Assessment proceedings cannot continue once corporate insolvency resolution proceedings commence under sections 7, 9, or 10 of Insolvency Code

ITAT Nagpur dismissed a revenue appeal against an insolvent company, holding that assessment proceedings cannot continue once corporate insolvency resolution proceedings commence under sections 7, 9, or 10 of the Insolvency Code. Following SC precedent in Ghanashyam Mishra And Sons and Bombay HC decision in Murli Industries Limited, the tribunal ruled that claims not included in an approved resolution plan stand extinguished and no proceedings can be initiated or continued regarding such claims. The appeal was dismissed in limine with leave granted to restore if necessitated by adjudicating authority orders.

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Issues:
Appeals filed by Revenue against orders of ld. Commissioner of Income Tax (Appeals) for assessment years 2008-09, 2009-10, and 2010-11. Interpretation of provisions of Insolvency and Bankruptcy Code, 2016 in the context of Corporate Insolvency Resolution Proceedings (CIRP). Applicability of the decision in Ghanashyam Mishra And Sons vs. Edelweiss Asset Reconstruction. Effect of resolution plan approval on claims against Corporate Debtor. Jurisdictional High Court's ruling in Murli Industries Limited case.

Analysis:

The judgment pertains to appeals by Revenue against orders of the ld. Commissioner of Income Tax (Appeals) for the assessment years 2008-09, 2009-10, and 2010-11. The Tribunal noted that the facts and issues in all three appeals were identical, leading to a common decision. The Tribunal proceeded to analyze the case for the assessment year 2008-09, where Corporate Insolvency Resolution Proceedings (CIRP) were pending against the respondent-assessee. The Tribunal highlighted the provisions of the Insolvency and Bankruptcy Code, 2016, particularly section 13, which mandates a moratorium upon admission of an application under the Code. Reference was made to the decision in Ghanashyam Mishra And Sons vs. Edelweiss Asset Reconstruction, emphasizing the binding nature of claims provided in a resolution plan upon approval by the Adjudicating Authority.

The Tribunal observed that once CIRP proceedings have commenced, the continuation of pending proceedings is prohibited until the approval of a resolution plan. The Tribunal cited the decision in the case of Murli Industries Limited vs. ACIT to support the extinguishment of claims not part of the resolution plan upon approval by the Adjudicating Authority. The Tribunal highlighted that the aim of the Insolvency and Bankruptcy Code is to revive the Corporate Debtor by settling claims against it, ensuring certainty for the Resolution Applicant regarding future claims. The Tribunal noted the overriding effect of the IBC provisions and the retrospective effect of section 31 of the amended Act.

In the present case, the Tribunal found that the claims subject to appeal were not part of the resolution plan, aligning with the principles established in the Murli Industries Limited case. Consequently, the Tribunal dismissed the appeal filed by the Revenue for the assessment year 2008-09. The Tribunal extended this decision to the remaining two appeals for the assessment years 2009-10 and 2010-11, resulting in the dismissal of all three appeals by the Revenue. The judgment was pronounced on October 5th, 2023.

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