2022 (12) TMI 1310 - AT - Income Tax

CIRP - Demand of income tax - Validity of order of Commissioner of Income Tax (appeals) passed u/s 250 - overriding nature and supremacy of the provisions of the Code over any other enactment in case of conflicting provisions by virtue of non obstante clause contained in section 238 of the Code - Assessee is admitted to Corporate Insolvency Resolution Process ( CIRP ) and moratorium under section 14 of Insolvency and Bankruptcy Code, 2016 has commenced - HELD THAT - 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. As noted above, it has been admitted that the moratorium period has commenced in the present case - 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. MONNET ISPAT AND ENERGY LTD. 2018 (8) TMI 1775 - SC ORDER upheld the overriding nature and supremacy of the provisions of the Code over any other enactment in case of conflicting provisions by virtue of non obstante clause contained in section 238 of the Code. Thus, we are of the considered view that the present cross-appeals are a continuation of pending Suit against the Corporate Debtor, which is prohibited under section 14 of the Code. It is further pertinent to note that under section 178(6) of the Act, as amended w.e.f. 01/11/2016, the Code shall have overriding effect. Appeal by the assessee have been filed by the Managing Director of the assessee company, which after initiation of CIRP has become functus officio. We further find that the Interim Resolution Professional has not been impleaded as a party in the present cross-appeals before us by filing revised Form No. 36. Once the insolvency proceedings commenced under the Code, all the litigations are to be pursued by Interim Resolution Professional appointed by the Committee of Creditors. In view of the above, we are of the considered view that the present cross-appeals, in the current form, are not maintainable. We dismiss the present appeals with a liberty that upon completion of the moratorium period, if it is so decided, the assessee and the Revenue 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 involved:
Cross-appeals challenging the order passed under section 250 of the Income Tax Act, 1961 for the assessment year 2011-12.

Analysis:
1. The cross-appeals were filed by the assessee and the Revenue challenging the order passed by the Commissioner of Income Tax (Appeals). Despite repeated instances of the assessee not appearing, the Tribunal proceeded ex-parte and heard the Departmental Representative based on the available material.

2. The learned Departmental Representative provided details regarding the appointment of an Interim Resolution Professional (IRP) for the assessee, who is admitted to Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The moratorium period, as per the Code, prohibits the institution of suits or continuation of proceedings against the Corporate Debtor.

3. Referring to a Supreme Court case, it was established that even arbitration proceedings cannot be initiated during the moratorium period. The Hon'ble Delhi High Court's decision highlighted the Code's supremacy over other laws, emphasizing that the moratorium continues until the completion of CIRP or approval of the resolution plan.

4. The Tribunal noted that the present cross-appeals are a continuation of pending suits against the Corporate Debtor, which is prohibited under the Code. The Code's overriding effect as per section 178(6) was also acknowledged, emphasizing the importance of the moratorium period.

5. The appeals filed by the assessee were found to be invalid post the initiation of CIRP, as the Managing Director became functus officio. The Interim Resolution Professional was not impleaded in the appeals, leading to the conclusion that the appeals were not maintainable in their current form.

6. Following the precedent set by the Hon'ble Delhi High Court and various Tribunal benches, the Tribunal dismissed the cross-appeals with the liberty for the parties to seek recall of the order upon completion of the moratorium period by impleading the appropriate representatives.

In conclusion, the cross-appeals by the assessee and the Revenue were dismissed by the Tribunal, emphasizing the importance of adhering to the provisions of the Code during the moratorium period.