TaxTMI 
TaxTMI 
2025 (9) TMI 1112
X X X X Extracts X X X X
X X X X Extracts X X X X
....the NCLT. The said application was admitted by the NCLT vide order dated 17.03.2017. The NCLT, while admitting the resolution application announced moratorium under section 14 of the IBC effective from 17.03.2017 till any resolution plan is approved under section 31 of the IBC and subsequently M/s Atyant Capital emerged as the successful resolution applicant, to acquire the assessee company. The successful resolution applicant submitted its final resolution plan/ scheme which was duly approved by, inter alia, the Committee of Creditors. Thereafter, the aforesaid final resolution plan was filed before the NCTL and was duly approved by the said adjudicating authority vide order dated 17.01.2020 (as amended by order dated 04.02.2020). 3. The claim of assessee is that on approval of the resolution plan by NCLT under section 31 of the IBC, the same becomes binding on all the stakeholder including the income tax authorities. All the liabilities of the corporate debtor (assessee in the present case) relating to the period prior to approval of the resolution plan stand settled in accordance with the approved resolution plan read with provisions of IBC. It is also submitted that as per t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion applicant cannot be faced with undecided claims and it goes without saying once the plan is approved the resolution applicant starts on a clean slate and it cannot be faced with surprise claims. Therefore, the assessment order which is the subject matter of the appeal cannot be enforced any longer, nor the consequential proceedings which arose from the assessment year. 5. For the above reasons, GA 2 of 2022 is allowed and the assessment order passed in case of the appellant/assessee dated March 30, 1998 and all proceedings arising therefrom are held to have been permanently extinguished. 6. In the light of the above, the appeal stands disposed of on the above terms and the substantial questions of law are left open. 5.1 Reliance in this regard is also placed by the Ld. Counsel of assessee on the decision of Hon'ble Bombay High Court in the case of Uttam Value Steels Ltd. vs. ACIT [WP No. 9420/2022] wherein court proceedings initiated under section 153C of the Act were quashed holding that that once a resolution plan is duly approved under IBC, no proceedings in respect of any dues relating to period prior to approval of resolution plan can be continued or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Raj Rayon Industries Ltd. v. PCIT: I.T.A. No.830/Mum/2022 5.3 Reliance in this regard is also placed on the decision of Hon'ble Delhi High Court in appellant's own case for AY 2008-09 [ITA No. 999/2017] wherein court has adopted a 'clean state approach' and closed the appeal stating as under: "13. Having regard to the fact that the claims which are the subject matter of the present appeal concern the period prior to the approval of the resolution plan by the NCLT, in which no provision has been made for statutory dues, the continuation of this appeal would serve no purpose. 14. The court in these matters adopts a "clean slate " approach, and therefore, this appeal would have to be closed. 15. The appeal is, accordingly, closed." 5.4 Further, our attention is also invited decision of Delhi Tribunal in appellant's own case for AY 2011-12 [ITA No. 3538/Del/2016) wherein Tribunal has followed the order passed by High court and dismissed the appeal of revenue stating as under: "2. At the outset, we find that the ld. AR placed on record a decision of the Hon'ble Jurisdictional High Court in assessee's own case passed in ITA999/2017 dated 05.09.20....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which though are lengthy but for fairness to his attempt to defend the issue, are reproduced below; "1. In this case, it is important to note that: (i) There is no documentary evidence brought on record by the assessee to substantiate that after issue of notice under 143(2) of the Act, which signified start of scrutiny assessment proceeding in its case, the Jurisdictional assessing officer was intimated about start of CIRP by way of some letter /communication. Rather, as evident from TPO's order under 92CA(3) of the Act, the assessee chose not the comply various notices issued by the department authorities, few of which were issued during period of moratorium too, for the reason best known to it. This failure on the part of the assessee to intimate assessing officer about ongoing corporate insolvency resolution process need to be seen adversely against the assessee. (ii) Major part of assessment proceedings calling various details on different issues were undertaken by the Department subsequent to lifting of moratorium under section 14 of IBC. Further, as stated above, the assessee was not forthcoming to submit the details called. Thus, during the period....