2022 (8) TMI 1269 - AT - Income Tax

ITAT allows delayed appeal in CIRP case, stresses resolution plan binding nature.

M/s. Neueon Towers Limited Versus Dy. CIT, Circle-16 (1), Hyderabad

The Appellate Tribunal ITAT Hyderabad allowed the delayed appeal by the assessee against the Commissioner of Income Tax (Appeals) order, condoning the ... Continuation of appeal after the initiation of CIRP proceedings - Corporate Insolvency Resolution Proceedings (CIRP) are pending against the assessee and as of now, Hon'ble National Company Law Appellate Tribunal (NCLAT) is seized with the jurisdiction - 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, this appeal cannot be proceeded with during the continuance of the proceedings under the Code. However, 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 appeal, if necessitated by the orders in the Corporate Insolvency Resolution Proceedings, dismiss the appeal in limine. For the above proposition, we derive support from the decision of the Mumbai Bench of the Tribunal in the case of Mahavir Roads & Infrastructure Pvt. Ltd [2022 (6) TMI 1294 - ITAT MUMBAI] Issues: Delay in filing appeal, Corporate Insolvency Resolution Proceedings (CIRP) and its impact on pending legal proceedings, Interpretation of provisions of Insolvency and Bankruptcy Code, 2016, Effect of resolution plan approval on claims against corporate debtor, Dismissal of appeal due to ongoing CIRP proceedings.The judgment by the Appellate Tribunal ITAT Hyderabad addressed the issue of a delayed appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals). The Tribunal considered the reasons for the delay and decided to condone it, allowing the matter to proceed on merits. It was noted that Corporate Insolvency Resolution Proceedings (CIRP) were ongoing against the assessee, with the National Company Law Appellate Tribunal (NCLAT) having jurisdiction over the matter.The Tribunal analyzed the provisions of the Insolvency and Bankruptcy Code, 2016, particularly section 13, which mandates a moratorium on legal proceedings against the corporate debtor once the application is admitted. Referring to the decision in Ghanashyam Mishra And Sons vs Edelweiss Asset Reconstruction, the Tribunal highlighted that claims not part of the resolution plan approved by the Adjudicating Authority would stand extinguished. The Tribunal emphasized that pending proceedings are prohibited once CIRP commences, and claims as per the resolution plan become binding on the corporate debtor and stakeholders upon approval.Considering the impact of ongoing CIRP proceedings, the Tribunal dismissed the appeal in limine, stating that no further action could be taken until the conclusion of the insolvency resolution process. The Tribunal allowed the appellant/respondent to seek restoration of the appeal based on the outcome of the CIRP proceedings. The decision was supported by a previous ruling of the Mumbai Bench of the Tribunal in a similar case. Ultimately, the appeal filed by the assessee was dismissed due to the ongoing CIRP proceedings and the binding nature of the resolution plan on the claims against the corporate debtor.