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2025 (4) TMI 1448 - AT - Income TaxIncome tax demand against company dissolved - HELD THAT - In the case of Rishi Ganga Power Corporation Ltd. 2023 (11) TMI 201 - DELHI HIGH COURT held that where National Company Law Tribunal admitted insolvency petition against assessee but revenue in terms of Insolvency and Bankruptcy Code 2016 had not lodged its claim with RP revenue could not enforce assessment order and demand notice. In the instant facts we observe that the assessment was completed and demand was raised on the assessee on 01.12.2017 whereas the order of NCLT u/s 30(6) r.w.s. 31 of IBC was passed on 06.12.2023. In the Resolution Plan the Department had not filed any claim for recovery of tax demand with respect to outstanding demand against the assessee. Therefore assessee s case and the judicial precedents cited above the Department cannot now claim and recover from the assessee an amount of arrears that accrued prior to approval of Resolution Plan u/s 31 of IBC. Appeal of the Department is dismissed and the appeal of the assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this matter include: (a) Whether the Commissioner of Income Tax (Appeals) erred in admitting additional evidence without satisfying the conditions prescribed under Rule 46A of the Income Tax Rules, 1962, especially when the Assessing Officer had provided ample opportunity to the assessee to furnish requisite details. (b) Whether the Commissioner of Income Tax (Appeals) erred in deleting additions made under Section 68 of the Income Tax Act without proper examination of the applicability of precedents to the facts of the case. (c) Whether the Assessing Officer's order should have been upheld by the Commissioner of Income Tax (Appeals) in respect of the additions made. (d) Whether the Income Tax Department's appeal is maintainable in light of the fact that it did not file any claim before the National Company Law Tribunal (NCLT) during the Corporate Insolvency Resolution Process (CIRP) and the Resolution Plan was approved by the NCLT without including the Department's claim. (e) Whether the outstanding demand and interest raised by the Income Tax Department prior to the approval of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC) survive after the approval of the Resolution Plan by the NCLT. (f) Whether the Revenue can enforce tax demands or continue proceedings in respect of dues not admitted or included in the Resolution Plan approved by the NCLT. (g) Whether the assessee was entitled to further opportunity to submit evidence regarding the source of funds for certain loans, which were added back by the Commissioner of Income Tax (Appeals). 2. ISSUE-WISE DETAILED ANALYSIS Issue (a) and (b): Admission of Additional Evidence and Deletion of Additions under Section 68 The Department challenged the Commissioner of Income Tax (Appeals) for admitting additional evidence without proper satisfaction of the conditions laid down in Rule 46A of the Income Tax Rules, 1962, and for deleting additions made under Section 68 of the Income Tax Act. The Department contended that the Assessing Officer had given ample opportunity to the assessee to furnish details, and the Commissioner erred in relying on precedents without examining their applicability to the facts. The Tribunal noted these contentions but did not delve deeply into these procedural objections, as the principal issue that emerged related to the effect of the Resolution Plan approved by the NCLT on the outstanding tax demands. The Tribunal's focus shifted to the question of whether the tax demands could survive after the insolvency resolution process. Issue (c): Whether the Assessing Officer's Order Should Have Been Upheld The Department argued that the Commissioner of Income Tax (Appeals) ought to have upheld the additions made by the Assessing Officer. However, the Tribunal observed that the Assessing Officer's order was passed on 01.12.2017, and subsequent proceedings and appeals had resulted in a substantial reduction of demand. The Tribunal considered the impact of the insolvency resolution process on the enforceability of the demand. Issue (d), (e), and (f): Effect of Non-Filing of Claim by Income Tax Department before NCLT and Extinguishment of Tax Demands The pivotal issue before the Tribunal was whether the Income Tax Department's failure to file a claim before the NCLT during the CIRP process and the approval of the Resolution Plan without inclusion of the Department's claim extinguished the outstanding tax demand and interest raised prior to the Resolution Plan's approval. The Tribunal examined the factual matrix: the Resolution Plan was approved by the NCLT on 06.12.2023, and the Income Tax Department had not submitted any claim in response to the public announcement inviting claims from creditors. The list of claims admitted in the Resolution Plan did not include any claim of the Income Tax Department. The Tribunal relied heavily on the Supreme Court's decision in Ghanashyam Mishra & Sons (P.) Ltd. vs. Edelweiss Asset Reconstruction Co. Ltd., which clarified that once a Resolution Plan is approved under Section 31 of the IBC, all claims not included in the plan stand extinguished and no person, including Central or State Government authorities, can initiate or continue proceedings in respect of such claims. The Court emphasized that the Resolution Plan binds the corporate debtor, its creditors, and other stakeholders, including government authorities. The Tribunal further referred to the ITAT Delhi decision in ACIT (OSD) vs. GAIL Mangalore Petrochemicals Ltd. and the Delhi High Court decision in TUF Metallurgical (P.) Ltd. vs. Union of India, which upheld the principle that tax claims not submitted during the CIRP process and not included in the Resolution Plan are extinguished post-approval. The Delhi High Court reiterated that the Revenue's right to recover such dues is extinguished and no proceedings can be continued. The Tribunal also cited subsequent authoritative decisions, including the Supreme Court's dismissal of appeals in Commissioner of Central Excise and Service Tax Vadodra v. EMCO Ltd., which reaffirmed the binding nature of the Resolution Plan on statutory authorities. The Department's argument that it being the State exchequer cannot be bound by the Resolution Plan was rejected based on the above precedents. Issue (g): Opportunity to Submit Evidence Regarding Source of Funds The assessee contended that the Commissioner of Income Tax (Appeals) erred in confirming additions of certain loans as unexplained due to non-submission of evidence regarding the source of funds and in not granting further opportunity to submit such evidence. The Tribunal noted these grounds but did not elaborate on this issue in detail, as the principal legal question revolved around the effect of the Resolution Plan on the outstanding tax demands. 3. SIGNIFICANT HOLDINGS The Tribunal's key legal determinations and principles established are as follows: "Once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31 [of the IBC], 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 Tribunal concluded that since the Income Tax Department did not file any claim before the NCLT during the CIRP and was not included in the Resolution Plan, the outstanding demand and interest raised prior to the approval of the Resolution Plan stand extinguished. It was held that the Department cannot now claim and recover arrears that accrued prior to the approval of the Resolution Plan under Section 31 of the IBC. The Tribunal rejected the Department's contention that it should be allowed to enforce the impugned orders and notices despite non-inclusion in the Resolution Plan. Accordingly, the Tribunal dismissed the Department's appeal and allowed the assessee's appeal.
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