2024 (5) TMI 1301 - AT - Income Tax

Dismissal of assessee s appeal as not maintainable and having become infructuous due to the pendency of liquidation process - Penalty passed u/s 271 imposed on assessee s failure to get its accounts audited u/s. 44AB - Whether, the provisions of the IBC code 2016 would prevail over the Income Tax Act 1961, and if so to what extent? HELD THAT - The provisions of IBC 2016 would prevail over the Income Tax Act. However, Income Tax authorities have limited jurisdiction to assess/determine the quantum of Income Tax dues, but have no authority to initiate recovery of such dues at its own during the period of moratorium in violation of Section 14 or 33(5) of the IBC. The Income Tax Authorities are like any other creditor, may stake their claim before liquidator in the statutory limitation period provided under the IBC. The first point is accordingly determined in positive in favour of the assessee. Whether CIT(A) erred in not adjudicating the issue on merit, merely because of the pendency of the liquidation process against the assessee corporate debtor? - As in view of the findings given at point no.1, it is easily concluded that Learned CIT(A) has erred in not adjudicating the matter which was with respect to the determination of tax dues only, more so, when the liquidator, himself, was pursuing the matter. The second point is accordingly determined in positive in favour of the assessee and against the revenue department. Failure to Adjudicate on Merit - CIT(A) has not adjudicated the issues involved before him on merit despite no legal impediments. The learned representative of the assessee company has filed electronically generated copy of the order dated 02.04.2024, passed against the reassessment order dated 17.05.2023 passed u/s. 147 r.w.s 144 of the Income Tax Act for the relevant Assessment Year 2017 18, wherein the part of additions were not found sustainable due to moratorium imposed upon the appellant corporate debtor u/s. 33(5) of IBC. This apart, part of additions u/s. 69A of the Act have also not been adjudicated. This submission of appellant is not fruitful in view of our findings recorded at point No. 1 in respect of the fact that the income tax authorities are not barred from determining the tax dues during the moratorium imposed upon the appellant assessee/corporate debtor in terms of section 14 or section 33(5) of the IBC 2016. In view of our finding given at point No. 1 and 2 above, the case deserves to be restored back to the file of learned CIT(A).

Summary

Issues Involved:
The judgment involves issues related to the imposition of penalty under section 271B of the Income Tax Act 1961 for failure to get accounts audited u/s. 44AB, the impact of the Insolvency and Bankruptcy Code 2016 on income tax proceedings, and the failure of the CIT(A) to adjudicate the matter on merit despite the pendency of liquidation process.

Imposition of Penalty u/s. 271B:
The appeal was filed against the penalty order imposed under section 271B of the Act due to the assessee's failure to get its accounts audited u/s. 44AB. The CIT(A) dismissed the appeal as not maintainable and infructuous due to the ongoing liquidation process, leading the assessee to approach the Tribunal for relief.

Impact of Insolvency and Bankruptcy Code 2016:
The Tribunal deliberated on whether the IBC 2016 would prevail over the Income Tax Act 1961 and to what extent. It was noted that the Income Tax Authorities were aware of the corporate debtor's liquidation status and that the IBC Code would override the provisions of the Income Tax Act, limiting the authority of the Income Tax Authorities during the moratorium period.

Failure to Adjudicate on Merit:
The CIT(A) was found to have erred in not adjudicating the tax dues issue on merit, especially when the liquidator was actively involved in the matter. Despite the lack of legal impediments, the CIT(A) did not address the issues involved, leading to the Tribunal's decision to partially allow the appeal and remand the case back to the CIT(A) for a fresh order on merit.

The Tribunal held that the IBC 2016 prevails over the Income Tax Act, limiting the Income Tax Authorities' jurisdiction to assess tax dues but not initiate recovery during the moratorium period. The CIT(A) was found to have erred in not adjudicating the matter on merit, leading to the appeal being partially allowed and the case remanded back for a fresh order.