2022 (5) TMI 1015 - HC - Income Tax

Court allows appeal, stays proceedings for CIRP under Insolvency and Bankruptcy Code.

Srei Equipment Finance Limited Versus Additional/Joint/Deputy/Assistant Commissioner Of Income Tax And Others.

Srei Equipment Finance Limited Versus Additional/Joint/Deputy/Assistant Commissioner Of Income Tax And Others. - TMI Issues Involved:1. Validity of the assessment proceedings during the pendency of Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).2. Alleged violation of principles of natural justice due to lack of personal hearing.3. Adverse remarks and imposition of costs on the appellant's counsel by the learned Single Bench.Analysis:1. Validity of the Assessment Proceedings During CIRP:The appellant challenged the notice dated 23rd March, 2022, issued to give effect to the order under Section 263 of the Income Tax Act, 1961. The appellant contended that the proceedings should be stayed due to the ongoing CIRP under the IBC and the moratorium imposed by the NCLT. The appellant cited Section 14 of the IBC and relevant judicial precedents, including Alchemist Asset Reconstruction Company vs. Hotel Gaudavan (P) Ltd. & Ors. and PCIT vs. Monnet Ispat and Energy Ltd., to argue that the IBC provisions override the Income Tax Act. The appellant requested the assessing officer to keep the proceedings in abeyance until the completion of CIRP. Despite these arguments, the assessing officer proceeded with the assessment, leading to the appellant filing a writ petition.2. Alleged Violation of Principles of Natural Justice:The appellant argued that they were not afforded a proper opportunity for a personal hearing, as the hearing was conducted through chat messages, which they claimed was ineffective. The appellant highlighted that the assessing officer did not consider the judicial pronouncements and the order passed by PCIT-II, who had acceded to a similar request for a different assessment year. The court observed that the assessing officer failed to provide a meaningful opportunity for a personal hearing and did not consider the legal arguments presented by the appellant. The court noted that the assessment order was ex parte and that the assessing officer committed a grave error by not staying the proceedings during the CIRP.3. Adverse Remarks and Imposition of Costs on Counsel:The learned Single Bench had imposed a cost of Rs. 10,000/- on the appellant's counsel, Mr. Somak Basu, for alleged rude behavior and disrespectful conduct in court. The appellant's counsel denied these allegations, stating that his intention was to persuade the court to consider the relevant sections of the IBC and the principles of natural justice. The court referred to various judicial precedents, including Neeraj Garg vs. Sarita Rani & Ors., which emphasized the importance of judicial restraint and the need for judges to avoid unnecessary remarks against counsel. The court concluded that the adverse remarks and costs imposed on the appellant's counsel were unwarranted and should be expunged.Conclusion:The court allowed the appeal, set aside the assessment order dated 30th March, 2022, and restored the matter to the file of the assessing officer, directing that the proceedings be kept in abeyance until the completion of the CIRP. The court also expunged the adverse remarks and vacated the costs imposed on the appellant's counsel. The application for stay was closed, and no costs were awarded.