The Nagpur Bench of Income Tax Appellate Tribunal ( ITAT ), on hearing two parallel cases, held that no legal action including Income Tax can be proceed by or against the party whose liquidation order is passed. On the interpretation of such a legal provision, the bench dismissed both the appeals before it.
The Revenue Department filed an appeal challenging an order made by the Commissioner of Income Tax (Appeals) [CIT(A)] dated 21/06/2016 on the assessment years 2007-08 and 2009-10. Parallelly, Gigeo Construction Co.Pvt.Ltd., the assessee, filed an appeal for the assessment year 2003-04, which challenged an order by the CIT(A)-3 Nagpur, dated 28/12/2016. Both these appeals were dismissed by the ITAT because the company had undergone insolvency proceedings under the IBC.
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In the instant case, the revenue department had filed an appeal against the order passed by the CIT(A) on the ground that the CIT(A) had caused an error in revising the disallowance under Section 40(a)(ai) to a lesser amount as compared to the one ordered by the Assessing officer.
The ITAT, on hearing the submission made by Authorized Representatives (A.R) on behalf of the assessee, held that it was evident that the assessee company had gone into insolvency proceedings under the Insolvency and Bankruptcy Code Act. A copy of an order passed by the National Company Law Tribunal ( NCLT ) dated 04/06/2024, a copy of Form-A: Public Announcement and a newspaper clipping of the same were provided to prove the legitimacy of the insolvency proceedings.
The Departmental Representative could not provide any arguments contradicting the submissions made by the A.R. The ITAT, after considering both sides, held that in the light of the provisions of the Insolvency and Bankruptcy Code, 2016 and the judicial pronouncements of various Courts, including that of the Hon’ble Supreme Court and Hon’ble Bombay High Court and other Jurisdictional Benches which strongly support the case of assessee.
The bench further held that NCLT has prohibited all proceedings against before any of the Courts, including this Tribunal. As a result, the appeals filed by the revenue for the assessment years 2007-08 and 2009-10 were dismissed. As in the case of the assessee’s appeal, the appellant assessee submitted that the order passed by the CIT(A) regarding the assessment year 2003-04 was illegal, invalid and wrong in law.
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While considering the submissions made by the appellant assessee, the ITAT upheld the NCLT’s order to prohibit the proceedings before the Tribunal. The bench also resorted to a judgement of the Hon’ble Supreme Court dated 10/08/2018 in PCIT v/s Monnet Ispat and Energy Ltd., in which the apex court held that in the light of Section 238 of the Insolvency and Bankruptcy Code, 2016, it is evident that the code will override anything inconsistent contained in any other enactment, including the Income Tax Act.
The ITAT, comprising of Shri V.Durga Rao ( Judicial member ) and Shri K.M.Roy ( Accountant Member ), also considered an order passed by the Tribunal’s Mumbai bench in the case of Prathibha Industries Ltd. v/s DCIT in which it was held by the tribunal that, when a liquidation order is passed under Section 52 of the IBC, no suit or legal proceedings shall be taken by or against the said party. The bench studied all such judicial pronouncements carefully and gave an order dismissing the appeal made by the assessee.
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