THE ACIT.,MEHSANA CIRCLE,, MEHSANA vs. M/S. B & C ENERGY INFRA PVT.LTD., AHMEDABAD

The Department has taken the following grounds of appeal:-

The Assessee has taken the following grounds of appeal:-

The brief facts of the case are that assessment order under Section 143(3) of the Act was passed on 01.12.2017 and demand of Rs. 1,94,40,450/- was raised on the assessee. The assessee, aggrieved by the order of the Assessing Officer, filed an appeal before Ld. CIT(A) who gave substantial relief to the assessee and after giving appeal effect, the demand was reduced ACIT vs. M/s. B&C Energy Infra Pvt. Ltd. and B&C Energy Infra Pvt. Ltd. vs. DCIT Asst. Year –2015-16 - 3– to Rs. 37,25,740/-, which as per Department is still pending. Further, as per the Department the assessee is also liable to pay interest on outstanding demand under Section 220(2) of the Act which comes to Rs. 25,33,503/-. Therefore, as per the Department the total outstanding demand is of Rs. 62,59,243/-. Further, penalty proceedings under Section 271(1)(c) of the Act have also been initiated against the assessee, which are pending adjudication. The contention of the Ld. Counsel for the assessee is that since the Income Tax Department has not made any claim before NCLT though it got adequate opportunity of representation, no further demand is liable to be paid by the assessee. Before us, the Counsel for the assessee submitted that the Resolution Plan of the assessee has been approved by NCLT vide it’s order dated 06.02.2023 copy of which was placed before us at Page No. 1 to 45 of the Paper Book. The Contention of the Counsel for the assessee was that the Income Tax Department has not made any claim before NCLT and therefore, after approval of the Resolution Plan by NCLT, the Department’s appeal could not be proceeded with and is liable to be dismissed. In this regard, the Counsel for the assessee drew our attention to relevant pages of the order of NCLT at Page No. 59-60 of the Paper Book, containing the list of claims received by NCLT in response to the public announcement. The Counsel for the assessee submitted that the claim of the Income Tax Department was not listed therein. The Counsel for the assessee also referred to Pages 12-15 of the Paper Book and pointed out that in the list of claim of creditors admitted in the Resolution Plan, it did not include any claim of the Income Tax Department. Accordingly, no demand is liable to be paid by the assessee and all income tax demands against the assessee stands extinguished.

Thence, the short question before us is as to whether the respondent/revenue can justifiably claim and recover from the petitioners any amount of money towards income tax that accrued prior to approval of Resolution Plan under section 31 of the Code.

In the case of Ghanshyam Mishra & Sons (P.) Ltd. (supra), relied upon by the petitioner/assessee, it was held by the Supreme Court as under: "94. We have no hesitation to say that the words "other stakeholders" would squarely cover the Central Government, any State Government or any local authorities. The legislature noticing that on account of obvious omission certain tax authorities were not abiding by the mandate of the I&B Code and continuing with the proceedings, has brought out the 2019 Amendment so as to cure the said mischief. We therefore hold that the 2019 Amendment is declaratory and clarificatory in nature and therefore retrospective in operation. ** ** ** 102.1 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. .......... .......... 102.3 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."

The above quoted legal position and the judicial precedent were reiterated and referred to in the subsequent judgments in the cases of Ruchi Soya Industries Ltd. v. Union of India[2022] 6 SCC 343/[2022] 139 taxmann.com 266/172 SCL 361 (SC) and Sree Metaliks Ltd. v. Additional Director General2023/DHC/001118/[2023] 149 taxmann.com 401/177 SCL 458 (Delhi). Most recently, vide order dated 7-7-2023, the Supreme Court, referring to the law laid down in the case of Ghanshyam Mishra & Sons (P.) Ltd. (supra) summarily dismissed a bunch of appeals in case titled Commissioner of Central Excise and Service Tax Vadodra v. EMCO Ltd. [Civil Appeal No. 8189/2019 with Civil Appeals No. 5701-5703 of 2019]/2023 (385) ELT 644 (SC).

