2024 (7) TMI 1050 - AT - Income Tax

Income tax demand / proceedings pertaining to pre-CIRP periods survive after insolvency resolution proceedings - HELD THAT - The statutory provision of section 156A effective from 1st April, 2022 thus provides that where any tax, interest, penalty, fine or any other sum in respect of which a notice of demand has been issued under section 156, is reduced as a result of an order of an Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016, the AO shall modify the demand payable in conformity with such order and shall thereafter serve on the assessee a notice of demand specifying the sum payable, if any, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly. The amended law further provides that where the order referred to in sub-section (1) is modified by the National Company Law Appellate Tribunal or the Supreme Court, as the case may be, the modified notice of demand as referred to in sub-section (1), issued by the Assessing Officer shall be revised accordingly. Accordingly, we direct the assessing officer to take necessary action under section 156A. Since the grounds of appeal No.1 raised by the assessee on the technical grounds are allowed, the alternative grounds concerning merits of the case have not been found to be deserving any separate adjudication. Appeals are allowed.

Summary

Issues:
- Appeals against orders of the CIT(A), National Faceless Appeal Center, Delhi
- Dismissal of appeals by first appellate authority due to moratorium during insolvency resolution proceedings
- Common issue related to orders of the National Company Law Tribunal, Mumbai Bench
- Grounds of appeal: survival of demands/proceedings post National Company Law Tribunal order and merits of the case
- Interpretation of NCLT order regarding withdrawal of proceedings and liabilities
- Application of Section 156A for modification of demand orders post NCLT decision
- Direction to assessing officer for necessary action under Section 156A

Analysis:
The judgment pertains to 11 appeals challenging orders passed by the CIT(A), National Faceless Appeal Center, Delhi. The first appellate authority had dismissed the appeals citing a moratorium due to insolvency resolution proceedings. A common issue involving orders of the National Company Law Tribunal, Mumbai Bench, was identified, leading to a consolidated adjudication. The appeals raised concerns about the survival of demands/proceedings post the NCLT order and the merits of the case.

The key focus was on the interpretation of the NCLT order, specifically para 9.1.16, which outlined the withdrawal of proceedings and extinguishment of liabilities pre-Approval Date. Section 156A was highlighted for modifying demand orders in line with the NCLT decision. The assessing officer was directed to take necessary action under Section 156A, as per the amended law effective from April 1, 2022.

The judgment emphasized the importance of complying with the NCLT order and the statutory provisions of Section 156A. As the grounds of appeal related to technical aspects were allowed, the alternative grounds on the merits of the case did not warrant separate consideration. Ultimately, all appeals were allowed, with the order pronounced in Chennai on July 10, 2024.