2022 (6) TMI 1362 - AT - Income Tax

Proceeding initiated or continued till the completion of liquidation proceedings - parallel proceedings under Income-tax Act 1961 and IBC 2016 - HELD THAT - We observe that the liquidation proceedings has commenced as per the order of the Hon ble NCLT Mumbai in assessee s case thereby appointing Official Liquidator. We are aware that from the time of appointment of Official Liquidator the assessee company became defunct and the Official Liquidator steps into the shoes of the assessee. In the present case it is seen that the Official Liquidator has not appeared before us so far to present the case of the assessee. Even during the moratorium period specified under section 14(1)(a) of the IBC Code the Ld.representative for the AR made no representation on several hearings and the case was adjourned on various hearings. Therefore we are of the considered opinion that no suit or other legal proceedings shall be initiated by or against the corporate debtor which is also applicable for pending proceedings and the Proviso to section 33(5) also provides prior approval of the Adjudicating Authority to be obtained by the Official Liquidator. It is also to be observed that in case of parallel proceedings under Income-tax Act 1961 and IBC 2016 the IBC has an overriding effect over the provisions of the Income-tax Act which has been decided by Hon ble Apex Court in Principal Commissioner of Income-tax Vs Monnet Ispat Energy Ltd 2018 (8) TMI 1775 - SC ORDER wherein the Hon ble Apex Court had observed that as per section 238 of IBC the IBC Code will override anything inconsistent contained in any other enactment including the Income-tax Act. We hereby dismiss the cross appeals filed by the Revenue and the Assessee with the liberty to the appellants / Official Liquidator to recall the present order when the occasion warrants.

Summary

Issues: Cross appeals challenging order of Ld.CIT(A) for various assessment years, delay in filing appeals, effect of liquidation proceedings on legal proceedings, overriding effect of IBC over Income-tax Act, dismissal of appeals.

Analysis:
1. Delay in Filing Appeals: The judgment addresses a 10-day delay in filing cross appeals by the Revenue and the Assessee. The Tribunal, after hearing the parties, decided to condone the delay and admit the appeals for adjudication.

2. Effect of Liquidation Proceedings on Legal Proceedings: The assessee, engaged in construction and infrastructure projects, faced liquidation proceedings initiated by Bank of Baroda under the Insolvency and Bankruptcy Code-2016. The Tribunal noted that no suit or legal proceeding can be initiated against the corporate debtor once a liquidation order has been passed, as per section 33(5) of the IBC Code. The Official Liquidator, appointed by the NCLT, steps into the shoes of the assessee during liquidation.

3. Overriding Effect of IBC over Income-tax Act: The judgment highlights that in cases of parallel proceedings under the Income-tax Act, 1961, and IBC, 2016, the IBC prevails over the Income-tax Act. Citing a Supreme Court decision, it is noted that the IBC Code overrides any inconsistency with other enactments, including the Income-tax Act. Section 178 of the Income-tax Act has been amended to prevent conflicts with the IBC Code.

4. Dismissal of Appeals: Based on the observations and legal precedents, the Tribunal dismissed the cross appeals filed by both the Revenue and the Assessee. The parties were granted liberty to recall the order when necessary. The judgment also referenced a Supreme Court case regarding the issue of limitation in filing fresh appeals.

In conclusion, the Tribunal dismissed the appeals, emphasizing the impact of liquidation proceedings on legal actions, the overriding effect of the IBC over the Income-tax Act, and the importance of adhering to statutory provisions in such cases.