether the CIT(A) was right in not appreciating the fact that where the Joint Development Agreement is made with builder- It is deemed transfer under section 53A of Transfer of Property Act, Section 2(24) of IT Act applies and Transfer has taken place when limited/irrevocable power of attorney is given to developer and registration may be done subsequently. In this case, such GPA was entered into by the assessee in the AY 2006-07. Reliance is placed on the following judicial decisions: (a) Chaturbu] Dwarakadas Kapadia Vs C1T(Bom) 260 ITR 491 (b) Dyaneswar N Mulik Vs DCIT (ITAT Pune) 98 TTJ 179 (c) Rubab M Kazerani Vs JCIT (ITAT, Mum-TM) 91 ITD 429 (d) Jasbir Singh Sarkaria in RE(AAR) 294 ITR 196 5. Any other additional ground that may be urged at the time of appeal hearing”.
Ld.Counsel for the assessee, at the outset, submitted that Corporate Insolvency Resolution process took place and the NCLT, Amaravati Bench vide order dt.25-06-2021 accepted
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the resolution plan dt.19-05-2021 submitted jointly by one M/s.RV Consulting Services Pvt. Limited and Sagar Power Limited, who happened to be the resolution applicants. The NCLT, Amaravati Bench observed that as against the claim of government dues to the tune of Rs.189.91 Crores, a sum of Rs.159.37 Crores was admitted, but only a sum of Rs.0.22 Crores was provided and upon this acceptance of the resolution plan dt.19-05-2021, all crystalised as well as the un-claimed liabilities of the corporate debtor (the assessee) as on such date stood extinguished and no creditors of the erstwhile corporate debtor can claim anything other than the liabilities referred to in the plan. Referring to the order of the Tribunal in assessee’s own case in ITA Nos.562 & 563/Hyd/2018, dt.25-04-2022 for the AYs.2008-09 & 2013- 14, copy of which is placed at Pg.43 to 47 of the paper book, he submitted that the Tribunal has decided identical issue and has held that Revenue is bound by the resolution plan accepted by the NCLT and not entitled to anything more than what is provided therein. He accordingly submitted that facts being similar, the order of the Tribunal should be followed and similar direction should be given.
Ld.DR, on the other hand, supported the order of the Assessing Officer.
We have heard the rival contentions made by both the sides, perused the orders of the AO and Ld.CIT(A) and the paper book filed on behalf of the assessee. We find identical issue had come up before the Co-ordinate Bench of the
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Tribunal in assessee’s own case for AYs.2008-09 & 2013-14. We find the Tribunal vide ITA Nos.562 & 563/Hyd/2018 order dt.25-04-2022 while deciding the issue has observed as under:
At the outset, when the matter is called today, counsel on either side submitted that in the case of assessee, the Corporate Insolvency Resolution Process took placed and the Hon'ble National Company Law Tribunal, Amaravati Bench (NCLT) by order dt.25/06/2021 accepted the resolution plan dt.19/05/2021 submitted jointly by one M/s.RV Consulting Services Pvt Limited and Sagar Power Limited, who happened to be the resolution applicants, and observed that as against the claim of the Government to the tune of Rs.189.91 Crores, a sum of Rs.159.37 Crores was admitted, but only a sum of Rs.0.22 Crores was provided and upon this acceptance of the resolution plan dt.19/05/2021 all crystalised as well as the un-claimed liabilities of the corporate debtor (the assessee) as on such date stood extinguished and no creditors of the erstwhile corporate debtor can claim anything other than the liabilities referred to in the plan. A copy of the order dt.25/06/2021 passed by the NCLT in MA No.04/2021 in CP No.(IB)187/7/AMR/2019 is filed and forms part of record. 3. Both the counsel submitted that in view of the decision of the Hon'ble Supreme Court in the case of Ghanashyam Mishra and Sons Vs. Edelweiss Asset Reconstruction (2021) 126 taxmann.com 132 (SC), once a resolution plan is duly approved 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, that on the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; that the 2019 amendment to Section 31 of the Insolvency and Bankruptcy Code is clarificatory and declaratory in nature and, therefore, will be effective from the date on which I&B Code has come into effect; and that consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. 4. We have gone through the record in the light of the submissions made on either side. It could be seen from the Form-B filed by the Revenue before the Insolvency Resolution Professional on 03/07/2020 (a copy of which forms part of record), Revenue preferred a claim to the tune of Rs.5,92,88,707/- before the Insolvency Resolution Professional basing on the demand notice/competition sheet
