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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
In this case, the assessee has filed an application for condoning the delay in the filing of appeal, through which the reasons for delay have been laid out in great detail. For the sake of capturing the main reasons some parts from the said petition are extracted as under: -
“1.The Appellant, Vikas WSP Ltd., is undergoing the Corporate Insolvency Resolution Process (CIRP) as per provisions of insolvency & Bankruptcy Code, 2016 since 02.02.2022. In the matter of Bank of India Vs. Vikas WSP Ltd., Hon'ble NCLT Chandigarh Bench has passed an order for initiation of Corporate Insolvency Resolution Process (CIRP) vide Ref. No. CP(IB)-315/2019 dated 02.02.2022 under provisions of insolvency and Bankruptcy Code (IBC), 2016 and appointed Mr. Darshan Singh Anand as Interim. Resolution Professional (IRP) of Vikas WSP Ltd. Copy of Order of Hon'ble National Company Law Tribunal (NCLT) for initiation of Corporate Insolvency Resolution Process (CIRP) against the Appellant is enclosed herewith.
2.As per Section 17 of the IBC, 2016, the powers of the Board of Directors stands suspended and such powers shall be vested with Mr. Darshan Singh Anand (IP Registration No. IBBI/IPA-002/IP-N00326/2017-2018/10931) and Hon'ble NCLT has ordered for commencement of the Moratorium period under Section 14 of the IBC, 2016 with effect from 02.02.2022. 3. The appellant submits that this condonation petition is filed for the delay in filing an appeal for 327 days against the order passed under Section 250 of the Income bearing Tax 1961, dated Act. ITBA/NFAC/S/250/2024-25/1066717837(1). 15.07.2024, DIN: ITBA/NFAC/S/250/2024-25/1066717837(1).
4.The appellant states the said order was not served upon them hence was not aware of the above captioned order. The order was merely uploaded on the income tax portal and was not served to the appellant either through email or by physical post.
5.in the Appeal Form 35 filed before the Commissioner of Income Tax (Appeals) the appellant had mentioned the address to which the notices may be sent to the appellant as C/o Stellar Insolvency Professionals LLP, Suite 10, 3rd Floor 310, New Delhi House, 27 Barakhamba Road, Connaught Place, New Delhi -110001 in addition to address of appellant as Railway Road, Siwani, Bhiwani, Haryana-127046. Further the email address has been mentioned as [email protected]. Copy of Appeal Form 35 submitted before Hon'ble CIT(A) is enclosed herewith.
6.The primary and secondary email ids on income tax e filing portal has been registered as [email protected] and [email protected] respectively. Copy of Screenshot of Income Tax e filling portal is enclosed herewith.
7.The appellant has not been serviced /served the copy of order under section 250 of the Income Tax Act 1961 passed by National Faceless Appeal Centre (NFAC) vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1066717837(1), Dated 15.07.2024 on the address and correspondence address of the Appellant. Further the copy of the order is neither served on email address mentioned in Appeal Form 35 nor as registered on the income tax portal i.e. [email protected] and [email protected].”
Considering the reasons presented in the condonation petition, we hereby condone the delay and admit this appeal for adjudication.
The present appeal arises from order dated 15.07.2024, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC. In this case, the Ld. AO completed the assessment, dated 27.03.2023, by adding an amount of Rs.59,50,00,000/- u/s 68 of the Act on account of value of shares and premium thereon received by the assessee. Admittedly, the case of the assessee was subject matter of proceedings before the National Company Law Tribunal (NCLT), whereby vide order dated 02.02.2022, a moratorium had been directed in terms of Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereafter as ‘IBC’) as under: -
“14.In the given facts and circumstances, the present petition being complete and having established the default in payment of the Financial Debt for the default amount being above the threshold limit, the petition is admitted in terms of Section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code. As a necessary consequence of the moratorium in terms of Section 14, the following prohibitions are imposed, which must be followed by all and sundry: …………………….”
It appears that the Ld. AO has disregarded this development and completed the assessment order.
The aggrieved assessee filed the first appeal through one Shri Darshan Singh Anand, Resolution Professional (hereafter as ‘IRP’). It is seen from the impugned order that the Ld. CIT(A) has confirmed the action of Ld. AO mainly on the ground that the IRP could not file the requisite details and hence, the action of Ld. AO has been confirmed in more or less an ex parte manner.
Further aggrieved, the assessee, through the IRP, has filed the present appeal with the following grounds: -
1.“The L4. CIT(A) has ignored the fact that the appellant company is under Corporate Insolvency Resolution Process as per t provisions of Insolvency & Bankruptcy Code (IBC), 2016 and moratorium is declared under section 14 of IBC. As per section imposed on the 14(1)(A) during the moratorium, prohibition is impose institution of suits OR continuation of pending suits OR proceedings against the corporate debtor including execution of any judgement, decree Oft order in any court of law, tribunal, arbitration panel Oft other authority.
