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

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 Insolvency Resolution Proceedings against the assessee. Referring to the Insolvency and Bankruptcy Code, 2016, and the Supreme Court's decision in Ghanashyam Mishra And Sons vs Edelweiss Asset Reconstruction, the Tribunal held that once a resolution plan is approved, claims are frozen and binding on the Corporate Debtor. The Tribunal emphasized the prohibition on continuing pending proceedings during CIRP and dismissed the appeal, with the possibility of restoration based on the CIRP outcome.

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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.

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