2022 (3) TMI 971 - AT - Income Tax

Dismissal of Cross Appeals under Income Tax Act Amid Insolvency Proceedings

The cross appeals challenging an order under the Income Tax Act for a specific assessment year were dismissed due to the absence of the assessee during ... Moratorium under Insolvency and Bankruptcy Code, 2016 - prohibition on institution or continuation of proceedings during moratorium - overriding effect of the Insolvency and Bankruptcy Code - binding nature of an approved resolution plan - authority of Interim/Resolution Professional to represent the corporate debtor - requirement of prior permission of the Adjudicating Authority for prosecution of suits/appeals by a corporate debtorMoratorium under Insolvency and Bankruptcy Code, 2016 - prohibition on institution or continuation of proceedings during moratorium - overriding effect of the Insolvency and Bankruptcy Code - binding nature of an approved resolution plan - Whether the Revenue's appeal could be continued or entertained during the moratorium declared under the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal noted that CIRP had been initiated against the corporate debtor and an Interim Resolution Professional appointed, and that section 14 of the Code imposes a moratorium prohibiting institution or continuation of suits or proceedings against the corporate debtor during the moratorium period. Reliance was placed on authority holding that proceedings, including arbitration, cannot be initiated or continued after imposition of the moratorium. The Tribunal observed that the Code has overriding effect and that an approved resolution plan is binding on stakeholders, preventing tax or regulatory authorities from proceeding in breach of the moratorium. In consequence, the Revenue's appeal, being an institution of proceedings against the corporate debtor during the moratorium, could not be entertained and was dismissed, while liberty was granted to file afresh after completion of the moratorium or as may be appropriate post-approval of a resolution plan or upon appointment of a liquidator. [Paras 4, 5, 6, 7, 8]Revenue's appeal dismissed as barred by the moratorium with liberty to institute proceedings afresh after moratorium expiry or as permitted upon revival or liquidation.Authority of Interim/Resolution Professional to represent the corporate debtor - requirement of prior permission of the Adjudicating Authority for prosecution of suits/appeals by a corporate debtor - binding nature of an approved resolution plan - Whether the assessee's cross-appeal was maintainable in the absence of NCLT permission and express authority from the Interim Resolution Professional or Committee of Creditors. - HELD THAT: - The Tribunal observed that no permission from the Adjudicating Authority (NCLT) had been filed nor any letter of authority from the Interim Resolution Professional authorising the authorised signatory to prosecute the appeals on behalf of the corporate debtor. In view of authorities and the scheme of the Code, the Tribunal held that the appeal by the corporate debtor could not be sustained without the requisite NCLT permission or an authorised representation by the Interim/Resolution Professional, or without showing that the Interim Resolution Professional was authorised by the Committee of Creditors. The assessee's appeal was therefore dismissed, with liberty to file afresh by the Interim/Resolution Professional (or substitute) with prior NCLT permission or after completion of the moratorium as applicable. [Paras 9, 10]Assessee's appeal dismissed for want of NCLT permission/authority of the Interim/Resolution Professional, with liberty to file afresh by an authorised representative or after moratorium.Final Conclusion: Both cross-appeals are dismissed: the Revenue's appeal as barred by the IBC moratorium (liberty to file after moratorium or as permitted post-resolution/liquidation), and the assessee's appeal for lack of NCLT permission or authorised representation (liberty to file afresh by the Interim/Resolution Professional or after moratorium). Issues:Cross appeals challenging the order dated 27.04.2015 under section 250 of the Income Tax Act, 1961 for the assessment year 2012–13.Analysis:1. Absentia of Assessee Representation:- No representation from the assessee was present during the hearing, and no adjournment application was submitted. The appeals were disposed of ex-parte after hearing the Departmental Representative and reviewing the available material.2. Insolvency Proceedings under the Code:- The matter concerning the assessee was pending before the Insolvency Professional as per the Insolvency and Bankruptcy Code, 2016. A moratorium period had been declared under section 14 of the Code, prohibiting the initiation or continuation of legal proceedings against the corporate debtor.3. Corporate Insolvency Resolution Process (CIRP):- A petition was filed by Financial Creditors for the initiation of CIRP of the Corporate Debtor. An Interim Resolution Professional was appointed by the National Company Law Tribunal to conduct the CIRP as per the provisions of the Code.4. Effect of Moratorium under the Code:- Section 14 of the Code prohibits the institution or continuation of legal proceedings against the corporate debtor during the moratorium period. The appeal filed by the Revenue was considered as an institution of a suit against the corporate debtor, which was prohibited by the Code.5. Binding Nature of Resolution Plan:- As per section 31 of the Code, the resolution plan approved by the Adjudicating Authority is binding on various stakeholders involved, preventing State authorities and Regulatory bodies from challenging the plan.6. Dismissal of Appeals:- The appeal filed by the Revenue was dismissed with the liberty for the Assessing Officer to refile the appeal after the completion of the moratorium period. Similarly, the appeal filed by the assessee was dismissed for lack of permission from the NCLT and absence of authorization from the Interim Resolution Professional.7. Future Filing of Appeals:- Both parties were granted the liberty to file appeals afresh after the completion of the moratorium period or upon the revival of the Corporate Debtor as per the Resolution Plan approved by the Adjudicating Authority.8. Final Dismissal of Appeals:- Ultimately, both the appeal filed by the assessee and the Revenue were dismissed, with the order pronounced in the open court on 16/03/2022.This judgment primarily dealt with cross appeals related to an order under the Income Tax Act, 1961 for a specific assessment year. The absence of the assessee during the hearing, coupled with the ongoing insolvency proceedings under the Code, led to the dismissal of both appeals. The legal implications of the moratorium period, the binding nature of the resolution plan, and the necessity for proper permissions and authorizations were crucial factors in the decision to dismiss the appeals. The parties were granted the opportunity to refile their appeals after the completion of the moratorium period or as per the Resolution Plan approved by the Adjudicating Authority.