2022 (7) TMI 271 - AT - Income Tax

NCLT Resolution Plan Binding on Revenue: Pre-existing Claims Extinguished

Asst. Commissioner of Income Tax, Circle-1, Kurnool Versus M/s. Panyam Cements & Mineral Industries Ltd., Nandyal And (Vice-Versa)

The Tribunal held that the Revenue is bound by the resolution plan accepted by the NCLT, extinguishing all pre-existing claims of the corporate debtor. ... Reopening of assessment u/s 147 - Corporate Insolvency Resolution process accepted - HELD THAT:- Respectfully following the order of the Tribunal in assessee’s own case [2022 (5) TMI 820 - ITAT HYDERABAD], we hold that the Revenue is bound by the resolution plan as accepted by the NCLT and not entitled to anything more than what is provided therein. We find the amount provided under the resolution plan is only Rs.22 Lakhs as against the claim of the Revenue to the tune of Rs.189.91 Crores. Therefore, the assessee or Revenue cannot have any grievance in disposing of these appeals in tune with the orders of the NCLT. This appeal is disposed-of accordingly. Issues Involved:1. Validity of the reopening of assessment under Section 147 of the Income Tax Act.2. Deletion of additions made by the Assessing Officer (AO) by the Commissioner of Income Tax (Appeals) [CIT(A)].3. Binding nature of the resolution plan accepted by the National Company Law Tribunal (NCLT) on the Revenue.4. Applicability of judicial precedents regarding the assessment of Long Term Capital Gains.5. Validity of reassessment under Section 150(1) following directions of the Tribunal.Detailed Analysis:1. Validity of the reopening of assessment under Section 147 of the Income Tax Act:The assessee filed its return for AY 2006-07 declaring a net business loss and capital gains. The AO reopened the assessment under Section 147 on the grounds that Long Term Capital Gains had escaped assessment. Statutory notices were issued, and the AO completed the assessment determining a significantly higher total income. The CIT(A) deleted the addition made by the AO, leading to the Revenue's appeal.2. Deletion of additions made by the AO by the CIT(A):The Revenue contested the CIT(A)'s deletion of the additions, arguing that the CIT(A) ignored binding judicial decisions and misinterpreted the facts. The CIT(A) had relied on the Andhra Pradesh High Court's decision in Potla Nageswara Rao Vs DCIT, emphasizing that the payment of consideration on the date of the agreement of sale is not required, and transfer is deemed complete when factual possession and agreement are in place.3. Binding nature of the resolution plan accepted by the NCLT on the Revenue:The Tribunal noted that the Corporate Insolvency Resolution Process had taken place, and the NCLT, Amaravati Bench, had accepted the resolution plan, which extinguished all crystallized and unclaimed liabilities of the corporate debtor (the assessee). The Tribunal referred to its own decision in the assessee's case for AYs 2008-09 and 2013-14, where it held that the Revenue is bound by the resolution plan and not entitled to anything beyond what is provided therein. The Tribunal also cited the Supreme Court's decision in Ghanashyam Mishra and Sons Vs. Edelweiss Asset Reconstruction, which clarified that once a resolution plan is approved, all claims not part of the plan are extinguished.4. Applicability of judicial precedents regarding the assessment of Long Term Capital Gains:The Revenue argued that the CIT(A) failed to appreciate judicial precedents that support the assessment of Long Term Capital Gains based on the agreement and possession dates. The Tribunal, however, emphasized the binding nature of the NCLT's resolution plan, which supersedes other considerations.5. Validity of reassessment under Section 150(1) following directions of the Tribunal:For AY 2009-10, the Revenue challenged the CIT(A)'s decision to invalidate the assessment, arguing that the reassessment was done following the Tribunal's directions under Section 150(1). The CIT(A) had relied on the Supreme Court's decision in Rajindernath Vs CIT, which requires that a finding or direction must be necessary for the disposal of the particular case and directly involved in the disposal. The Tribunal upheld the CIT(A)'s decision, stating that the Revenue and the assessee are bound by the NCLT's resolution plan.Conclusion:The Tribunal concluded that the Revenue is bound by the resolution plan accepted by the NCLT and cannot claim anything beyond what is provided therein. Both appeals by the Revenue were partly allowed, and the Cross Objection filed by the assessee was dismissed. The Tribunal's decision underscores the supremacy of the NCLT's resolution plan in extinguishing all pre-existing claims, including statutory dues.