2023 (3) TMI 1327 - HC - Income Tax

Validity of re-opening post insolvency proceedings - demand of income tax after the Approval of Resolution Plan - approval of the resolution by the NCLT - HELD THAT - NCTL has approved the resolution plan submitted by the company on 24th February, 2020. Since the resolution plan has already been approved, the instant appeal has become infructuous and, accordingly, stands dismissed.

Summary

Issues:
1. Appeal filed by revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2012-13.
2. Substantial questions of law regarding the similarity of facts with a previous case, treatment of retention amount as income, and correctness of accounting principles.
3. Impact of admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) on the appeal.

Analysis:
The High Court of Calcutta addressed the appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2012-13. The appeal was admitted based on substantial questions of law, including the similarity of facts with a previous case, the treatment of retention amount as income, and the correctness of accounting principles. The court heard arguments from both sides, with Mr. Om Narayan Rai representing the appellant/revenue and Mr. Avra Majumdar representing the respondent/assessee.

Regarding the substantial questions of law raised, the respondent/assessee argued that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) was admitted by the NCLT, Kolkata, leading to the declaration of a moratorium and approval of a resolution plan. The respondent contended that due to the approval of the resolution plan, the appeal had become infructuous and should be dismissed. The court noted that in a previous case involving the same assessee, appeals were dismissed on similar grounds, further supporting the respondent's argument.

In light of the above submissions and considering the impact of the insolvency proceedings on the appeal, the High Court dismissed the appeal filed by the revenue. The court found the appeal to be infructuous due to the approval of the resolution plan and the dismissal of similar appeals in the past. Consequently, the substantial questions of law were left open for future consideration. The judgment underscores the significance of insolvency proceedings and their implications on tax appeals, emphasizing the need for alignment between legal processes to ensure effective resolution of disputes.