2024 (7) TMI 1141 - HC - Income Tax

Interest u/s 234A, 234B and 234C post Corporate Insolvency Resolution Process - as argued Tribunal which had authorised the Assessing Officer only to verify the inclusion of income tax due in the IRP, has without giving any notice to the Assessee unilaterally charged interest u/s 234A, 234B and 234C resulting in an enhancement of demand - HELD THAT - In Ghanashyam Mishra Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. Ors. 2021 (4) TMI 613 - SUPREME COURT and M/S. Ruchi Soya Industries Ltd. v. Union Of India Ors. 2022 (3) TMI 60 - SUPREME COURT as held that once a resolution plan is duly approved by the adjudicating authority under Section 31(1), the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan The amount has stood frozen by the operation of moratorium under IBC and also not part of the Resolution Plan. Hence, no claim can be made against the Petitioner. The charge of Interest amounting to Rs. 9,32,218.00 under section 234A, Rs. 10,79,21,201.00 under section 234B, Rs. 44,71,790.00 under Section 234C of the Income Tax Act does not survive. The order passed under Section 254 of the Income Tax Act giving effect to the order of the ITAT and the Notice of Demand u/s 156 are hereby quashed and the Petitioner be refunded an amount which was paid pertaing to the Assessment Year 2010-11.

Summary

Issues:
Challenge to demand raised by ACIT under sections 234A, 234B, and 234C of the Income Tax Act for Assessment Year 2010-11 based on ITAT order.

Detailed Analysis:

I. Factual Matrix of the Case:
The petitioner challenged a demand raised by the ACIT for Assessment Year 2010-11 following an ITAT order. The petitioner filed returns, faced insolvency proceedings, and had a Resolution Plan approved by NCLT. The ITAT allowed the appeal, questioning the inclusion of income tax liabilities in the Resolution Plan.

II. Submissions of Opposite Parties:
The Opposite Party argued that interest under sections 234A, 234B, and 234C was added as per IT Act provisions. They contended that the demand raised was legal and just, considering the petitioner's awareness of tax implications. The impugned order was passed after providing an opportunity to the petitioner.

III. Court's Reasoning and Analysis:
The Court noted that the Resolution Plan was approved by NCLT, freezing claims not part of the plan. Citing IBC provisions and Supreme Court precedents, the Court held that the frozen amount could not be claimed against the petitioner. The interest charges under sections 234A, 234B, and 234C were deemed unsustainable. Consequently, the order giving effect to the ITAT decision and the Notice of Demand were quashed, directing a refund to the petitioner.

The judgment highlighted the legal intricacies of insolvency proceedings, tax liabilities, and the binding nature of Resolution Plans under IBC. The Court's analysis emphasized the statutory provisions and Supreme Court rulings to determine the validity of the demand raised by the ACIT. Ultimately, the Court ruled in favor of the petitioner, ordering a refund and quashing the impugned order and Notice of Demand.