2021 (7) TMI 245 - AT - Income Tax

Recovery proceedings - Attachment orders - NCLT's order is binging and any recovery of an amount in excess of the specified amount - HELD THAT - Hon'ble Supreme Court after considering the tax value involved, deemed it appropriate to dismiss the tax appeal leaving the question of law for adjudication at appropriate stage. The Hon'ble Rajasthan High Court in the case of Ultra Tech Nathdwara Cement Ltd. v. UOI 2020 (4) TMI 269 - RAJASTHAN HIGH COURT had held that NCLT's order is binging and any recovery of an amount in excess of the specified amount in the NCLT's order is totally illegal and arbitrary. The Hon'ble Andhra Pradesh Telangana High Court in the case of Leo Edibles Fats Limited v. Tax Recovery Officer 2018 (8) TMI 62 - TELANGANA ANDHRA PRADESH HIGH COURT had held that the Income Tax Department cannot claim any priority merely because of fact that order of attachment was issued long prior to initiation of liquidation proceedings under Code against company. The Madras High Court in the case of Official Assignee v. T.R. Bhuvaneswari 2016 (6) TMI 291 - MADRAS HIGH COURT had held that the Official Assignee need not go before Central Board of Direct Taxes praying for waiver of interest under sections 234A, 234B and 234C as Insolvency Court itself can consider question of waiver of interest in terms of power conferred under section 7 of Presidency Towns Insolvency Act, 1909. The other judicial pronouncements relied by the learned AR are also to the effect that NCLT orders are binding and the Revenue cannot recover any amount other than specifically mentioned in the said order. We are of the view that the Revenue being not in a position to recover any amount exceeding ₹ 1 lakh in the facts of this case, no useful purpose would be served in adjudicating the issue raised in this appeal. Taking into consideration the tax value involved, we dismiss the Department's appeal being below the monetary limit specified under the Board Circular No. 17/2019 dated 8th August, 2019.

Summary

Issues:
1. Adjudication of Revenue's appeal regarding recovery of tax arrears.
2. Consideration of NCLT order dated 09.07.2019 limiting recovery to ?1,00,000.
3. Analysis of relevant judicial pronouncements cited by the parties.
4. Decision on the dismissal of the Department's appeal and Cross Objection by the assessee.

Adjudication of Revenue's Appeal:
The appeal by the Revenue, challenging the CIT(A)'s order dated 30.11.2016 for the assessment year 2012-2013, was considered by the Appellate Tribunal. The learned AR argued that as per the NCLT order dated 09.07.2019, the Revenue could only recover ?1,00,000, citing judicial pronouncements such as CIT v. Moser Baer India Ltd. and others. The Departmental Representative did not contest the recovery limit but sought adjudication on the issue. The Tribunal noted the NCLT's acceptance of a resolution regarding disputed income tax liability, emphasizing that recovery exceeding ?1,00,000 would be inappropriate based on the judicial precedents cited.

NCLT Order and Judicial Pronouncements:
The resolution plan considered the disputed income tax liability, with a proposal to settle it at ?1,00,000. Citing cases like CIT v. Moser Baer India Ltd. and Ultra Tech Nathdwara Cement Ltd. v. UOI, the Tribunal highlighted the binding nature of NCLT orders and the limitation on recovery beyond the specified amount. Various High Courts' decisions, including the Andhra Pradesh & Telangana High Court and the Madras High Court, reinforced the principle that recovery exceeding the NCLT's specified amount would be unlawful. Hence, the Tribunal concluded that adjudicating the Revenue's appeal beyond the ?1,00,000 limit was unnecessary.

Dismissal of Appeals:
Considering the legal principles and the limited recovery scope established by the NCLT order, the Tribunal dismissed the Revenue's appeal as the recovery amount did not exceed ?1,00,000. Consequently, the Cross Objection by the assessee was also dismissed, leading to the overall dismissal of both appeals. The Tribunal left the issue raised in the Department's appeal open for future consideration in an appropriate case, aligning the decision with the judicial precedents and the NCLT order.

This detailed analysis of the judgment showcases the Tribunal's careful consideration of the NCLT order, relevant legal principles, and judicial pronouncements to arrive at a decision regarding the recovery of tax arrears within the specified limit.