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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 08.08.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 12.12.2019 passed by learned ACIT, Circle-4(1), Indore [“AO”] u/s 144 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal.
Brief facts of the case are such that the assessee is a company presently named as “ARCPL Developers Private Limited” with erstwhile name
ARCPL Developers Private Limited – AY 2017-18 “Rajpal Abhikaran Pvt. Ltd.”. The AO, based on information available in AIMS on ITBA Portal regarding deposits made by assessee-company in its bank a/c during the demonetization period and finding that the assessee- company did not file any return u/s 139(1) for AY 2017-18 under consideration, initially issued notice dated 11.12.2017 u/s 142(1) calling return of income from assessee but the assessee did not respond to such notice. Ultimately, the AO issued notice u/s 148 on 06.06.2018 taking case of assessee u/s 147 wherein the assessee filed return on 13.03.2019 declaring a total income of Rs. 1,44,16,560/-. Then, the case was selected for scrutiny and the AO issued notices u/s 143(2)/142(1). Finally, the AO passed assessment-order u/s 144 on 12.12.2019 after making certain additions and determining total income at Rs. 11,65,83,363/-.
3. Aggrieved, the assessee carried matter in first-appeal before CIT(A) on as many as 9 grounds as re-produced by CIT(A) in Para 3 of impugned order.
During pendency of first appellate proceedings before CIT(A), the matter of assessee reached to NCLT, Indore Bench in IA/12(MP)2022 in CP(IB) 6 of 2020 [“NCLT”] under the Insolvency & Bankruptcy Code, 2016 [“IBC”] and the NCLT passed order dated 25.08.2022. Therefore, the assessee filed a copy of NCLT’s order to the CIT(A) and also raised following additional Ground No. 10 before CIT(A):
"Ground No.10: The order passed by the Ld.AO and the demand raised has become ineffective and infructuous subsequent to the order passed by Honourable National Company Law Tribunal Indore Bench (NCLT) under the Insolvency and Bankruptcy Code,2016 (IBC) on Page 2 of 10 ARCPL Developers Private Limited – AY 2017-18 25.08.2022. That on the facts and in the circumstances of the case and in law and according to the Insolvency and Bankruptcy Code, 2016 which code have overriding effect, the impugned assessment order and the demand stand extinguished. The assessment order is prayed to be annulled and the entire demand is prayed to be deleted.”
Vide Para 5.6 of impugned order, the CIT(A) summarily dismissed Ground No. 1 to 9 for want of evidences by assessee. Further, vide Paras 5.7 & 6.1, the CIT(A) adjudicated assessee’s additional Ground No. 10 in these words:
“5.7 In respect of the addition ground no. 10 which is reproduced in para 4.3 above and admitted to get adjudicated, while the appellant had failed to impress that the claims as fostered in the ITR with regard to quantification of income are true and correct, the corresponding additions made in the assessment order have got sustained and therefore, when the first appellate authority is not empowered to delete the demand, which is the exclusive prerogative of the Assessing Officer as per the provisions of section 156A(1), the corresponding ground of appeal is also dismissed. 6.1 However, the Assessing Officer may after examining the order of the Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code 2016, modified the demand payable u/s 156, in conformity with such order and thereafter serve on the appellant a notice of demand specifying the sum payable, if any.”
5. Now, the assessee has come before us in next appeal.
6. The assessee has raised following grounds before us:
“1. That, the learned CIT(A) erred in dismissing the appeal filed by the appellant. That on the facts and in the circumstances of the case the said dismissal is wrong and bad in law.
2. That, the learned CIT(A) erred in holding that the first appellate authority is not empowered to delete the demand which is the exclusive prerogative of the AO. That on the facts and in the circumstances of the case and in law the Learned CIT(A) having plenary powers in disposing of an appeal which are coterminous and Page 3 of 10
ARCPL Developers Private Limited – AY 2017-18 coextensive with that of the AO, the Learned CIT(A) was very much empowered to delete the demand as per the provisions of section 156A(1). It is prayed that the said demand may very kindly be now directed to be deleted.
The Learned CIT(A) while dismissing the appeal on merits erred in not appreciating the fact that the appellant company was acquired by the present management under the Insolvency and Bankruptcy Code 2016 (IBC) through the order of the Honourable NCLT whereas the impugned assessment order was passed much before the initiation of the proceedings under IBC, therefore, the present management was not only incapable but was also not obliged to adduce any document or evidence in support of the appeal filed by the erstwhile management.”