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and outstanding demand taken as on 03/07/2020, such a claim was considered by the committee of creditors and ultimately resulted in allocation of a sum of Rs.0.22 Crores to the Government vide Sr.No.3(b)(i) of paragraph No.3(C) of the order dt.25/06/2021 passed by the NCLT. Apart from this, the NCLT categorically observed vide paragraph Nos. 18 and 20 that under the Insolvency and Bankruptcy Code, 2016 that all crystalized liabilities and unclaimed liabilities of the Corporate Debtor as on the date of this order shall stand extinguished on the approval of the Resolution Plan and no creditors of the erstwhile Corporate Debtor can claim anything other than the liabilities referred to in para 3(C) to para 5. 5. Further, the Hon'ble Supreme Court in the case of Ghanashyam Mishra and Sons Vs. Edelweiss Asset Reconstruction (2021) 126 taxmann.com 132 (SC) observed that - ….once a resolution plan is duly approved 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. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; (ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect; and (iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. In view of the above factual and legal position, we are of the considered opinion that the Revenue is also bound by the Resolution plan as accepted by the NCLT and not entitled to anything more than what is provided therein. It is submitted across the Bar by the Ld.AR that the Revenue did not prefer any appeal against the order passed by the NCLT. Amount provided under the resolution plan is only Rs.22 Lakhs as against the claim of the Revenue to the tune of Rs.5.93 Crores and therefore, the assessee cannot have any grievance in disposing-of these appeals in tune with the orders of the NCLT. Appeals are disposed-of accordingly.
6.1. Respectfully following the order of the Tribunal in assessee’s own case, we hold that the Revenue is bound by the resolution plan as accepted by the NCLT and not entitled to anything more than what is provided therein. We find the
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amount provided under the resolution plan is only Rs.22 Lakhs as against the claim of the Revenue to the tune of Rs.189.91 Crores. Therefore, the assessee or Revenue cannot have any grievance in disposing of these appeals in tune with the orders of the NCLT. This appeal is disposed-of accordingly.
In the result, appeal of Revenue in ITA No.1039/Hyd/2018 (AY.2006-07) is partly allowed.
ITA No.1963/Hyd/2018 (AY.2009-10): C.O.No.41/Hyd/2018 (AY.2009-10):
After hearing both the sides, we find the grounds raised by Revenue are as under:
“1. The order of the Ld CIT(Appeals) is bad both on facts and in law. 2. Whether, on the facts and in circumstances of the case the Ld.CIT(A) is correct in granting legal relief by holding that the assessment is invalid as it is done following the directions of Tribunal as per Section 150(1) as held by the Hon'ble Supreme Court in the case of Rajindernath Vs CIT 120 ITR 14. It was held by the Supreme Court that: "A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding it must be directly involved in the disposal of the case" The finding of the Long Term Capital Gains is taxable in A.V 2009-10 is essential for disposal of appeal for A.V 2008-09, in the case of the assessee, hence it constitutes a finding. 3. The Ld.CIT(A) also failed to appreciate the Hon'ble High Court of Calcutta in the case of Glass Equipment (India) Ltd (47 taxmann.com 138) whicb after considering the Supreme Court decision in the case of Rajinder Nath Vs CIT 120 ITR 14 held that even where there is no express finding or direction, then also re-assessment is valid in view of the Explanation 2 of Section 153(3) of I.T Act.
