Income-tax Proceedings Halted if the Petition as Corporate Debtor Admitted under IBC: ITAT

Case Details: Deputy Commissioner of Income-tax v. Sumeet Industries Ltd. - [2023] 150 taxmann.com 464 (Surat-Trib.)

Judiciary and Counsel Details

• • Pawan Singh, Judicial Member & Dr A.L. Saini, Accountant Member
  • Rasesh Shah, CA for the Appellant.
  • Ashok B. Koli CIT (DR) for the Respondent.

Facts of the Case

The Assessing Officer (AO) filed the instant appeal against the order passed by the CIT(A). Assessee stated that the National Company Law Tribunal (NCLT) approved the resolution plan of IDBI Bank Limited under section 31(1) of the Insolvency and Bankruptcy Code, 2016 (IBC) for the insolvency resolution of the corporate debtor i.e. assessee.

Based on this order, the assessee contended that all the appeals filed by the assessee were liable to be allowed and prayed for a direction to Assessing Officer (AO) to modify/revise/reduce/cancel the demand according to the provision of section 156A of the Income-tax Act. Assessee also contended that the appeal filed by AO does not survive.

AO contended that the interest of revenue may be protected and revenue may be given liberty to move appropriate application/appeal before this Tribunal or NCLT.

ITAT Held

The Tribunal held that NCLT had declared a moratorium under section 14 of the IBC and prohibited the continuation of pending suits or proceedings against the assessee, including the execution of any judgement, decree or order in any court of law, Tribunal, arbitration panel or other authority.

Section 14 of IBC clearly states that adjudicating authority shall by order declare a moratorium for prohibiting the institutions of suits transferring or disposing of by corporate debtor of its assets, an action to foreclose, recover or enforce any security and the recovery of any property by an owner. Section 14 also states that the moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process.

Further, all claims, which are not a part of the resolution plan, shall stand extinguished, and no person will be entitled to initiate or continue any proceedings concerning a claim that is not a part of the resolution plan. It is also noted that section 238 of the IBC clearly says that provisions of the IBC shall have an overriding effect over all other laws. Thus, section 238 IBC makes it abundantly clear that provisions of the IBC would prevail over the Income-tax Act

Section 14 of the IBC is a self-explanatory provision. The claims, including statutory dues owned to the Central Government or any State Government, if not part of the resolution plan, is also extinguished. Therefore, there could be no continuation of any pending proceedings before the Income-tax Appellate Tribunal.

List of Cases Reviewed

• • Sirpur Paper Mills Ltd. v. Union of India [2022] 135 taxmann.com 188 (Telangana) (para 9) followed.

List of Cases Referred to

• • Ghanashyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021] 126 taxmann.com 132/166 SCL 237 (SC) (para 3)
  • Sirpur Paper Mills Ltd. v. Union of India [2022] 135 taxmann.com 188 (Telangana) (para 8).