2022 (7) TMI 690 - AT - Income Tax

Assessment order passed during the continuation of moratorium period - In case of the assessee the matter is pending before the Insolvency Professional in terms of The Insolvency and Bankruptcy Code 2016 ( the Code ) and moratorium period has been declared as per section 14 of the Code - HELD THAT - It is pertinent to note that as per the provisions of section 14 of the Code institution of a Suit or continuation of pending Suit or proceedings against the Corporate Debtor including execution of any judgment decree or order in any Court of law Tribunal Arbitration Panel or other authorities shall be prohibited during the moratorium period. The period of moratorium shall have the effect from the date of such order till the completion of CIRP; or if during the CIRP period Hon ble NCLT approves the resolution plan under section 31(1) or passes an order for liquidation of corporate debtor under section 33 of the Code moratorium shall cease to have effect on date of such order. It has not been disputed by either of the parties that moratorium period is still continuing in the present case. We find that the Hon ble Supreme Court in case of Alchemist Asset Reconstruction Co. Ltd. v/s Hotel Gaudavan Pvt. Ltd. 2017 (12) TMI 1107 - SUPREME COURT held that even arbitration proceedings cannot be initiated after imposition of the moratorium under section 14(1)(a) has come into effect and it is non est in law and could not have been allowed to continue. We are of the view that in case of assessment proceedings the only option available with the Assessing Officer is to keep the proceedings in abeyance during the continuation of moratorium period as per section 14 of the Code and there is no option to quash the same in totality. Since if the assessment proceeding is dropped then same cannot be revived upon completion of the moratorium period and only remedy available with the Assessing Officer will be under the provisions of section 154/147/263 of the Act provided the jurisdictional conditions as laid down in the said sections are satisfied. Appeal by the assessee have been filed by the Director of the assessee company which after initiation of CIRP has become functus officio. We further find that the Interim Resolution Professional / Resolution Professional has not been impleaded as a party in the appeals before us by filing revised Form No. 36. Similarly in the appeal filed by the Revenue also revised Form No. 36 including the Interim Resolution Professional / Resolution Professional has not been filed. Once the insolvency proceedings commenced under the Code all the litigations are to be pursued by Interim Resolution Professional / Resolution Professional appointed by the Committee of Creditors and not by the company. In view of the above we are of the considered view that the present appeals in the present form are not maintainable. Thus respectfully following the aforesaid decision in Monnet Ispat Energy Ltd. ( 2017 (9) TMI 1907 - DELHI HIGH COURT which approach has also been adopted by various coordinate bench of the Tribunal we dismiss the present cross appeals with a liberty that upon completion of the moratorium period if it is so decided both the parties may seek recall of this order by impleading Managing Director / Director representing the new management of the assessee company or the Official Liquidator as the case may be.

Summary

Issues:
Challenges to orders under section 250 of the Income Tax Act for multiple assessment years due to ongoing insolvency proceedings and moratorium period.

Analysis:
The cross appeals were filed challenging orders under section 250 of the Income Tax Act for various assessment years. The assessee's matter was pending before the Insolvency Professional under The Insolvency and Bankruptcy Code, 2016, with a declared moratorium period. A petition was filed against the assessee before the National Company Law Tribunal, leading to the commencement of Corporate Insolvency Resolution Process. The Hon'ble NCLT declared a moratorium period under the Code. The learned Authorised Representative requested adjournment of the appeals due to the ongoing CRIP and moratorium. The Hon'ble Supreme Court precedent established that no suits or proceedings could continue against a Corporate Debtor during the moratorium period.

The Hon'ble Calcutta High Court decision highlighted the need to keep proceedings in abeyance during insolvency proceedings and the effect of Section 14 of the Code. The court emphasized that assessment orders passed during the moratorium period should be set aside and proceedings kept in abeyance until the completion of insolvency resolution proceedings. However, the Delhi High Court clarified that the Code's provisions prevail over other laws, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor during the moratorium period.

The appeals filed by the assessee were found to be not maintainable as the Director of the company became functus officio after CIRP initiation, and the Interim Resolution Professional was not impleaded. The Tribunal dismissed the appeals, following the precedent set by the Delhi High Court and Supreme Court, with the provision for parties to seek recall of the order upon completion of the moratorium period by impleading relevant parties like the Managing Director or Official Liquidator.

In conclusion, the Tribunal dismissed the cross appeals due to the ongoing moratorium period and insolvency proceedings, emphasizing the overriding effect of the Code's provisions and the need for proper party representation in such cases.