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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: SRI RAJPAL YADAV, VICE- & SRI SANJAY AWASTHI
order : August 9th, 2024 ORDER Per Sanjay Awasthi, Accountant Member: The instant batch of appeals are filed by the Income Tax Department bearing numbers 1140, 1141 & 1801/KOL/2018. In all these four appeals the common issue involved is that a liquidator has been appointed under the provisions of Insolvency and Bankruptcy Code, 2016 (hereafter ‘IBC’). Accordingly, these four appeals are being disposed off with this single order. ITA No. 1139/KOL/2018
In this case, the assessee had filed its return of income on 29.09.2008 at a loss of Rs. 8,45,76,498/-. This case was picked up for scrutiny and vide order dated 28.10.2010 the income was computed after a disallowance of Rs. 66,81,612/-. The appellant got relief at first stage but was served with a notice u/s 148 of the Income Tax Act, 1961 (in short the 'Act') dated 15.05.2015 through which reasons were communicated for re-opening of the assessment. Thereafter, vide order dated 29.03.2016 re-assessment was completed on enhanced income. Before the Commissioner of Income Tax (Appeals)-3, Kolkata [hereinafter referred to as ld. 'CIT(A)'] the assessee got relief and thereafter, the Department has filed an appeal before the ITAT.
2.1. Return of income was filed on 24.09.2009 at a loss of Rs. 1,03,11,02,674/-. The case was selected for scrutiny and vide order dated 16.12.2011 the income was assessed at a total loss of Rs. 31,11,81,698/-. Thereafter, the assessee was served with a notice u/s 148 of the Act dated 09.04.2015. Thereafter, some additions were made to the income/loss declared vide order dated 29.03.2016 u/s 147/143(3) of the Act. Subsequently, vide order dated 23.03.2018 the appeal of the assessee was allowed by the ld. CIT(A), leading to the income Tax Department filing the present appeal before the ITAT.
2.2. The assessee filed its return of income on 27.09.2010 showing a total loss of Rs. 98,45,76,943/-. This return was selected for scrutiny and vide order dated 19.03.2013, the assessment was passed at a total loss of Rs. 29,18,75,497/-. Thereafter, the case was re-opened and after an enhancement to the income/loss a re-assessment order was passed on 29.03.2016. Here again, the ld. CIT(A) allowed the assessee’s appeal leading to the present appeal being filed by the Department before the ITAT. ITA No. 1801/KOL/2018 2.3. In this case, return of income was filed on 30.09.2011 at a total loss of Rs. 60,19,40,850/-. This was later revised on 29.02.2012 disclosing a loss of Rs. 76,47,06,800/-. The case was selected for scrutiny and assessment was completed at a total loss of Rs. 74,75,81,872/-. In this case also the assessee was served with a notice u/s 148 of the Act dated 30.03.2015. Thereafter, vide order dated 29.03.2016 the re-assessment proceedings were completed after making additions to the returned income/loss. Aggrieved with the action of ld. AO, the appellant filed an appeal before the ld. CIT(A), where his appeal was allowed in full. Thereafter, the Department has filed this appeal before the ITAT.
