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Facts
The assessee, a telecom entity, filed returns for AY 2006-07, 2012-13, 2013-14, and 2017-18. The initial assessment order for AY 2006-07 was followed by a reopened assessment. The assessee had also undergone corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016, and a resolution plan was approved. The core issue is whether the approval of the resolution plan extinguishes all liabilities of the pre-CIRP period.
Held
The Tribunal held that the CIT(A) could have waited for the outcome of appeals before the Madras High Court concerning the extinguishment of liabilities post-CIRP approval. The CIT(A)'s reliance on an earlier order despite an interim stay was found to be not permissible. The Tribunal observed that the CIT(A) had dismissed the appeals without providing adequate opportunity to the assessee on merits.
Key Issues
Whether the approval of the resolution plan under the Insolvency and Bankruptcy Code extinguishes all liabilities of the corporate debtor for the pre-CIRP period. Whether the CIT(A) erred in dismissing the appeals without proper adjudication, especially in light of pending High Court appeals and interim stays.
Sections Cited
143(3), 147, 260, 148, 31(1) of the Insolvency and Bankruptcy Code, 2016
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Income Tax Appellate Tribunal, ‘B ’ BENCH, CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI, JM & SHRI S.R. RAGHUNATHA
O R D E R
PER MANU KUMAR GIRI (Judicial Member ) These four appeals filed by the assessee are directed against the separate orders of the Ld. Commissioner of Income Tax(Appeals)(NFAC) Delhi [CIT(A)] dated 17.10.2023 for Assessment Year 2006-2007, dated27.10.2023 to 1605/Chny/2023 for assessment year 2012-2013, dated 25.10.2023 for assessment year 2013- 14 and dated 30.10.2023 for assessment year 2017-2018.
for assessment year 2006- 2007 as lead case for adjudication wherein main issue is with regard to extinguishing of all liabilities of the pre-CIRP period by the approval order passed by the NCLT dated 09.06.2020. Our decision on this issue will equally apply to others appeals being 1604 & 1605/CHNY/2023 also.
Brief facts of the case are that the assessee is an entity holding telecom license and providing cellular services. It filed return of income for on 29.11.2006 declaring total income at Rs.89,85,72,257/-. Subsequently, a revised return was filed on 31.7.2007 declaring taxable income at Rs.2,56,02,295/-. The case was selected for scrutiny and assessment order under section 143(3) of the Income Tax Act, 1961 (in short ‘’the Act’’) was made on 28/11/2008 determining the total income at Rs.2,65,01,478/--. Subsequently, the assessment was reopened, against this assessee filed a writ petition challenging the reopening of assessment before the Hon'ble Madras High Court. The same was disposed off by the Hon'ble Madras High Court vide order dated April 27, 2021, that the assessment proceedings shall continue. The assessment order under section 143(3) r.w.s 147 read with section 260 was made on 29/08/2022 determining the total income at Rs.89,94,71,440/-.
to 1605/Chny/2023 4. Aggrieved with the assessment order, appeal has been filed before the ld.CIT(A). Before the ld.CIT(A), appellant submitted that the Assessee was undergoing corporate insolvency resolution process ("CIRP") under the provisions of the Insolvency and Bankruptcy Code, 2016 ("Code") and the rules and regulations framed there under vide an order dated March 19, 2018 of the Hon'ble National Company Law Tribunal ("NCLT"). On June 9, 2020, the resolution plan submitted by UV Asset Reconstruction Company Limited ("UVARC") was approved, which has been published and uploaded on the website of the ("NCLT") on June 18, 2020. The ld.CIT(A) after considering the facts of the case and the submissions as advanced by the A.R., case laws relied upon and the Insolvency and Bankruptcy Code, 2016 and Hon’ble Madras High Court order dated 27.04.2021 held as under: The Hon'ble Madras High Court in its order dated April 27, 2021, as directed that the assessment proceedings shall continue. Further, it directed as follows "The learned counsel for the petitioner made a submission that a Resolution Plan has been sanctioned under IBC Code. The petitioner is at liberty to submit all the particulars regarding the resolution plan sanctioned before the Income Tax authorities, who can consider the said documents and take appropriate decision under the provisions of law." As per section 31(1) of the Insolvency and Bankruptcy Code, 2016: "If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan." to 1605/Chny/2023 It is seen from the above that there is no bar on reopening of the assessment and/or passing of an assessment Order or a Re-assessment Order. The Impugned Re-assessment Order is not bad in law and in complete disregard of the Approval Order passed by the Hon'ble NCLT. Thus, ground no. 1 is dismissed.
