2023 (1) TMI 1264 - AT - Income Tax

Appellate Tribunal Upholds Freeze on Claims in CIRP, Dismisses Revenue's Appeal

DCIT, Circle-16 (1) Hyderabad Versus M/s. Leo Meridian Infrastructure Projects & Hotels Ltd.

The Appellate Tribunal dismissed the revenue's appeal against the Commissioner of Income Tax (Appeals) order for A.Y 2010-11, noting the pending Corporate ... Continuance of the pending proceedings once the proceedings commenced by institution of application Insolvency Resolution Proceedings - HELD THAT:- A reading of the provisions under section 13 and 14 of the Code along with the decision in Ghanashyam Mishra And Sons [2021 (4) TMI 613 - SUPREME COURT] clearly shows that once the proceedings have commenced by institution of application under section 7 or 9 or 10 of the Code, the continuance of the pending proceedings is prohibited and when once they reach the logical conclusion with due approval of the resolution plan by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand 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. At any rate, for the time being, these appeals cannot be proceeded with during the continuance of the proceedings under the Code. Depending upon the result of such proceedings before the adjudicating authority in respect of the corporate debtor, appropriate steps if any, may be taken by the appellant/respondent. We, therefore, granting leave to the appellant/respondent in this appeal to seek the restoration of the appeals, if necessitated by the orders in the Corporate Insolvency Resolution Proceedings, dismiss the appeals in limine. We derive support for the above proposition from the decision in the case of Mahavir Roads & Infrastructure Pvt. Ltd.,[2022 (6) TMI 1294 - ITAT MUMBAI] Issues:1. Appeal against order passed by Commissioner of Income Tax (Appeals) for A.Y 2010-11.2. Corporate Insolvency Resolution Proceedings (CIRP) pending against the assessee.3. Interpretation of provisions of Insolvency and Bankruptcy Code, 2016.4. Effect of resolution plan approval on claims against the corporate debtor.5. Prohibition on continuation of pending proceedings during CIRP.6. Dismissal of appeal by the Appellate Tribunal.Analysis:1. The appeal was filed by the revenue against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. The Appellate Tribunal noted that the Corporate Insolvency Resolution Proceedings (CIRP) were pending against the assessee, and the National Company Law Appellate Tribunal (NCLAT) had jurisdiction over the matter.2. The Tribunal considered the provisions of the Insolvency and Bankruptcy Code, 2016, and referred to the decision of the Supreme Court in the case of Ghanashyam Mishra And Sons vs Edelweiss Asset Reconstruction. The Tribunal highlighted that once a resolution plan is approved by the Adjudicating Authority under Section 31 of the Code, the claims as provided in the resolution plan shall stand frozen and be binding on the Corporate Debtor and other stakeholders.3. The Tribunal emphasized that the provisions of the Code, along with the decision in Ghanashyam Mishra And Sons case, prohibit the continuation of pending proceedings once CIRP has commenced. It was clarified that during the CIRP, appeals cannot be proceeded with, and any further steps would depend on the outcome of the proceedings before the adjudicating authority. The Tribunal also mentioned a similar decision by the Mumbai Bench of the Tribunal in a related case.4. Consequently, the Tribunal dismissed the appeal by the revenue in limine, indicating that the appeal could be restored if necessary based on the outcome of the Corporate Insolvency Resolution Proceedings. The order was pronounced in the Open Court on 16th January 2023.