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TMI Blog2025 (3) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... s that primarily the issue determined by the ld. CIT(A) and now asserted before us is as to what is the consequence of conclusion of insolvency proceedings initiated by appellant which was formerly known as M/s Educomp Infrastructure & Schools Management Ltd., on the impugned assessment orders for respective AY involved in these appeals. Pertinent to mention is that appeals before the ld. CIT(A) were filed in the name of M/s Jasrati Education Solutions Limited and so are filed now. 3. The facts necessary for disposal of these appeals are that in regard to AY 2013-14, assessment u/s 143(3) was completed on 20.05.2015 and in AY 2016- 17, return of the assessee was processed u/s 143(1) of the Act on 25.08.2017 and the return for AY 2018-19 was filed on 31.10.2018 and notice u/s 143(2) was issued on 22.09.2019. In regard to AY 2013-14 and AY 2016-17 notice u/s 148 was issued on 20.03.2020 and 19.03.2020 respectively. The CIRP proceedings had also taken in case of the assessee on 25.04.2018 and a moratorium u/s 14 of Insolvency and Bankruptcy Code (IBC) was passed. On 24.05.2018, Insolvency Resolution Professional constituted the Committee of Creditors (COC) and very first meeting was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that since the appeal filed by the Revenue after the moratorium period is not maintainable and hence dismissed. Ld. CIT(A) has relied the same and dismissed the appeals of assessee. As for convenient reference we reproduce the para 5.3 to para 6 from the impugned order of ld. CIT(A) for AY 2013-14, which is common to other AY, except the paragraph number being different:- "5. Determination and Decision : 5.1 All the Grounds of Appeal are related to disallowance of Rs. 39,80,47,655/- u/s. 56(2)(viib) rwr 11U & 11UA(2) of the Act, on account of excess consideration received towards share premium and further Rs. 1,40,00,000/- on account of unexplained payment made to M/s. Bhagawati Trading Co (Prop. Sanjiv Yadav). I have gone through the facts of the case and submissions filed by the Appellant and my decision is as under. 5.2 In the case of the Appellant, Return of Income for A.Y. 2013-14 was filed on 30.11.2013 declaring total income at (-) Rs. 10,50,68,978/-. Scrutiny assessment u/s. 143(3) was also completed vide order dated 20.05.2015 computing loss at (-) Rs. 8,61,21,015/-. However, based on the subsequent information available with the Department, case was reopened by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an is duly approved by the Adjudicating Authority under Section 31(1), the claims as provided in the resolution plan shall be frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of the resolution plan by the Adjudicating Authority, all such claims, which are not a part of the resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect of a claim, which is not part of the resolution plan. A.5 The Resolution Plan approved by NCLT also states that all dues arising in relation to the provisions of Income tax shall be permanently settled by attributing a NIL value to them and the Appellant shall not be liable to pay any other amount against such demand. A.6 Upon approval of this Resolution Plan by the NCLT, any and all rights and entitlements of, claims or demands made by or liabilities or obligations owed or payable to, any government agencies, whether filed/ admitted/ verified or not, due or contingent, asserted or unasserted, crystallized or un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority u/s.31 of I & B Code, the claim has been provided in the resolution plan shall stands frozen and will be binding on the corporate debtors and its employees, members, creditors, including Central Government. In this case, the Hon'ble NCLT ordered liquidation of respondent company under I & B Code and further, the claim of the Department has been rejected. Therefore, we are of the considered view that appeal filed by the Revenue after the moratorium period is not maintainable and thus, the appeal filed by the Revenue is dismissed as not maintainable. 6. In the result, appeal filed by the Revenue is dismissed. CO No.92/Chny/2019: 7. Since the appeal filed by the Revenue has been dismissed as not maintainable, the Cross-Objection filed by the assessee against the order of the Ld.CIT(A), is also not maintainable and thus, Cross-Objection filed by the assessee is dismissed as not maintainable. 8. In the result, appeal filed by the Revenue in ITA No.1892/Chny/2019 & Cross-Objection filed by the assessee in CO No.92/Chny/2019 for the AY 2008-09 are dismissed as not maintainable. Order pronounced on the 31st day of March, 2023, in Chennai. Sd/- Sd/- (V. DURGA RAO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainable, due to approval of Resolution Plan, since the Assessment Order was to be quashed/reversed in order to give effect to Resolution Plan through a proper remedy available in law which included the allowance of appeal by CIT(A) under section 250 of the Act. 4 That the CIT(A) has erred on facts as well as in law in dismissing the appeal as non-maintainable without providing the opportunity of being heard to the Appellant ." 6. Now what we find relevant is that assessee underwent a Corporate Insolvency Resolution Process (CIRP), pursuant to the order under section 10 of Insolvency and Bankruptcy Code (IBC) on April 25, 2018 passed by the NCLT. As per the provisions of IBC, Committee of Creditors sanctioned the Resolution Plan proposed by Mr. Parmjit Gandhi, under section 30(4) of the Code, 2016. Subsequently, the aforesaid Resolution Plan was approved by the Committee of Creditors under section 30(4) of the IBC, which was further approved by the Adjudication Authority, i.e. NCLT under section 31(1) of the IBC vide order dated 14.12.2020. Post initiation of CIRP process, pursuant to order dated 25.04.2018 passed by the NCLT when the period of moratorium against the Appellant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax, Excise Duty etc. a) Income tax benefits as permitted under section 79 and any other applicable provisions of the Income Tax Act, 1961 for set off of unabsorbed depreciation, carry forward and brought forward losses. b) MAT under section 115JB of the Income Tax Act. 11.2 All assessments / appellate or other proceedings pending in case of the Corporate Debtor, on the date of the order of NCLT relating to the period prior to that date, shall stand terminated and all consequential liabilities, if any, stand abated and should be considered to be not payable by the Corporate Debtor. 