Ld. AR for assessee at first carried us to following paras of the aforesaid order dated 25.08.2022 of NCLT, copy filed in Paper-Book:
“10. As far as reliefs and concessions claimed by the resolution applicant, the law has been well settled by the Hon'ble Supreme Court in the case of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited and Ors. reported in MANU/SC/0273/2021 in the following words: 86. “……The legislative intent behind this is, to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans, would go haywire and the plan would be unworkable.
We have no hesitation to say, that the word "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 I&B Code and continuing with the proceedings, has brought out the 2019 amendment so as to cure the said mischief....."
In view of the above, all past claims would stand extinguished. However, as far as various statutory rights vested with the corporate debtor in form of various licenses, leases, and other alike matter, we make it clear that the successful resolution applicant has to approach the concerned statutory authority for those concessions and Page 4 of 10
ARCPL Developers Private Limited – AY 2017-18 those authorities will consider the same as per their established procedure.” [Emphasis supplied] 8. Ld. AR next referred following para of the Resolution Plan submitted to NCLT by “M/s Agarwal Real City Private Limited”, the bidder/intending purchaser:
“10.8. Statutory/ Government Dues a. XXX b. XXX c. XXX d. It is further clarified that all amounts payable as statutory taxes, duties, levies, additional fees, dues including but not limited to Companies Act 2013/1956, Income Tax, VAT, GST, Customs, Central Excise etc. their respective additional fees, penalties, interest, fines, cases, unpaid Tax Deducted at Source/tax collected at Source, which is not admitted or contingent, whether part of the above claim or not, pertaining to any period prior to the Insolvency commencement date whether part of due diligence finding or not or assisted or unassisted, crystallized or un- crystallized, known or unknown, secured or unsecured, disputed, present or future shall stand extinguished by virtue of the order of the Hon'ble Adjudicating Authority/ NCLT approving this Plan and the Company would not be liable to pay any amount against such demand.” [Emphasis supplied] 9. Ld. AR next referred following paras of judgement of Hon’ble Supreme Court in Ghanshyam Mishra and Sons Private Limited Vs.
Edelweiss Asset Reconstruction Company Limited, reported in MANU/SC/0273/2021 dated 13.04.2021 (Para No. 86 and 87 of this judgement have already been re-produced in aforesaid NCLT’s order, hence we do not repeat the same):
ARCPL Developers Private Limited – AY 2017-18 “2. The short but important questions, that arise for consideration in this batch of matters, are as under:- (i) XXX (ii) XXX (iii) As to whether after approval of resolution plan by the Adjudicating Authority a creditor including the Central Government, State Government or any local authority is entitled to initiate any proceedings for recovery of any of the dues from the Corporate Debtor, which are not a part of the Resolution Plan approved by the adjudicating authority?” XXX 64. As held by this Court in the case of Pr. Commissioner of Income Tax us. Monnet Ispat and Energy Ltd. SLP(C) No. 6483/2018 (order dated 10.08.2018), in view of provisions of Section 238 of I&B Code, the provisions thereof will have an overriding effect, if there is any inconsistency with any of the provisions of the law for the time being in force or any instrument having effect by virtue of any such law. As such, the observations made by NCLAT to the aforesaid effect, if permitted to remain, would frustrate the very purpose for which the I&B Code is enacted.
However, in Civil Appeal arising out of Special Leave Petition (Civil) No.11232 of 2020, Writ Petition (Civil) No.1177 of 2020 and Civil Appeals arising out of Special Leave Petition (Civil) Nos. 7147-7150 of 2020, the issue with regard to the statutory claims of the State Government and the Central Government in respect of the period prior to the approval of resolution plan by NCLT. will have to be considered.
Vide Section 7 of Act No.26 of 2019 (vide S.O. 2953(E), dated 16.8.2019 w.e.f. 16.8.2019), the following words have been inserted in Section 31 of the I&B Code: "including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed"
As such, with respect to the proceedings, which arise after 16.8.2019, there will be no difficulty. After the amendment, any debt in respect of the payment of dues arising under any law for the time being in force including the ones owed to the Central Government, any State Government or any local authority, which does not form a part of the approved resolution plan, shall stand extinguished.
