2025 (1) TMI 169 - AT - Income Tax

Validity of Revision proceedings against company dissolved/insolvent - HELD THAT - We find that provisions contained u/s 238 of the Code are having an overriding effect over all other Central and State statutes including Income Tax Act as held by Hon ble Supreme Court in case of PCIT vs. Monnet Ispat and Energy Ltd. 2018 (8) TMI 1775 - SC ORDER Section 238 of the Code will have overriding effect over all other Central and State statutes including the Income Tax Act and all the claims including claim of the Income Tax Department under the Income Tax Act, 1961 shall be entertained by the Official Liquidator u/s. 53(1) of the Code. Appeal filed by the assessee has become infructuous and dismissed as such. However, the assessee is at liberty to approach the Tribunal for reinstitution of the appeal and the Tribunal shall consider such application appropriately, as per law.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are as follows:

Whether the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961, is lawful and within permissible jurisdiction.
Whether the PCIT was justified in remanding the matter back to the Assessing Officer (AO) for re-computation of income concerning the transfer of a commercial plot of land.
Whether the provisions of section 43CA of the Income Tax Act apply to the transfer of leasehold rights in the commercial plot of land.
Whether the initiation of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016, affects the proceedings under the Income Tax Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of the PCIT's Order under Section 263

Relevant Legal Framework and Precedents: Section 263 of the Income Tax Act empowers the PCIT to revise an order passed by the AO if it is erroneous and prejudicial to the interests of the revenue.
Court's Interpretation and Reasoning: The Tribunal examined whether the AO's order was erroneous and prejudicial. It considered the PCIT's reliance on Explanation 2(a) to section 263(1), which deems an order erroneous if the AO fails to make necessary inquiries.
Key Evidence and Findings: The PCIT's order was based on the lack of inquiry into the computation of income from the transfer of the commercial plot.
Application of Law to Facts: The Tribunal assessed whether the AO conducted adequate inquiries and whether the PCIT's directions were justified.
Treatment of Competing Arguments: The assessee contended that the AO had duly considered all relevant materials, while the PCIT argued that further inquiries were necessary.
Conclusions: The Tribunal did not provide a final conclusion on this issue due to the overriding effect of the Insolvency and Bankruptcy Code, 2016, as discussed below.

Issue 2: Application of Section 43CA

Relevant Legal Framework and Precedents: Section 43CA applies to the transfer of assets at a value lower than the circle rate for stamp duty purposes.
Court's Interpretation and Reasoning: The Tribunal considered whether section 43CA was applicable to the transfer of leasehold rights in the commercial plot.
Key Evidence and Findings: The assessee argued that the transaction was accounted for in a previous assessment year, where section 43CA was not applicable.
Application of Law to Facts: The Tribunal evaluated the timing of the transaction and the applicability of section 43CA.
Treatment of Competing Arguments: The PCIT believed section 43CA applied, while the assessee disagreed based on the timing of the transaction.
Conclusions: The Tribunal did not resolve this issue due to the overriding effect of the Insolvency and Bankruptcy Code, 2016.

Issue 3: Impact of Insolvency Proceedings

Relevant Legal Framework and Precedents: Section 238 of the Insolvency and Bankruptcy Code, 2016, provides that the Code has an overriding effect over other statutes.
Court's Interpretation and Reasoning: The Tribunal referred to the Supreme Court's decision that the Insolvency and Bankruptcy Code overrides the Income Tax Act.
Key Evidence and Findings: The initiation of CIRP and the moratorium imposed by the National Company Law Tribunal (NCLT) were crucial factors.
Application of Law to Facts: The Tribunal found that due to the insolvency proceedings, the appeal had become infructuous.
Treatment of Competing Arguments: The Tribunal acknowledged the overriding nature of the Insolvency and Bankruptcy Code.
Conclusions: The appeal was dismissed as infructuous, with liberty for the assessee to approach the Tribunal for reinstitution of the appeal if necessary.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Given section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income Tax Act."
Core Principles Established: The overriding effect of the Insolvency and Bankruptcy Code over the Income Tax Act in insolvency proceedings.
Final Determinations on Each Issue: The appeal was dismissed as infructuous due to the overriding effect of the Insolvency and Bankruptcy Code, with the option for the assessee to seek reinstitution of the appeal.

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