2023 (3) TMI 970 - AT - Income Tax

Parallel proceedings under Income-tax Act, 1961 and IBC, 2016 - Proceedings against corporate debtor - financial creditor Application u/s 7 of Insolvency and Bankruptcy Code 2016 against the assessee before NCLT allowed - HELD THAT - As per the provisions of section 14 of the Code institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority 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 the corporate insolvency resolution process. In the present case, the appeal filed by the Revenue is an institution of suit against the corporate debtor, which is prohibited under section 14 of the Code. Hon ble Supreme Court in the case of Pr. CIT v. Monnet Ispat Energy Ltd 2018 (8) TMI 1775 - SC ORDER has upheld overriding nature and supremacy of the provisions of the Code over any other enactment in case of conflicting provisions, by virtue of a non obstante clause contained in section 238 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. As per section 31 of the Code, resolution plan as approved by the Adjudicating Authority shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. Thus, this will prevent State authorities, Regulatory bodies including Direct Indirect Tax Departments from questioning the resolution plan. Therefore, there is no reason to keep this appeal pending. We dismiss the appeal filed by the Revenue with the liberty to the Assessing Officer to file the appeal afresh after completion of moratorium period upon the revival of the Corporate Debtor as per Resolution Plan as approved by the Adjudicating Authority or upon appointment of the Liquidator, as the case may be. Appeal filed by the assessee also cannot be sustained as the assessee did not furnish any permission obtained from Hon ble NCLT as held in Mrs. Jai Rajkumar v. Stanbic Bank Ghana Ltd. 2019 (1) TMI 1254 - MADRAS HIGH COURT . Further, no letter of authority issued by the Interim Resolution Professional in favour of the Authorised Signatory of the assessee, in respect of present appeal before us, has been filed. The appeal filed by the assessee is dismissed with the liberty to file the appeal afresh by the Interim Resolution Professional / Resolution Professional, as may be substituted by the Hon ble NCLT, on behalf of the Corporate Debtor with prior permission of the Hon ble NCLT; or after completion of moratorium period upon the revival of the Corporate Debtor as per Resolution Plan as approved by the Adjudicating Authority or upon appointment of the Liquidator.

Summary

Issues:
1. Appeal against order of Ld. CIT(A)-4, Kolkata under section 143(3) of the Income-tax Act, 1961.
2. Effect of Insolvency and Bankruptcy Code, 2016 on pending legal proceedings.
3. Appointment of Interim Resolution Professional and moratorium period.
4. Prohibition on institution of suits during moratorium period.
5. Binding nature of resolution plan under section 31 of the Insolvency and Bankruptcy Code, 2016.
6. Dismissal of appeal by Revenue and assessee due to non-compliance with NCLT permissions.

Analysis:

1. The appeal was filed against the order of Ld. CIT(A)-4, Kolkata under section 143(3) of the Income-tax Act, 1961. The appellant did not appear during the hearing, leading to an ex-parte disposal of the appeal. The nature of the dispute necessitated the disposal of the appeal based on available records.

2. The matter involved the Insolvency and Bankruptcy Code, 2016, where the corporate debtor was under the Corporate Insolvency Resolution Process (CIRP). The National Company Law Tribunal, Kolkata Bench, appointed an Interim Resolution Professional to oversee the CIRP, and a moratorium period was declared under section 14 of the Code.

3. The appointment of the Interim Resolution Professional was a crucial step in the CIRP process, as per the provisions of the Insolvency and Bankruptcy Code, 2016. The moratorium period, as per section 14 of the Code, prohibited the institution of suits or continuation of pending suits against the corporate debtor.

4. The Hon'ble Supreme Court's rulings emphasized the overriding nature of the Insolvency and Bankruptcy Code, 2016, over conflicting provisions of other enactments. The moratorium period had legal implications, including the prohibition of initiating legal proceedings against the corporate debtor.

5. Section 31 of the Insolvency and Bankruptcy Code, 2016, highlighted the binding nature of the resolution plan approved by the Adjudicating Authority on all stakeholders involved. This provision prevented State authorities and regulatory bodies from challenging the resolution plan.

6. The appeal filed by the Revenue was dismissed due to the ongoing moratorium period, with the Assessing Officer granted the liberty to refile the appeal after the moratorium period upon the revival of the Corporate Debtor as per the Resolution Plan. Similarly, the appeal filed by the assessee was dismissed for lack of NCLT permissions and authorization from the Interim Resolution Professional.

In conclusion, the judgment highlighted the legal implications of the Insolvency and Bankruptcy Code, 2016 on pending legal proceedings, emphasizing the binding nature of resolution plans and the prohibition on initiating suits during the moratorium period. Both appeals were dismissed due to non-compliance with NCLT permissions and the ongoing CIRP process, with the option to refile the appeals after fulfilling the necessary requirements.