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Similar views were expressed by the farrowing Hon'ble High Court on this issue: i. Addl.CIT Vs Kamlapat Moti Lal [1977] 110 ITR 769 (All) and affirmed by Apex Court in Kamlapat Moti Lal Vs Addl.CIT [1992] 193 ITR 338. ii. Mysore Tobacco Co.Ltd Vs C1T [1986] 157 ITR 606/ [1987] 30 Taxmann 675 (Kar) iii.Ambaji Traders(P) Ltd vs ITO[1976] 05 ITR 273 [Bom)
The Ld.CIT(A) failed to appreciate the decision of Hon'ble High Court of Andhra Pradesh & Telangana which is jurisdictional High Court in the case of Abdul Rahaman Saheb (B.A.R) Vs ITO [1975] 100 ITR 541 wherein it was held that: "Thus, on a careful reading of Explanation Z to subsection (3) of section 153, it is evident that the mere exclusion of an income from an assessment year by a higher authority in a proceeding before it, gives jurisdiction to the Income Tax Officer to assess or reassess that excluded income in a different assessment year, and, in such a case, under Explanation 2 to Section 153(3), it will be deemed to have been made in consequence of or to give effect to a finding or direction contained in the said order. If there is no finding or direction in the order of a higher authority, then Explanation 2 to Section 153(3) of the Act will apply. On the other hand, if there is a finding or direction, the case would fall under section 153(3)(ii)· In this case, the Hon'ble ITAT excluded the long term capital gains from A.Y.2008-09 thereby giving jurisdiction to the AO to reassess the same in AY 2009-10, where it should have been taxed as held by the Hon'ble’ ITAT.
Whether, on the facts and in circumstances of the case, the ld.ClT(A) is correct in allowing the appeal of the assessee following the decision of Hon'ble ITAT, Hyderabad in the case of M/s Sujana Metal Products Ltd in ITA No.1068 & 1069/Hyd/2010 dtd 21.04.2011 and in treating the issue of notice u/s 148 as bad in law. 6. Any other additional ground that may be urged at the time of appeal hearing”.
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8.1. Grounds raised by assessee in C.O.No.41/Hyd/2018 are as under:
“1. The order of the CIT(A) is factually and legally valid not only in law but also in the facts and circumstances of the case. 2. The order of the CIT(A) is legally valid in holding that mere observation or passing remark of Hon'ble ITAT cannot be treated as direction for the purposes of section 149 r.w.s 150(1) & 150(2) of the Act as held by Apex court in Rajinder Nath vs. CIT 120 ITR 14 (SC) which was followed by ITAT in [2016] 179 TTJ (Chennai) (TM) 393 Emgeeyar Pictures P Ltd vs DCIT and by jurisdictional tribunal in ITA No. 554/Hyd/2017 for AY 2005-06 dated 13.09.2017 in the case R Venkataramaiah v ACIT. 3. The Hon'ble ITAT no where any express finding or direction or even observation that the capital gains be assessed in AY 2009-10 and merely stated that no willingness to perform until AY 2009-10 which cannot be by any stretch of imagination be construed as finding or direction to assess in AY 2009-10 and hence the order of Ld. CIT(A) is legally justified. 4. For these and other reasons that may be urged at the time of hearing, prays the Hon'ble ITAT that departmental appeal shall be dismissed”.
After hearing both the sides, we find the Corporate Insolvency Resolution process has taken place and the NCLT, Amaravati Bench vide order dt.25-06-2021 accepted the resolution plan dt.19-05-2021 submitted by the resolution professional. Since we have already decided identical issue while deciding the appeal for AY.2006-07 vide ITA No.1039/Hyd/2018 in the preceding paragraphs, therefore following similar reasoning, we hold that the Revenue as well as the assessee are bound by the resolution plan accepted by the NCLT and Revenue is not entitled to anything more than what is provided therein. Accordingly, the appeal filed by the
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Revenue for the AY.2009-10 is partly allowed and the Cross Objections filed by the assessee is dismissed.
In the result, both the appeals by the Revenue are partly allowed and the C.O. filed by the assessee is dismissed.
Order pronounced in the open court on 4th July, 2022
Sd/- Sd/- ( LALIET KUMAR ) ( RAMA KANTA PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 04-07-2022 TNMM
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Copy to : 1.Asst.Commissioner of Income Tax, Circle-1, Kurnool. 2.M/s.Panyam Cements & Mineral Industries Limited, C-1, Industrial Estate, Bommalasatram, Nandyal. 3.CIT(Appeals)-1, Guntur. 4.CIT(Appeals)-Kurnool. 5.Pr.CIT-Kurnool. 6 6.D.R. ITAT, Hyderabad. 7.Guard File.