The ld.CIT(A) in AY 2012-13 relied upon the judgment of the Hon’ble Jurisdictional High Court of Madras dated 17.06.2022 (W.P.No.34664 of 2018) passed in appellant’s own case and held as under: The Hon’ble Madras High Court in its order dated 17.06.2022 (W.P.No.34664 of 2018) has held in regards to the approval order passed by the Hon’ble NCLT approving the resolution plan “Corporate Insolvency Resolution Plan sanctioned and approved cannot impinge on the rights of the Income Tax Department to pass any fresh Assessment Order under Section 148 read with Sections 143(3) and 147 of the Income Tax Act, 1961.”
The ld.CIT(A) in AY 2012-13, in respect to Ground No.3 regarding extinguishing of all liabilities of the pre-CIRP period by the Approval Order stated as under: `“It is seen from the submissions of the appellant that an appeal has been `filed by the appellant against the order dated June 17, 2022 before the Madras High Court and vide an order dated August 18, 2022, the Hon’ble Madras High Court has granted an interim stay on the order dated June 17, 2022. The Asssessing officer is directed to monitor the outcome of the same. Further, this not being the right forum to claim relief with regards to the above ground, the same is not adjudicated upon, therefore, ground of appeal no.5 is dismissed.” to 1605/Chny/2023 The ld.CIT(A) has also taken a similar view on this issue in AYs 2013-14 and 2017-18. Now assesse is in further appeal before us.
We have heard the rival submissions and perused the records of the appeal files, assessment orders, impugned orders and interim stay order of the Hon’ble Madas High Court dated 18.08.2022 passed by the Division Bench in W.A.Nos.1796, 1797, 1799, 1800, 1801 and 1802 of 2022ANDC.M.P.Nos.13166, 13178, 13174, 13180, 13181 and 13185 of 2022 against the order of the Hon’ble Madras High Court dated 17.06.2022.
We find it necessary to reproduce here the interim stay order of the Hon’ble Madas High Court dated 18.08.2022 in W.A.Nos.1796, 1797, 1799, 1800, 1801 and 1802 of 2022 which is as under: ‘’Mr.D.Prabhu Mukunth Arunkumar, learned standing counsel takes notice for the respondents and seeks time for getting instructions. 2.The sheet anchor argument of the learned senior counsel appearing for the appellants Mr.AR.L.Sundaresan is that in terms of clause 9.6.1 of the NCLT Approval Order and section 31 of the Insolvency and Bankruptcy Code, 2016, on approval of the Resolution Plan by the NCLT, the claims of the respondent viz., the impugned proceedings, stood extinguished and the said NCLT Approval Order is binding on all the creditors of the appellants including the respondents. However, the learned Judge erred in dismissing the writ petition, observing inter alia that the Resolution Plan did not contemplate any concession from the Income-tax department and hence, the respondent was not precluded from reopening the assessment proceedings. To substantiate his to 1605/Chny/2023 contention, the learned senior counsel referred to a decision of the Hon'ble Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd. and Others [(2021)9 SCC 657], wherein, it was held as follows: “ In the result, we answer the questions framed by us as under : (i) 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) The 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 the I&B Code has come into effect. (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.” 3.Having regard to the facts and circumstances of the case coupled with the submissions made by the learned senior counsel appearing for the appellants and also in the light of to 1605/Chny/2023 the decision of the Hon'ble Supreme court as referred to above, there shall be an order of interim stay for a period of six weeks. 4.Post these appeals after six weeks. Copies of the affidavit along with the typed set of papers be served on the learned standing counsel taking notice for the respondents’’.
We further note that despite the knowledge of the interim stay order of the Hon’ble Madas High Court dated 18.08.2022 passed in W.A.Nos.1796, 1797, 1799, 1800, 1801 and 1802 of 2022 against the order of the Hon’ble Madras High Court dated 17.06.2022, the ld.CIT(A) without waiting for the judgment in aforesaid appeals has dismissed the grounds of appellant on the issue of extinguishing of all liabilities of the pre-CIRP period by the Approval Order passed by NCLT dated 09.06.2020 and also proceeded to dismiss the appeals on merits of addition.
We are of the considered opinion that the ld.CIT(A) could have waited for the outcome in appeals W.A.Nos.1796, 1797, 1799, 1800, 1801 and 1802 of 2022 pending adjudication before the Hon’ble Madras High Court which have a direct bearing on these appeals. We have also noted that despite interim stay by the Hon’ble Madras High Court vide order dated 18.08.2022, reliance on the order dated 17.06.2022 by the ld.CIT(A) is not permissible in law. to 1605/Chny/2023 10. We have further observed that in all appeals the ld.CIT(A) without giving proper and an adequate opportunity of being heard to the assessee on merits of additions has dismissed the appeals.