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Facts
The assessee companies, currently undergoing insolvency proceedings with an Interim Resolution Professional appointed and a moratorium in effect under Section 14 of the IBC, appealed against orders passed under Section 143(3) of the Income Tax Act. The core contention was the applicability of the IBC moratorium to these income tax appeals.
Held
The Tribunal held that while Section 14 of the IBC prohibits proceedings *against* the corporate debtor, the appeals were filed by the assessee. However, upon initiation of insolvency, the original directors become functus officio, and only the Interim Resolution Professional or Resolution Professional, in consultation with the Committee of Creditors, can pursue such appeals. The appeals were dismissed with liberty for the IRP/RP to seek recall and fresh hearing on merits.
Key Issues
The primary issue was the maintainability of income tax appeals filed by a corporate debtor post-insolvency proceedings and the appointment of an IRP, especially concerning who holds the authority to pursue such appeals under the IBC moratorium.
Sections Cited
143(3), 7 (IBC), 14 (IBC), 238 (IBC)
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Income Tax Appellate Tribunal, DELHI BENCHES : G : NEW DELHI
Before: SHRI G.S. PANNU & SHRI ANUBHAV SHARMA
(Appellant) (Respondent) Assessee by : Shri Shrey Jain, Advocate Revenue by : Shri Ravi Kant Choudhary, Sr. DR Date of Hearing : 13.06.2024 Date of Pronouncement : 27.06.2024 ORDER PER ANUBHAV SHARMA, JM: These are appeals preferred by the Assessee against the orders dated 15.03.2019 & 31.03.2019 of the Commissioner of Income Tax (Appeals)-3,
ITAs No.6113 & 6114/Del/2019 Gurgaon, (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeals No.630/CIT(A)-3/GGN/2016-17 and No.631/CIT(A)- 3/GGN/2016-17 arising out of the appeals before it against the order dated 26.12.2016 and 27.12.2016, respectively, passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the DCIT, Central Circle-II, Faridabad (hereinafter referred to as the Ld. AO).
Heard and perused the record. The only submission made by the ld. Counsel for the assessee was that the assessee companies are under insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) and by order dated 16/08/2022 in CP(IB) No. 266/Chd/Hry/2020, Interim Resolution Professional has been appointed and a moratorium in terms of section 14 of the IBC stands issued.
Ld. departmental representative could not dispute the aforesaid submissions of the Ld. AR.
It is now a settled proposition of law that after the moratorium order in the insolvency proceedings and appointment of interim resolution professional, no claim can be entertained by any court or other authorities. The Hon'ble Delhi High Court had in the case of Pr. Commissioner of Income Tax-6, New Delhi Vs. Monnet Ispat & Energy Ltd.: [ITA No. 533 to 552 & 554 of 2017], vide order dated 04/09/2017, held that on admission of petition under Section 7 of ITAs No.6113 & 6114/Del/2019 the Code, 'the institution of suits or continuation of pending suits or proceedings' against the corporate debtor was not permitted and the same would include income tax appeals. In Special Leave Petition arising from the aforesaid order [SLP (C).No. 6487 of 2018, dated 10/08/2018], the Hon'ble Supreme Court upheld overriding nature and supremacy of the provisions of the Code over any other enactment in case of conflicting provisions by virtue of Section 238 of the Code by holding as follows:- “Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-Tax Act. We may also refer in this Connection to Dena Bank vs. Bhikhabhai Prabhudas Parekh and Co. & Ors. (2000) 5 SCC 694 and its progeny, making it clear that income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons.”
However, Clause (a) of Sub-section (1) of Section 14 of the IBC only prohibits the 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. It does not prohibit any proceedings by the debtor. Reliance can be placed on the judgment of Hon’ble Bombay High Court in case of in Reliance Communication Ltd. v. Rajendra P. Bansal, (2023) 143 taxmann.com 156 (Bombay) and of Hon’ble Supreme Court in New Delhi Municipal
ITAs No.6113 & 6114/Del/2019 Corporation v. Minosha India Ltd. 2 (2022) 138 taxmann.com 73,(SC), which have been relied by Hon’ble Bombay High Court in case of Imperial Consultants And Securities vs Asst. Commissioner Of Income Tax, vide order dated 6 February, 2024 in Writ Petition No. 26105 OF 2023. Thus on admission of the insolvency petition filed by the financial creditor under Section 7 of the IBC, the Directors of assessee have become functus officio and IRP or the RP, as the case may be, only can pursue the appeal, pertaining to Assessee Company in consultation with the Committee of Creditors.
In the light of the aforesaid, we are inclined to dismiss the appeals, with liberty to the IRP or the RP, as the case may, to apply for recall of the this order and restoration of appeal for hearing on merits.