It is seen that all the appeals have been filed by the Income Tax Department on 24.05.2018 and thereafter, the factual position/chronology becomes common for all the four cases. The same deserves to be highlighted as under:
24.07.2018 Company Petition under Section 7 of the Insolvency and Bankruptcy Code, 2017 was filed by a Financial Creditor of the Assessee 08.08.2019 Resolution Professional under the Insolvency and Bankruptcy Code, 2016 was appointed by the Hon’ble National Company Law Tribunal. 15.06.2022 Liquidator appointed under Section 33 of the Insolvency and Bankruptcy Code, 2016 by the Hon’ble National Company Law Tribunal. 15.02.2023 Notice received by the Liquidator intimating him of the proceedings filed on the Corporate Debtor (being the present assessee) before the Hon’ble Income Tax Appellate Tribunal. 21.03.2023 Reply by the Liquidator to the notice dated 15.02.2023- Liquidator by its letter intimated the provisions of the Insolvency and Bankruptcy Code, 2016 and informed that the proceedings cannot continue due to initiation of liquidation proceedings. 3.1. Incidentally, during the course of hearing, it was brought to the notice of this Bench that since the matter was already before the National Company Law Tribunal (hereafter ‘NCLT’), therefore, the present proceedings were not sustainable. Also, there are some communications received from Sri Ashok Kumar Agarwal, Insolvency Professional, who has been appointed as Interim Resolution Professional. He further informed this Bench that since no resolution during CIRP could be made possible, the Hon'ble NCLT vide its order dated 15.06.2022, has finally ordered liquidation of the company/corporate debtor. He transmitted copies of the orders of the Hon'ble NCLT in this regard. Considering the fact that the ld. Counsel for the assessee, on the last date of hearing averred that in terms of the provisions of Section 238 of the IBC, 2016 where liquidation proceedings were in progress and parallel proceedings under the Act are also ongoing against the assessee, then the IBC, 2016 will have an overriding effect over the provisions of the Income Tax Act, 1961. 3.2. The ld. D/R apprised this Bench of the reasons recorded prior to issuing notice u/s 148 of the Act in all the case and also informed that the matter was before the Hon'ble NCLT.
We have perused the documents placed on record and carefully considered the averments made by the ld. AR/DR. It is seen that in this case, once it is a matter of record that the proceedings are before the Hon'ble NCLT, then it merely needs to be considered whether the present proceedings can continue or need to abate considering the express provisions of Section 178(6) of the Act, which expressly provides for the IBC having an overriding effect, when a Company is in liquidation. 4.1. We observe that the liquidation proceedings have commenced as per the order of Hon'ble NCLT, Kolkata in the assessee’s case and an official liquidator has been appointed. It is a settled legal principle that from the time of appointment of official liquidator, the assessee company becomes defunct and the official liquidator steps into the shoes of the assessee. Considering the provisions of Section 33(5) of the IBC, 2016, wherein it is stated as under: “(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor:” 4.2. A reading of this provision makes it clear that once it is not possible to legally initiate any suit or other legal proceeding against the corporate debtor then the present proceedings before the ITAT are also affected and cannot proceed parallel to the proceedings under the IBC, 2016. 4.3. Pertinently, it is also to be observed that in case of parallel proceedings under Income-tax Act, 1961 and IBC, 2016, the IBC, 2016 has an overriding effect over the provisions of the Income-tax Act which has been decided by Hon'ble Apex Court in Pr. CIT v. Monnet Ispat & Energy Ltd. [2019] 107 taxmann.com 481, wherein the Hon'ble Apex Court had observed that as per section 238 of IBC, 2016, the IBC Code will override anything inconsistent contained in any other enactment, including the Income-tax Act. It is also trite to peruse section 178 of the Income-tax Act, 1961 which has been amended for the purpose of preventing any conflict with provisions of IBC Code, which is reproduced as under:
