The Income Tax Appellate Tribunal (ITAT) Mumbai Bench, comprising Om Prakash Kant (Accountant Member) and Sunil Kumar Singh (Judicial Member), has set aside the order of the Commissioner of Income Tax (Appeals) CIT(A) declaring an assessment order as void ab-initio due to the initiation of the Corporate Insolvency Resolution Process (CIRP). The case has been remanded back to the CIT(A) for fresh adjudication.
The matter pertains to MITC Metals Private Limited for the Assessment Year (AY) 2014-15. The Revenue had appealed against the CIT(A)’s order dated May 29, 2024, which held the assessment order dated May 19, 2023, as void ab-initio on the basis that CIRP had been initiated against the assessee on March 11, 2019, under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016.
During the proceedings, the Departmental Representative (DR), Smt. Sanyogita Nagpal, contended that the CIT(A) erroneously annulled the assessment merely on the grounds of CIRP initiation. The ITAT observed that the CIT(A) had relied on the Supreme Court’s decision in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., wherein the apex court ruled that once a resolution plan is approved under Section 31(1) of the IBC, all claims provided therein are frozen, and all other dues are extinguished. In this case, the resolution plan was approved on July 31, 2023, whereas the assessment order was passed on May 19, 2023, prior to the plan’s approval.
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The Tribunal further referred to the Supreme Court’s ruling in Sundaresh Bhatt, Liquidator of ABC Shipyard v. Central Board of Indirect Taxes and Customs, where it was held that tax authorities may assess tax dues but cannot initiate recovery during the moratorium period.
Additionally, the ITAT noted that a co-ordinate bench in the assessee’s case for AY 2013-14 had set aside a similar order passed by CIT(A). Given this precedent, the ITAT ruled that the assessment order could not have been declared void ab-initio merely due to CIRP initiation. Consequently, the matter was remanded back to the CIT(A) for fresh adjudication.
The appeal filed by the Revenue was allowed in these terms, clarifying that while the issue is now largely academic due to the resolution plan’s approval, the assessment order’s validity must be determined correctly in accordance with the law.
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