2022 (6) TMI 1074 - HC - Income Tax

Validity of reopening of assessment u/s 147 - petitioners had voluntarily filed Corporate Insolvency Resolution Process (CIRP) under the provisions of the Insolvency and Bankruptcy Code before the National Company Law Tribunal, Mumbai ( NCLT ) and were admitted on 12.03.2018/19.3.2018 and later ordered - HELD THAT - Since the proceedings under the Code were initiated by the petitioners few days prior to the initiation of the proceedings under Section 148 it was incumbent for the petitioners to have ensured proper notice to the Income Tax Department and obtained appropriate concession in Corporate Insolvency Resolution Plan. That apart, claims of the Income Tax Department were not considered by the NCLT, Mumbai, while approving the Resolution Plan and therefore the question of abetment of such rights of the Income Tax Department cannot be countenanced.The provisions of Insolvency and Bankruptcy Code, 2016 (IBC) cannot be interpreted in a manner which is inconsistent with any other law in the time being in force. Therefore, Corporate Insolvency Resolution Plan sanctioned and approved cannot impinge on the rights of the Income Tax Department to pass any fresh Assessment Order under Section 148 read with Sections 143(3) and 147 of the Income Tax Act, 1961. The proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be pressed into service to dilute the rights of the Income Tax Department under the Income Tax Act, 1961 to re-open the assessment under Section 148 of the Income Tax Act, 1961. Income Tax Department was not precluded from reopening the assessment completed under Section 143(3) of the Income Tax Act,1961. Therefore, these Writ Petitions filed by these petitioners have to be dismissed. The Assessment Orders which have been passed pursuant to the interim order dated 27.12.2018 are directed to be given to the respective petitioners by the respondent, within a period of thirty days from the date of receipt of a copy of this order - If the petitioners are so aggrieved by such of those Assessment Orders, the petitioners have to work out their Appellate remedy before the Commissioner of Income Tax (Appeals) under Section 246A of the Income Tax Act, 1961.

Issues Involved:
1. Jurisdiction of proceedings under Section 148 of the Income Tax Act, 1961 during the Corporate Insolvency Resolution Process (CIRP).
2. Impact of the approved resolution plan on pre-existing tax claims.
3. Validity of reopening assessments under Section 148 of the Income Tax Act, 1961 post-approval of the resolution plan.
4. Rights of the Income Tax Department to proceed with reassessment under Section 148 of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Jurisdiction of Proceedings under Section 148 of the Income Tax Act, 1961 during CIRP:
The primary issue was whether the proceedings under Section 148 of the Income Tax Act, 1961 were without jurisdiction since the petitioners had voluntarily filed for CIRP under the Insolvency and Bankruptcy Code, 2016, which was admitted by the NCLT. The court noted that the CIRP applications were admitted by the NCLT, Mumbai on 12.03.2018 and 19.03.2018, while the notices under Section 148 were issued during March 2018. The court observed that the interim orders allowed the Income Tax Department to proceed with the assessment but directed them to keep the assessment in a sealed cover.

2. Impact of the Approved Resolution Plan on Pre-existing Tax Claims:
The court referenced the Supreme Court's decision in Ghanashyam Mishra & Sons (P) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., which held that once a resolution plan is approved by the NCLT, all claims not part of the resolution plan are extinguished. The court examined whether the resolution plan approved by the NCLT on 09.06.2020 included the tax claims. It was found that the resolution plan did not contemplate any concession from the Income Tax Department, and the proceedings under Section 148 had not crystallized at that stage.

3. Validity of Reopening Assessments under Section 148 of the Income Tax Act, 1961 Post-approval of the Resolution Plan:
The court emphasized that the resolution plan did not include the tax dues under the Income Tax Act, 1961. The objections of the petitioners were not in light of the voluntary CIRP initiated by them. The court highlighted that the petitioners should have ensured proper notice to the Income Tax Department and obtained appropriate concessions in the resolution plan. Since the claims of the Income Tax Department were not considered by the NCLT, the question of abatement of such rights could not be entertained.

4. Rights of the Income Tax Department to Proceed with Reassessment under Section 148 of the Income Tax Act, 1961:
The court concluded that the provisions of the Insolvency and Bankruptcy Code, 2016, cannot be interpreted in a manner inconsistent with other laws in force. Therefore, the CIRP sanctioned and approved cannot impinge on the rights of the Income Tax Department to pass fresh assessment orders under Section 148 read with Sections 143(3) and 147 of the Income Tax Act, 1961. The court held that the Income Tax Department was not precluded from reopening the assessment completed under Section 143(3) of the Income Tax Act, 1961.

Conclusion:
The court dismissed the writ petitions, directing the respondent to provide the assessment orders to the petitioners within thirty days. It also granted the petitioners liberty to file an appeal before the Commissioner of Income Tax (Appeals) under Section 246A of the Income Tax Act, 1961, within thirty days from the communication of the assessment orders. The court emphasized that the CIRP proceedings cannot dilute the rights of the Income Tax Department to reopen assessments under Section 148 of the Income Tax Act, 1961.

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