2024 (10) TMI 1150 - AT - Income Tax

Income tax demand proceedings post insolvency - demand issued u/s 156 - Steps as secured creditor before the Hon ble NCLT against the tax liability arising in the present case - HELD THAT - Section 14 of IBC Code is very clear on the aspect that once moratorium is drawn and the insolvency commencement date is declared any institution of suits or definition of pending suits or proceedings against the creditor, debtor (in the present facts of the case of assessee before us) including the execution of any judgment, decree, or order in any Court of law, Tribunal, Arbitration Panel or other authority is to be prohibited. Admittedly, a registered Insolvency Professional is appointed by Hon ble NCLT and the assessee no longer could be represented by the representative to whom the authority was provided. Even otherwise, none appeared on behalf of the assessee before us today. At this juncture, we refer to the decision of in the case of Ghanshyam Mishra and Sons Pvt. Ltd 2021 (4) TMI 613 - SUPREME COURT wherein has considered a situation wherein, the resolution plan was approved by the adjudicating authority u/s 31(1) of the IBC Code. Hon ble Supreme Court observed that, once the resolution plan was drawn, the claim as provided in the resolution plan stood frozen, and will be binding on the corporate debtor, its employee, its members, creditors, Central Government and any State Government or legal authority, guarantor and other stakeholders. We note that in the present facts of the case, the resolution plan is yet to be finalized. When we read the newly inserted provisions of Section 156A of the Act, it is necessary to remand the appeal to the Ld. AO to take necessary steps/action before Hon ble NCLT. We deem it fit and proper to remand this appeal back to the Ld. AO to take necessary steps as per Section 156A of the Act

Summary

Issues:
1. Admittance of the assessee as a corporate debtor by NCLT and its implications on tax liabilities.
2. Interpretation of Section 14 of IBC regarding the prohibition of suits and proceedings against the corporate debtor.
3. Application of Section 156A of the Act in cases where tax liabilities are reduced due to insolvency proceedings.

Analysis:
1. The appeal arose from an order passed by the Ld. CIT(A)-17, Mumbai for Assessment Year 2007-08, following the assessee's admission as a corporate debtor by the NCLT. The NCLT imposed a moratorium under Section 14 of the IBC, prohibiting suits, proceedings, and asset transfers against the corporate debtor.

2. The Ld. DR argued that the demand under Section 156 of the Act cannot be enforced unless the Revenue is included as a secured creditor before the NCLT. Referring to Section 178(6) and newly inserted Section 156A, the DR highlighted the need for the Assessing Officer to modify the demand in conformity with the insolvency order.

3. The Tribunal observed that the appointment of a registered Insolvency Professional by the NCLT rendered the assessee unable to represent themselves. Citing a Supreme Court decision, the Tribunal emphasized that once a resolution plan is approved, the claims stand frozen. As the resolution plan was pending in this case, the Tribunal decided to remand the appeal to the Ld. AO for necessary steps before the NCLT under Section 156A of the Act.

4. Consequently, the Tribunal partially allowed the appeal, deeming it appropriate to remand the matter to the Ld. AO for further action in accordance with Section 156A of the Act. The decision was pronounced in open court on 18/10/2024.