2.The Ld. CTT(A) has erred in facts & circumstances of the case in adding amount of Rs.59,50,00,000/- under section 68 of Income Tax Act.
3.The Ld. CIT(A) has erred in facts & circumstances of the case in disallowing expense of Rs.3,42,00,000/-.
4.The Ld. CIT(A) has disposed of the appeal without providing adequate and reasonable opportunity of being heard to the appellant, thereby violating the principles of natural justice and infringing upon the fundamental rights of the appellant.
5.The appellant may please be allowed to alter, modify, add any other ground during the course of appellate proceedings.”
Before us the Ld. AR took us through the order dated 02.02.2022 passed by the NCLT in the assessee’s own case [Order – CP(IB) No.315/Chd./Hry/2019, order dated 02.02.2022] and read out para 14 (supra), through which the terms of the moratorium u/s 14 of the IBC have been spelt out in great detail. It was the submission that legally these proceedings could not proceed considering that Section 238 of the IBC has an overriding effect with respect to any other act, including the Income Tax Act, 1961.
The Ld. DR relied on the orders of the authorities below and stated that the Revenue’s right to collect the taxes due deserved to be upheld.
We have carefully considered the rival submissions and have gone through the records before us. It is clear that once the moratorium has been declared u/s 14 of the IBC there cannot be proceedings like the impugned. It would be further apt to consider that the period of moratorium shall have the effect from the date of such order till the completion of the corporate insolvency resolution process. In the present case, the appeal filed by the assessee as well as by the Revenue is an institution of suit against the corporate debtor (i.e. the assessee herein), which is prohibited under section 14 of the IBC 2016. The Hon’ble Supreme Court in the case of Alchemist Asset Reconstruction Company Limited vs. Hotel Gaudavan Private Limited reported in 88 taxmann.com 202 (SC) had held that even arbitration proceedings cannot be initiated after imposition of the moratorium under section 14(1)(a) of IBC 2016 had come into effect and it would not be appropriate in law and could not have been allowed to continue. Further, the Hon’ble Supreme Court in the case of PCIT vs. Monnet Ispat and Energy Limited in SLP (C) No.6487 of 2018 dated 10.08.2018 had upheld overriding nature and supremacy of the provisions of IBC 2016 over any other enactment in case of conflicting provisions of virtue of a non-obstante clause contained in section 238 of the IBC 2016.
It is felt that the authorities below should have taken note of the order of NCLT (supra) and taken steps as mandated u/s 156A of the Act. This is all the more essential because at the time of passing of both the orders, by Ld. AO/CIT(A), the NCLT’s order was duly brought to their notice. However, a review of judicial literature on the subject indicates an order in the case of Manz Retail (P) Ltd. reported in [2024] 168 taxmann.com 199 (Mumbai – Trib.), where on similar facts the matter was remanded to the Ld. AO for taking necessary steps as per Section 156A of the Act. We may extract the head notes from this case: -
“Section 14 of IBC Code is very clear on the aspect that once moratorium is drawn and the insolvency commencement date is declared any institution of suits or definition of pending suits or proceedings against the creditor, debtor (in the present facts of the case of assessee before us) including the execution of any judgment, decree, or order in any Court of law, Tribunal, Arbitration Panel or other authority is to be prohibited. Admittedly, a registered Insolvency Professional is appointed by NCLT and the assessee no longer could be represented by the representative to whom the authority was provided. Even otherwise, none appeared on behalf of the assessee today. At this juncture, the decision of Supreme Court in the case of Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021] 126 taxmann.com 132/166 SCL. 237 (SC) is referred to wherein the Supreme Court has considered a situation wherein, the resolution plan was approved by the adjudicating authority under section 31(1) of the IBC Code. Supreme Court observed that, once the resolution plan was drawn, the claim as provided in the resolution plan stood frozen, and will be binding on the corporate debtor, its employee, its members, creditors, Central Government and any State Government or legal authority, guarantor and other stakeholders. [Para 5.1] In the present facts of the case, the resolution plan is yet to be finalized. When the newly inserted provisions of section 156A are read, it is necessary to remand the appeal to the Assessing Officer to take necessary steps/action before NCLT. [Para 5.2] Hence, in the above circumstances, it is deemed fit and proper to remand this appeal back to the Assessing Officer to take necessary steps as per section 156A. Accordingly, the appeal filed by the assessee is partly allowed. [Para 61].”
We can do no better than to follow the finding in this case. Considering the totality of facts and circumstances of this case, we deem it fit to set aside the impugned order and remit the same back to the file of Ld. AO for taking necessary steps as mandated u/s 156A of the Act.
In the result, this appeal is partly allowed.