In the present cases, as described above, the admitted factual matrix is that the notices and orders impugned in these writ petitions pertain to the income tax claims of the respondents/revenue pertaining to the period much prior to the date of approval of the Resolution Plan. The impugned notices and orders were issued by the respondents/revenue admittedly subsequent to the public announcement under section 15 of the Code regarding CIRP process pertaining to the petitioner/assessee. As noted above, pertaining to the WP(C) 10528/2022, the public announcement under section 15 of the Code called for submission of claims by 21-1-2019, but the respondents/revenue did not file any claim till that date or even thereafter; it is only subsequent to approval of the Resolution Plan vide order dated 5-11-2019 of the Tribunal, (which order was communicated to respondents/revenue on 2-12-2019) that the respondents/revenue issued the impugned Assessment Order and Demand Notice both dated 12-12-2019. Similarly, in the other writ petition WP(C) 10628/2022, the impugned notices and orders were issued by the respondents/revenue much subsequent to the public announcement dated 30-9-2019 of commencement of CIRP under section 13 of the Code; vide order dated 21-2-2022, the Tribunal approved the final ACIT vs. M/s. B&C Energy Infra Pvt. Ltd. and B&C Energy Infra Pvt. Ltd. vs. DCIT Asst. Year –2015-16 - 7– Resolution Plan and that order was communicated by the petitioner/assessee to the respondents/revenue, calling upon the latter to withdraw the earlier notices, but to no avail.

In nutshell, the Resolution Plans qua the petitioners/assessees having been approved by the National Company Law Tribunal on 5-11-2019 (in WP(C) 10528/2022) and on 21-2-2022 (in WP(C) 10628/2022), the tax claims pertaining to the Assessment Year 2017-18 (in WP(C) 10528/2022) and Assessment Year 2014-15 (in WP(C) 10628/2022) stood extinguished.

In the case of Rishi Ganga Power Corporation Ltd. vs. Assistant Commissioner of Income-tax [2024] 158 taxmann.com 72 (Delhi) / [2024] 297 Taxman 123 (Delhi) / [2024] 464 ITR 133 (Delhi) [31-10-2023], the Delhi High Court held that where National Company Law Tribunal admitted insolvency petition against assessee but revenue in terms of Insolvency and Bankruptcy Code, 2016 had not lodged its claim with RP, revenue could not enforce assessment order and demand notice. While passing the order, the Delhi High Court made the following observations:

Section 31 of the 2016 Code, among other things, stipulates that once the RP is approved, it shall be binding on the corporate debtor and its employees, members, and creditors, which includes the Central Government, State Government, Local Authority to whom a debt in respect of payment of dues arising under any law for the time being in force and also on authorities to whom statutory dues are owed. Furthermore, the provision also stipulates that the approved plan will bind the guarantors and other stakeholders involved in forging the same. [See Ghanashyam Mishra & Sons (P.) Ltd. (supra)].

Since the revenue failed to lodge its claims, the impugned demands raised by the revenue stand automatically extinguished. [See Ruchi Soya Industries Ltd. (supra) and Sreemetaliks Ltd. v. Addl. Director General [2023] 149 taxmann.com 401/177 SCL 458 (Delhi), 2023/DHC/001118 (at para 53)] ACIT vs. M/s. B&C Energy Infra Pvt. Ltd. and B&C Energy Infra Pvt. Ltd. vs. DCIT Asst. Year –2015-16 - 8– 27.1 Therefore, the submission made on behalf of the revenue that it should be allowed to enforce the impugned orders and notices is misconceived in law.

In the instant facts, we observe that the assessment was completed and demand was raised on the assessee on 01.12.2017, whereas the order of NCLT under Section 30(6) r.w.s. 31 of IBC was passed on 06.12.2023. In the Resolution Plan, the Department had not filed any claim for recovery of tax demand with respect to outstanding demand against the assessee. Therefore, in light of the facts of the assessee’s case and the judicial precedents cited above, the Department cannot now claim and recover from the assessee an amount of arrears that accrued prior to approval of Resolution Plan under Section 31 of IBC.

In the result, the appeal of the Department is dismissed and the appeal of the assessee is allowed. This Order is pronounced in the Open Court on 24/04/2025 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 24/04/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,