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2024 (12) TMI 379 - AT - Income TaxValidity of assessment order against company insolvent - HELD THAT - It is undisputed fact that during the course of assessment proceedings, the Insolvency Resolution Professional vide its letter dated 01-02-2021 informed the assessing officer about the order dated 29-05-2019 passed by NCLT for commencement of Corporate Insolvency Resolution Process. However the assessing officer has not made any claim on the part of the Income Tax Department before the NCLT. However, State Government VAT Department and GST Department made the respective claim before NCLT. Jurisdictional High Court in the case of Jyoti Power Corporation Private Limited (Now Known as Ausil Corporation Private Limited) 2024 (10) TMI 1156 - GUJARAT HIGH COURT held that invocation of Revision proceedings after the Resolution Plan is against the Provisions of Law and quashed the Revision proceedings.
Issues Involved:
1. Validity of assessment order passed during the moratorium period under the Corporate Insolvency Resolution Process (CIRP). 2. Legality of the Principal Commissioner's revision order disallowing expenses claimed by the assessee. 3. Impact of the approved resolution plan on pending tax liabilities and proceedings. Issue-wise Detailed Analysis: 1. Validity of Assessment Order During Moratorium: The appeal concerns an assessment order passed during the moratorium period under the Corporate Insolvency Resolution Process (CIRP) as per the Insolvency and Bankruptcy Code, 2016 (IBC). The assessee argued that the assessment order dated 10-03-2023 was invalid as it was passed during the moratorium period initiated by the National Company Law Tribunal (NCLT) order dated 29-05-2019. According to Section 14(1) of the IBC, the moratorium prohibits the continuation of proceedings against the corporate debtor, thus rendering the assessment order void. The Tribunal acknowledged that the assessment should not have proceeded during the moratorium, emphasizing that the resolution plan approved by the NCLT extinguishes liabilities prior to the effective date. 2. Legality of the Principal Commissioner's Revision Order: The Principal Commissioner of Income Tax (PCIT) revised the assessment order, arguing that the Assessing Officer (AO) should have disallowed the entire claimed expenses of Rs. 59,20,48,980/- due to lack of supporting evidence, rather than making an ad hoc disallowance of 25%. The assessee contended that the revision was erroneous and prejudicial to the interest of revenue. The Tribunal noted that the PCIT's reliance on a Madras High Court judgment was misplaced, as the facts of the present case differed significantly. The Tribunal highlighted that the resolution plan approved by the NCLT extinguishes all claims not part of the plan, including tax liabilities, thus invalidating the PCIT's revision order. 3. Impact of the Approved Resolution Plan: The Tribunal extensively referenced the Supreme Court's decision in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Limited, which clarified that once a resolution plan is approved by the adjudicating authority, all claims not part of the plan are extinguished. This includes statutory dues owed to the government. The Tribunal also cited the jurisdictional High Court's judgment in Jyoti Power Corporation Private Limited, affirming that post-approval of the resolution plan, all liabilities, including those to government authorities, are extinguished. The Tribunal concluded that the PCIT's revision proceedings were invalid as they contravened the provisions of the IBC and the approved resolution plan. Conclusion: The Tribunal quashed the revision order passed by the PCIT, emphasizing that the resolution plan approved by the NCLT extinguished all prior claims against the corporate debtor, including tax liabilities. The appeal filed by the assessee was allowed, reinforcing the binding nature of the resolution plan on all stakeholders, including tax authorities. The judgment underscores the primacy of the IBC process in resolving corporate insolvency and the extinguishment of claims not included in the resolution plan.
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