ARCPL Developers Private Limited – AY 2017-18 XXX 77. It is clear, that the mischief, which was noticed prior to amendment of Section 31 of I&B Code was, that though the legislative intent was to extinguish all such debts owed to the Central Government, any State Government or any local authority, including the tax authorities once an approval was granted to the resolution plan by NCLT: on account of there being some ambiguity, the State/Central Government authorities continued with the proceedings in respect of the debts owed to them. In order to remedy the said mischief, the legislature thought it appropriate to clarify the position, that once such a resolution plan was approved by the Adjudicating Authority. all such claims/dues owed to the State/Central Government or any local authority including tax authorities, which were not part of the resolution plan shall stand extinguished.”
Lastly, Ld. AR also referred section 156A of Income-tax Act, 1961 introduced recently through Finance Act, 2022 w.e.f. 01.04.2022:
Modification and revision of notice in certain cases. 156A. (1) Where any tax, interest, penalty, fine or any other sum in respect of which a notice of demand has been issued under section 156, is reduced Assessing Officer shall modify the demand payable in conformity with such as a result of an order of the Adjudicating Authority as defined in clause (7) of section 593 of the Insolvency and Bankruptcy Code. 2016 (31 of 2016), the order and shall thereafter serve on the assessee a notice of demand specifying the sum payable, if any, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall accordingly, apply in relation to such notice. (2) Where the order referred to in sub-section (1) is modified by the National Company Law Appellate Tribunal or the Supreme Court, as the case may be the modified notice of demand as referred to in sub- section (1), issued by the Assessing Officer shall be revised accordingly.
11. Referring to above, Ld. AR submitted that since the NCLT has, based on resolution plan submitted by bidder/intending purchaser, ordered in Para 11 of its order that “all past claims would stand extinguished.”, this Page 7 of 10
ARCPL Developers Private Limited – AY 2017-18 bench should direct the AO to delete the entire demand created against assessee vide impugned assessment-order passed for AY 2017-18.
Per contra, Ld. DR for revenue referred the Paras 5.7 & 6.1 of impugned order passed by CIT(A) as re-produced in an earlier para. He submitted that the section 156A gives power to modify demand against assessee to AO only, therefore the CIT(A) has passed a proper and valid order. He requested to uphold the impugned order passed by CIT(A).
We have considered rival submissions of both sides and perused the document held on record including the orders of lower-authorities and other material to which our attention has been drawn. In present appeal before us, the assessee/Ld. AR’s endeavor is that the AO must be directed to delete the entire demand created against assessee by impugned assessment order dated 12.12.2019 passed u/s 144. Such a request is being supported by (i)
Paras 10 & 11 of NCLT’s order, (ii) The Resolution Plan submitted to NCLT, (iii) The judgement of Hon’ble Supreme Court in Ghanshyam Mishra (supra) and (iv) Section 156A of Income-tax Act, 1961. We have already extracted all these in earlier paras of this order. On a careful consideration, we agree that in terms of section 156A of the Income-tax Act, 1961, the AO shall modify the demand payable by assessee in conformity with the order passed by NCLT under IBC. We note that the provision of section 156A has recently come in the statute through Finance Act, 2022. While enacting this Page 8 of 10
ARCPL Developers Private Limited – AY 2017-18 provision, the Parliament has given following Explanation in the “Memorandum explaining the provisions in the Finance Bill, 2022”:
“5. Further, it has been noted that in the cases of business re- organisation, instances have been found where the Court or Tribunal or an Adjudicating Authority, as defined in clause (1) of section (5) of the Insolvency and Bankruptcy Code, 2016, as the case may be, as a part of the restructuring process, recast the entire liability to ensure future viability of such sick entities and in the process, modify the demand created vide various proceedings in the past, by the Income Tax department as well, amongst other things.
However, it is observed that there is no procedure or mechanism provided in the Act to reduce such demands from the outstanding demand register. Hence, in order to remove this anomaly, it is proposed to insert a new section 156A to the Act to give effect to the orders of the competent authority and to modify such demands in accordance with such directions These amendments will take effect from 1 April, 2022. [Clauses 50, 53 and 54]”
Ld. AR for assessee has expressed an apprehension during hearing that the demand in present case is high and the AO may not be inclined to act (or act judiciously) in terms of section 156A. We would like to mention that the provision of section 156A is a mandatory provision and it not only empowers but also casts a duty upon the AO to modify the demand notice earlier issued u/s 156 to bring such demand notice in conformity with the order of NCLT. The judgement of Hon’ble Supreme Court in Ghanshyam Das (supra) is also having the same tune and the AO shall necessarily and fairly act in conformity with section 156A and judgement of Hon’ble Supreme Court leaving no grievance for assessee.
ARCPL Developers Private Limited – AY 2017-18 15. Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 24/07/2025