11.3 All notices proposing to initiate any proceedings against the Corporate Debtor in relation to the period prior to the date of NCLT order and pending on that date, shall stand abated and should not be proceeded against. Post the order of the NCLT, no re-assessment/ revision or any other proceedings under the provisions of the Income Tax Act shall be initiated on the Corporate Debtor in relation to period prior to acquisition of control by the Resolution Applicant and any consequential demand should be considered non-est, void, incapable of demands and not payable by the Corporate Debtor. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby approved. The resolution plan so approved shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the Resolution Plan. 46. Under the provisions of Section 31 (3) of the Code, we also direct as under:- a) The moratorium order passed by the Adjudicating Authority under Section 14 of the Code on 25.04.2018 shall cease to have effect; and b) The RP shall forward all records relating to the conduct of the CIRP and the resolution plan to the Board to be recorded on its database. CA No. 898/2019 is disposed of." 9. It is now settled that as per Section 31(1) of the IBC, once the resolution plan is approved by the Adjudicating Authority, it shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period prior to the Effective Date and pending on that date shall stand abated and should not be proceeded against. Post the Effective Date, no re-assessment / revision or any other proceedings under the provisions of the Income Tax Act shall be initiated on the Corporate Debtor in relation to period prior to acquisition of control by the Resolution Applicant and any consequential demand should be considered non- existing and as not payable by the Corporate Debtor. Any proceedings which were kept in abeyance in view of the insolvency process or otherwise shall not be revived post the order of NCLT. 4.4.3. Any and all rights and entitlements of the Governmental Authorities including but not limited to the Central government, the State governments any regulatory or local authority or body or any agency or instrumentality thereof, or any other party or entity (under any agreement, lease, licence, approval, consent or permission) whether admitted or not, due or contingent, asserted or unasserted, crystallized or uncrystallised, known or unknown, disputed or undisputed, present or future, in relation to any period prior to the Effective Date, shall be deemed to be permanently extin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The resolution plans undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the resolution applicant, various modifications may be made so as to ensure, that while paying part of the dues of financial creditors as well as operational creditors and other stakeholders, the Corporate Debtor is revived and is made an on-going concern. After CoC approves the plan, the NCLT is required to arrive at a subjective satisfaction, that the plan conforms to the requirements as are provided in sub-section (2) of Section 30 of the l&B Code. Only thereafter, the NCLT can grant its approval to the plan. It is at this stage, that the plan becomes binding on Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution Plan. The legislative intent behind this is, to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans, would go haywire and the plan would be unworkable CONCLUSION 95. In the result, we answer the questions framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NCLAT judgment must also be set aside on this count." [Emphasis supplied) 16. Ld. AR has drawn our attention to the decision of Hon'ble Delhi High Court in the case of TUF Metallurgical Pvt. Ltd. vs. UOI (W.P.(C) 10528/2022) & connected matter where Hon'ble High Court has also applied the principles laid down by the Hon'ble Supreme Court in the case of Ghanashyam Mishra (supra) and held as follows: "8. In the present cases, as described above, the admitted factual matrix is that the notices and orders impugned in these writ petitions pertain to the income tax claims of the respondents/revenue pertaining to the period much prior to the date of approval of the Resolution Plan. The impugned notices and orders were issued by the respondents/ revenue admittedly subsequent to the public announcement under Section 15 of the Code regarding CIRP process pertaining to the petitioner/assessee. As noted above, pertaining to the WP(C) 10528/2022, the public announcement under Section 15 of the Code called for submission of claims by 21.01.2019, but the respondents/revenue did not file any claim till that date or even thereafter; it is only subsequent to approval of the Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AO, if has to take a call on the basis of NCLT order only, then as such there is no enforceable demand left after the acceptance of resolution plan. Now as department has not challenged the aforesaid direction of NFAC by way of any appeal, the ld. AO, can only treat the demands for these AYs to be NIL. 14. In fact we are aware of the fact that there has been legislative intervention also in case of such matters and Finance Act, 2022 inserted Section 156A to the Act to provide that the Assessing Officer shall modify the demand payable in conformity with the order of the Adjudicating Authority ('AA' or 'NCLT') 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 of the Act. Hence the order passed by the AA approving a Resolution Plan shall be complied by the Assessing Officer and the revised demand notice in accordance with the resolution plan duly approved by the AA shall be issued by the Assessing Officer under Section 156 of the Income Tax Act, 1961. 15. Thus we are of considered view that as there was no claim of department adjudicated during resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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