“178. (1) Every person— (a) who is the liquidator of any company which is being wound up whether under the orders of a court or otherwise; or (b) who has been appointed the receiver of any assets of a company; (hereinafter referred to as the liquidator) shall, within thirty days after he has become such liquidator, give notice of his appointment as such to the Income-tax Officer who is entitled to assess the income of the company. (2) The Income-tax Officer shall, after making such enquiries of calling for such information as he may deem fit, notify to the liquidator within three months from the date on which he receives notice of the appointment of the liquidator the amount which, in the opinion of the Income-tax Officer, would be sufficient to provide for any tax which is then, or is likely thereafter to become, payable by the company. (3) The liquidator— (a) shall not, without the leave of the Commissioner, part with any of the assets of the company or the properties in his hands until he has been notified by the Income-tax Officer under sub-section (2); and (b) on being so notified, shall set aside an amount, equal to the amount notified and, until he so sets aside such amount, shall not part with any of the assets of the company or the properties in his hands: Provided that nothing contained in this sub-section shall debar the liquidator from parting with such assets or properties for the purpose of the payment of the tax payable by the company or for making any payment to secured creditors whose debts are entitled under law to priority of payment over debts due to Government on the date of liquidation or for meeting such cost and expenses of the winding up of the company as are in the opinion of the Commissioner reasonable. (4) If the liquidator fails to give the notice in accordance with sub-section (1) or fails to set aside the amount as required by sub-section (3) or parts with any of the assets of the company or the properties in his hands in contravention of the provisions of that sub-section, he shall be personally liable for the payment of the tax which the company would be liable to pay: Provided that if the amount of any tax payable by the company is notified under sub-section (2), the personal liability of the liquidator under this sub- section shall be to the extent of such amount.] (5) Where there are more liquidators than one, the obligations and liabilities attached to the liquidator under this section shall attach to all the liquidators jointly and severally. (6) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force (except the provisions of the Insolvency & Bankruptcy Code, 2016).” (emphasis added) 4.4. From a plain reading of the provisions of Section 178(6) of the IBC, 2016, the IBC, 2016 has an overriding effect and therefore, the present proceedings cannot be sustained and the appeals need to be dismissed. Strength is also drawn from the order of the Hon'ble Calcutta High Court in the case of PCIT vs. Amrit Feeds Ltd. reported in ITAT/277/2023 IA NO: GA/2/2023, vide order dated 01.05.2024, wherein the Hon'ble Court approved the action of ITAT, Kolkata in dismissing the pending appeals before it through the appeals pertaining to M/s. Amrit Feeds Ltd. (supra) in 1863/KOL/2018, 1842/KOL/2018 & 1718/KOL/2019 in which on identical grounds to the present appeal all matters had been dismissed considering the overriding effect of IBC, 2016 over the Income Tax Act, 1961. 4.5. The relevant portions from the order of the Hon'ble Calcutta High Court (supra) deserves to be extracted as under: “We have heard Ms. Smita Das De, learned senior standing counsel appearing for the appellant and Mr. K.R. Thaker, learned counsel appearing for the respondent. The learned Tribunal has taken note of the fact that the liquidation proceedings have commenced as per the order passed by the NCLT, Kolkata and at the time of appointment of the Official Liquidator, the assessee company became defunct and the Official Liquidator stepped into the shoes of the assessee. Further, the Tribunal noted that even during the moratorium period specified under Section 14(1)(a) of the Insolvency and Bankruptcy Code, there has been no representation of the matter on behalf of the assessee. After taking note of the orders passed by the NCLT and also noting other decisions of the co-ordinate Bench of the Tribunal, the Tribunal in paragraph 7 of the impugned order, rightly came to the conclusion that the appeal filed by the revenue has to be dismissed so also the cross- objection filed by the assessee with liberty to both the assessee and the Official Liquidator to recall the order by filing appropriate application within the permissible period of limitation as and when occasion warrants. Thus, we find no grounds have been made out to interfere with the order passed by the learned Tribunal and no substantial question of law arises for consideration. In the result, the appeal is dismissed. Consequently, the connected application is also dismissed.” 4.6. From the above observation and also following the decisions rendered by the Coordinate Bench of this Tribunal in the case of M/s. Amrit Feeds Ltd. (supra), we hereby dismiss all the appeals filed by the Revenue, with the liberty granted to the appellant/official liquidator to recall the present order when the occasion so warrants. The issue of limitation in filing fresh appeal, if required, has already been dealt with in the judgment of the Hon'ble Supreme Court in the case of New Delhi Municipal Council vs. Minosha India Ltd. reported in [2022] 138 taxmann.com 73 (SC).
In the result, all the four appeals filed by the Revenue are dismissed. Order pronounced in the open Court on 9th August, 2024.
Sd/- Sd/- [Rajpal Yadav] [Sanjay Awasthi] Vice President Accountant Member Dated: 09.08.2024 Bidhan (P.S.)