The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has recently, in an appeal filed before it, held that income tax appeal filed after moratorium period in IBC Act is not maintainable.
The aforesaid observation was made by the Chennai ITAT, when an appeal was filed before it by the Revenue and Cross-Objection filed by the assessee, as directed against the order of the Commissioner of Income Tax (Appeals), Chennai, dated 31.03.2019, pertaining to the assessment year 2008-09.
The brief facts of the case were that the assessee was a Public Limited Company, engaged in the business of manufacturing and marketing of Sugar and industrial alcohol. And, the assessee had filed its return of income for the AY 2008-09 on 22.01.2010, admitting a loss of Rs.37,06,55,787/-.
Thereafter, a search operation was carried out in the premise of M/s.Praj Industries Ltd., Pune, on 03.04.2012 and a sworn statement under Section132(4) of the Income Tax Act, 1961, was recorded from one Mr.Aniruddha V.Phadke, the Associate Vice President (Commercial) of M/s.Praj Industries Ltd., where he had admitted that M/s.Praj Industries Ltd., had engaged in over invoicing its sales to the clients and returning the extra amount in cash to the parties.
Consequently, the assessment of the respondent company was reopened and was completed under Section143(3) r.w.s.147 of the Income Tax Act, on 10.05.2016, by making an addition of Rs.2,76,21,000/- under Section 69A of the Income Tax Act, on account of alleged cash received from M/s.Praj Industries Ltd.
On appeal, the CIT(A), Chennai, vide order dated 31.03.2019, deleted the additions made by the AO and held that there are no direct evidences to prove direct involvement of the respondent company in the issue of the receipt of cash as alleged by the AO. And, it is being aggrieved by this order of the CIT(A), that the present appeal is filed by the Department.
With Mr. Kiran Dhanateja, CA, the AR for the assessee, having submitted that the appeal was filed by the Revenue on 21.06.2019, i.e., after grant of moratorium by the NCLT vide order dated 07.06.2019, and hence that the same is not maintainable, he added that the NCLT Chennai Bench has ordered the liquidation of the assessee vide order dated 08.04.2021.
The AR for the assessee further submitted that the claim of the Department has also been rejected by the liquidator, and therefore that, the present appeal filed by the Revenue is not maintainable and needs to be dismissed.
On the other hand, Mr.D.Hema Bhupal (JCIT), the DR on behalf of the Revenue, fairly admitted that the NCLT ordered for liquidation of the company and further that the claim made by the AO for recovery of taxes has been rejected by the liquidator. However, he submitted that there is no bar under the Act for recovery of outstanding demand and thus that, the appeal filed by the Revenue is maintainable.
Hearing the opposing contentions of both sides, and thereby perusing the materials available on record, the ITAT observed:
“We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The fact with regard to liquidation of company by a final order of the Hon’ble NCLT dated 08.04.2021, is not disputed by the Revenue. Further, it is an admitted fact that in terms of sec.238 of the Insolvency & bankruptcy Code r.w.s. 178 of the Income Tax Act, the provisions of the code have an overriding effect over all other central & state statutes and this legal position has been upheld by the Hon’ble Supreme Court in the case of PCIT v. Monnet Ispat and Energy Ltd., in SLP No.6483 of 2018 order dated 10.08.2018. Therefore, the present appeal filed by the Revenue during moratorium period deserves to be dismissed. Further, apart from the liquidation process, the liabilities of the respondent company have been crystalized and the net assets were transferred to a new investor pursuant to a scheme under Section230(1) of the Companies Act 2013 approved by the Hon’ble NCLT vide order dated 02.05.2022.”
“In view of the Hon’ble NCLT order dated 02.05.2022, pending proceedings including proceedings under Income Tax Act, 1961, relating to period prior to the NCLT order, shall abate all the admitted liabilities, and shall be dealt as per the order of the Hon’ble NCLT in terms of waterfall mechanism prescribed under Section53 of the I & B Code”, the coram of V. Durga Rao, the Judicial Member and Manjunatha. G, the Accountant Member added.
Thus, the ITAT finally held:
“Therefore, we are of the considered view that appeal filed by the Revenue after the moratorium period is not maintainable and thus, the appeal filed by the Revenue is dismissed as not maintainable. In the result, appeal filed by the Revenue is dismissed.”
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