2021 (10) TMI 1255 - AT - Income Tax

Overriding effect of Insolvency and Bankruptcy Code over income tax act - National Company Law Tribunal under section 31 of the Insolvency and Bankruptcy Code 2016 overriding effect over anything inconsistent contained in the Income Tax Act - Effect of the order delivered by the National Company Law Tribunal, Kolkata Bench on 12.02.2018 approving the resolution plan on the proceedings in the case of the assessee for AY 2010-11 - HELD THAT - The order passed by the National Company Law Tribunal under section 31 of the Insolvency and Bankruptcy Code 2016 has overriding effect over anything inconsistent contained in the Income Tax Act and it shall be binding on all the respective entities including other stakeholders, which include Central Government, State Government and other Local Bodies. As per the said order delivered in the case of the assessee-company affirming the Resolution Plan, all dues under the provisions of the Income Tax Act including taxes, duty, penalties, interest, fines, cesses, unpaid tax deducted at source/tax collected at source, whether admitted or not, due or contingent, whether part of above claim of income tax authorities or not, whether part of tax due diligence finding or not, asserted or unasserted, crystallized or un-crystallized, known or known, secured or unsecured, disputed or undisputed, present or future, in relation to any period prior to the acquisition of control by the resolution applicant over the company pursuant to this plan shall extinguished by virtue of the order of the adjudicating authority and the company should not be liable to pay any amount against such demand. All assessments or other proceedings pending in case of the company, on the date of the order of the adjudicating authority relating to the period prior to that date, shall stand terminated and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the company by virtue of the order of the adjudicating authority. Post the order of the adjudicating authority, no reassessment/revision or any other proceedings under the provisions of the Income Tax Act should be initiated on the company in relation to period prior to acquisition of control by the resolution applicant over the Company pursuant to this plan shall stand extinguished by virtue of order of the National Company Law Tribunal and the assessee-company should not be liable to pay against such demand. Since the present appeal involving AY 2010-11 relates to the period prior to the acquisition of control by the Resolution Applicant over the company pursuant to this plan, all dues under the provisions of the Income Tax Act 1961 including taxes, duty, penalties, interest fines, cesses, etc. shall stand extinguished by virtue of the order of the National Company Law Tribunal and all proceedings including the appellate proceedings pending on the date of the order of the National Company Law Tribunal including the present proceedings relating to the prior period to the date of order shall stand extinguished and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the Company. In the light of the order of the National Company Law Tribunal (NCLT) dated 12.02.2018 passed in assessee s case, we deem it fit to restore the case for the assessment year under consideration before us to Assessing Officer for taking necessary action in accordance with law

Summary

Issues:
Validity of assessment under section 143(3) of the Income Tax Act and various additions/disallowances made by the Assessing Officer. Effect of the National Company Law Tribunal (NCLT) order dated 12.02.2018 on the proceedings for Assessment Year (AY) 2010-11.

Validity of Assessment and Additions/Disallowances:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) challenging the assessment under section 143(3) of the Income Tax Act and disputing the additions/disallowances. The Commissioner upheld the assessment and confirmed most additions/disallowances made by the Assessing Officer. The assessee then appealed to the Tribunal.

NCLT Order and Additional Grounds:
The NCLT order dated 12.02.2018 approved the resolution plan for the company under the Insolvency and Bankruptcy Code 2016. The assessee sought to extinguish all tax liabilities for AY 2010-11 based on this order. The Tribunal considered the effect of the NCLT order on the Income Tax Act, noting the overriding effect of the Insolvency and Bankruptcy Code as per Section 238.

Legal Precedents and Binding Effect of NCLT Order:
Citing legal precedents, the Tribunal emphasized that the NCLT order had binding effect on all entities, including government bodies. The order extinguished all tax liabilities, assessments, and pending proceedings for the relevant period. The Tribunal highlighted the importance of protecting assets under the resolution plan and preventing belated claims by creditors.

Decision and Conclusion:
Given the legal position and the NCLT order's overriding effect, the Tribunal held that all tax dues and proceedings for AY 2010-11 were extinguished by the NCLT order. Consequently, the case was restored to the Assessing Officer for appropriate action in accordance with the law. The appeal was treated as allowed for statistical purposes.

This detailed analysis of the judgment covers the issues related to the validity of assessment, the impact of the NCLT order, legal precedents, and the final decision of the Tribunal.