2023 (3) TMI 608 - AT - Income Tax

Insolvency proceedings - continuation of proceedings in respect to a claim, which is not a part of the resolution plan - Assessment proceedings u/s 143 (3) of Income-tax Act on corporate debtor for a period which was squarely covered by resolution plan as approved by NCLT - HELD THAT - From the above findings of Hon ble High Court of Telangana in the case of Sirpur Paper Mills Ltd 2022 (1) TMI 977 - TELANGANA, HIGH COURT it is vivid that all 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 a part of the resolution plan. We also note that provisions of section 238 of the IBC which clearly says that provisions of IBC shall have an overriding effect over all other laws. This, if there is any doubt, section 238 IBC makes it abundantly clear that provisions of the IBC would prevail over the Income Tax Act. In the order the ld NCLT has already appointed Interim Resolution Professional (IRP). We find that ld IRP had not impleaded himself to represent the assessee-company in the present appeal, hence, in view of Section 14 of I B code there cannot be any continuation of any pending proceedings before this Tribunal. Hence, we deem it fit to dismiss the appeal of the Assessee and all appeals of Revenue, as not maintainable in the present format. However, liberty is given to the IRP or his successor in interest to implead himself on behalf of the assessee company by filing a Miscellaneous Application before us, if he so desires, at later stage, in which event these appeals shall be restored. Likewise, liberty is given to Revenue to file Miscellaneous Application before us, if the Revenue so desires, at later stage, in which event these appeals shall be restored. With these observations, the appeal of the Assessee and all appeals of Revenue are hereby dismissed as not maintainable in the present format.

Summary

Issues Involved:
1. Approval of the resolution plan by NCLT.
2. Application of Section 14 of the Insolvency and Bankruptcy Code (I&B Code), 2016.
3. Impact of the resolution plan on statutory dues and pending proceedings.
4. Dismissal of appeals by the Revenue and Assessee.

Summary:

1. Approval of the resolution plan by NCLT:
The National Company Law Tribunal (NCLT), Ahmedabad, approved the resolution plan of IDBI Bank Limited for the insolvency resolution of the corporate debtor (the assessee) on 20.12.2022. The assessee's counsel argued that all appeals filed by the assessee should be allowed and requested directions for the Assessing Officer to modify, revise, reduce, or cancel the demand according to Section 156A of the Income Tax Act, 1961.

2. Application of Section 14 of the Insolvency and Bankruptcy Code (I&B Code), 2016:
Section 14 of the I&B Code provides for a moratorium prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of its assets, and recovering any property by an owner. The moratorium remains effective until the completion of the corporate insolvency resolution process or the approval of the resolution plan by the adjudicating authority.

3. Impact of the resolution plan on statutory dues and pending proceedings:
The Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd. held that once a resolution plan is approved, all claims not part of the resolution plan are extinguished, and no proceedings can continue for such claims. The Telangana High Court in Sirpur Paper Mills Ltd. ruled that statutory dues not included in the resolution plan are extinguished, and related proceedings cannot continue. The Tribunal noted that Section 238 of the IBC gives it an overriding effect over other laws, including the Income Tax Act.

4. Dismissal of appeals by the Revenue and Assessee:
The Tribunal dismissed the appeals of both the Revenue and the Assessee as not maintainable in the present format, citing the moratorium under Section 14 of the I&B Code. However, liberty was granted to the Interim Resolution Professional (IRP) or his successor to implead themselves on behalf of the assessee company and to the Revenue to file a Miscellaneous Application to restore the appeals if desired.

Conclusion:
All appeals filed by the Revenue and the Assessee were dismissed as not maintainable in the present format, with liberty granted to the IRP and the Revenue to take appropriate actions to restore the appeals if necessary. The order was pronounced in the open court on 13/03/2023.