2022 (1) TMI 286 - AT - Income Tax

Condonation of delay in filing appeal before CIT(A) - sufficient cause of such delay - assessee has gone into corporate insolvency resolution process and interim resolution professional has been appointed by NCLT - HELD THAT - Delay of 23 months in filing of the appeal before the learned CIT(A), the assessee did not file appeal in order to buy peace of mind and to avoid penalty - when the assessment orders in case of other assessment years were also framed on the similar line and when the penalty was levied by the AO, the assessee preferred the appeal. It caused delay of almost 23 months and therefore, the assessee preferred the application for condonation of delay, which was rejected by the learned CIT(Appeals). We find that even the order of the learned CIT (A) in not admitting the appeal of the assessee is an order passed in contravention of Section 14 of the Insolvency and Bankruptcy Code 2016. This is for the reason that the section 14 prohibits even continuation of proceedings during moratorium against the corporate debtor. In view of this, the order of the learned CIT(A) in not admitting the appeal of the assessee is in contravention of Section 14 of the IBC and therefore not sustainable. We allow the appeal of the assessee with respect to the ground No.1 of the appeal and restore these appeals back to the file of the learned CIT (A) to decide the issue afresh. He also directed now that as an official liquidator has been appointed, the respective notice for the hearing etc are also requiring to be addressed to the official liquidator. The assessee is also directed to place before the CIT (A) the revised form No.35 duly signed by the official liquidator. This may be taken on record by the CIT(A) and then decide the issue of condonation of delay in filing of these appeals of 23 months after granting proper opportunity of hearing - If the appeals are admitted, then to decide the issue on the merits of the case, after granting opportunity of hearing in accordance with the law.

Summary

Issues:
- Delay in filing appeals before the Commissioner of Income Tax (Appeals)
- Condonation of delay application rejected
- Maintainability of appeals due to delay
- Application of Insolvency and Bankruptcy Code 2016
- Authority of director to file appeals during insolvency resolution process
- Rectification of appeal forms
- Admissibility of appeals before the Appellate Tribunal

Analysis:

Issue 1: Delay in filing appeals before the Commissioner of Income Tax (Appeals)
- The assessee, engaged in the chemical business, filed returns for AY 2006-07 with a declared income. Following an action under section 132 of the Income-Tax Act, the Assessing Officer made additions to the income, leading to a total income computation.
- The assessee challenged this order before the Commissioner of Income Tax (Appeals), which noted a 23-month delay in filing the appeal and subsequently rejected the petition for condonation of delay.

Issue 2: Condonation of delay application rejected
- The Commissioner of Income Tax (Appeals) rejected the condonation application, citing the absence of sufficient reasons for the delay. The assessee's argument of not filing initially due to a belief of no penalty imposition was deemed insufficient, especially considering the significant 6-year delay in filing the appeal.

Issue 3: Maintainability of appeals due to delay
- The Commissioner of Income Tax (Appeals) held the appeals as not maintainable due to the delay, leading to their dismissal. The Departmental Representative supported this decision, emphasizing the lack of sufficient cause for the delay.

Issue 4: Application of Insolvency and Bankruptcy Code 2016
- During the appeal process, it was revealed that the company had entered corporate insolvency resolution, leading to the appointment of an interim resolution professional. The Appellate Tribunal considered the implications of Section 14 of the Insolvency and Bankruptcy Code 2016 in relation to the proceedings.

Issue 5: Authority of director to file appeals during insolvency resolution process
- Questions arose regarding the authority of a director to file appeals during the insolvency resolution process. The Appellate Tribunal sought clarification on the director's authorization from the interim resolution professional, ultimately accepting the revised forms signed by the official liquidator.

Issue 6: Rectification of appeal forms
- The rectification of appeal forms, now verified by the official liquidator, rendered the appeals maintainable before the Appellate Tribunal, addressing the initial concerns regarding the filing process.

Issue 7: Admissibility of appeals before the Appellate Tribunal
- The Appellate Tribunal allowed the appeals, directing the matters to be restored to the Commissioner of Income Tax (Appeals) for a fresh decision, considering the delay, the application of the Insolvency and Bankruptcy Code, and the appointment of the official liquidator.

This comprehensive analysis of the judgment highlights the key issues, legal considerations, and the ultimate decision of the Appellate Tribunal in the case.