2024 (11) TMI 851 - AT - Income Tax

Validity of proceedings against company dissolved/insolvent - HELD THAT - As per the provisions of Insolvency and Bankruptcy Code, 2016, and the judicial pronouncements of various Courts including that of the Hon ble Supreme Court and Hon ble Bombay High Court and other Jurisdictional Benches which strongly support the case of assessee. The NCLT has prohibited all the proceedings against the assessee before any of the Courts including this Tribunal and also judgments relied upon by the learned A.R. for the assessee which covers the case of the assessee respondent. Hence, in view of the judicial pronouncements, as relied upon by the learned A.R. appearing for the assessee, the appeal filed by the Revenue is liable to be dismissed.

Issues Involved:

1. Disallowance under Section 40(a)(ia) of the Income Tax Act.
2. Addition of Annual Letting Value (ALV) of unsold flats under the head "income from house property."
3. Disallowance under Section 40A(3) of the Income Tax Act.
4. Addition of inflated expenses and unaccounted income.
5. Penalty under Section 271(1)(c) of the Income Tax Act.
6. Impact of Insolvency and Bankruptcy Code proceedings on pending tax appeals.

Detailed Analysis:

1. Disallowance under Section 40(a)(ia):

For the assessment years 2007-08 and 2008-09, the Revenue challenged the CIT(A)'s decision to restrict disallowance under Section 40(a)(ia) to amounts payable as of the last day of the year. The Revenue argued that according to the Gujarat High Court in Sikandarkhan N. Tunvar and the Calcutta High Court in Crescent Exports Syndicate, disallowance should cover amounts payable at any time during the year. However, the Tribunal found that the assessee's case was covered by the judicial pronouncements supporting the assessee's position, leading to the dismissal of the Revenue's appeals.

2. Addition of ALV of Unsold Flats:

The Revenue contested the deletion of the addition of ALV of unsold flats under the head "income from house property," referencing the Delhi High Court's decision in Ansal Housing Finance & Leasing Co. Ltd. The Tribunal, however, upheld the CIT(A)'s decision, dismissing the Revenue's appeals for the assessment years 2007-08 and 2008-09, as the proceedings against the assessee were prohibited due to insolvency proceedings.

3. Disallowance under Section 40A(3):

For the assessment year 2008-09, the Revenue argued against the deletion of disallowance under Section 40A(3) for payments exceeding Rs. 20,000 made otherwise than by account payee cheque or bank draft. The Tribunal, considering the insolvency proceedings and the judicial pronouncements, dismissed the Revenue's appeal.

4. Addition of Inflated Expenses and Unaccounted Income:

The Revenue appealed against the deletion of additions for inflated expenses and unaccounted income for the assessment year 2008-09. The Tribunal, noting the insolvency proceedings and the judicial support for the assessee, dismissed the Revenue's appeal.

5. Penalty under Section 271(1)(c):

The assessee's appeal for the assessment year 2003-04 challenged the penalty under Section 271(1)(c), arguing it was unjustified and excessive. The Tribunal, considering the insolvency proceedings and relevant judicial pronouncements, dismissed the assessee's appeal, granting liberty to seek revival of the appeal subject to the outcome of the insolvency proceedings.

6. Impact of Insolvency and Bankruptcy Code Proceedings:

The Tribunal noted that the assessee company had undergone insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, with the NCLT prohibiting proceedings against the assessee. The Tribunal emphasized that the IBC overrides other enactments, including the Income Tax Act, as supported by the Supreme Court's decision in PCIT v. Monnet Ispat And Energy Ltd. Consequently, all appeals were dismissed, with liberty to seek revival based on the outcome of the IBC proceedings.

Conclusion:

All appeals by the Revenue for the assessment years 2007-08 and 2008-09, and the assessee's appeal for the assessment year 2003-04, were dismissed due to the overriding effect of the Insolvency and Bankruptcy Code proceedings. The Tribunal provided liberty to the parties to seek revival of the appeals based on the outcome of the insolvency proceedings.

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