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e that at the time of last date for filing proof of claim before RP, the return of income for AY 2017-18 was neither filed nor selected for scrutiny. Therefore, it is not a case of failure on the part of the Revenue to lodge its claim before RP. (iv) In this case, tax demand was raised and notice under Section 156 of the Act was issued and served upon the assessee only after resolution plan had been approved by NCLT under Section 31 of the Insolvency & bankruptcy Code (IBC) and period of moratorium issued under Section 14 of IBC was already over. Hence, as per facts of the instant case, no demand under Section 156 of the I.T Act was raised for AY 2017-18 by way of impugned Assessment during the period of moratorium under Section 14 of IBC. (v) In light of peculiar facts discussed above, particularly as discussed in point (iii) and (iv) above, the instant appeal is distinguishable on facts from facts as discussed in decisions of Hon'ble Delhi High Court's assessee's own case for AY 2008-09 [ITA No. 999/2017] and Hon'ble ITAT, Delhi's in assessee's own case for AY 2011-12 [ITA No. 3538/Del/2016] as for both these years, there was failure on the part of Reven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reme Court in the case of Sundaresh Bhatt ( Liquidator of ABG Shipyard) vs Central Board Of Indirect Taxes And Customs (CIVIL APPEAL No. 7667 of 2021) (Copy submitted during hearing ), where in Hon'ble Supreme court has explained interplay between IBC Act and determination of Tax, interest, fine under another Act (Custom Act in that case) during the period of moratorium. In the said judgement Hon'ble Apex Court has held that :- "Para 43 In the above context, the judgment of this Court in S.V.Kondaskar v. V.M. Deshpande, AIR 1972 SC 878, is extremely relevant. In that case, this Court, while expounding the interplay of Section 446 of the Companies Act 1956 (bankruptcy provision)with the Income Tax Act, 1961, held as follows: 7. Looking at the legislative history and the scheme of the Indian Companies Act, particularly the language of Section 446, read as a whole, it appears to us that the expression "other legal proceeding" in sub-section (1) and the expression "legal proceeding" in sub-section (2) convey the same sense and the proceedings in both the sub-sections must be such as can appropriately be dealt with by the winding up court. The Income Tax Act is, in our....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wn any principle on which the liquidation court should be vested with the power to stop assessment proceedings for determining the amount of tax payable by the company which is being wound up. The liquidation court would have full power to scrutinize the claim of the Revenue after income tax has been determined and its payment demanded from the liquidator. It would be open to the liquidation court then to decide how far under the law the amount of income tax determined by the Department should be accepted as a lawful liability on the funds of the company in liquidation. At that stage the winding, up court can fully safeguard the interests of the company and its Creditors under the Act. Incidentally, it may be pointed out that at the Bar no English decision was brought to our notice under which the assessment proceedings were held to be controlled by the winding up court. On the view that we have taken, the decisions in the case of Seth Spinning Mills Ltd., (In Liquidation) (1962) 46 ITR 193 (Punj) (Supra) and the Mysore Spun Silk Mills Ltd., (In Liquidation) (1968) 68 ITR 295 (Mys) (supra) do not seem to lay down the correct rule of law that the Income Tax Officers must obtain leav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....respect of claims forming part of resolution plan or not forming part of resolution plan and their fate consequent to approval of the plan. First of all, it should be taken note of that in the said judgement, Honorable Apex Court has explained the fate of claim which are forming and not forming part of finally approved resolution plan. Thus, this judgement is about those cases, where a Claim was in existence at the time of approval of resolution plan. This judgement is not about those situations where a claim is not in existence on the date of approval of the resolution plan by the adjudicating authority. In other words, this judgement does not deal with or cover those situations or cases, where a claim arises due to some legal proceedings after date of approval of resolution plan. This aspect is manifestly evident from sub para (i) and (iii) of para 95 of the judgement, wherein Hon'ble Supreme Court clearly mentions about the fate of those claims or dues, which are forming or not forming part of the finally approved resolution plan. Thus, this judgement is essentially on the point of enforcement of recovery of dues or claims already existing on the date of finalization of resoluti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court which shall prevail. In view of the same, it is respectfully submitted that assessee is not entitled to get relief in respect of issue raised by it relying upon aforesaid decision of Hon'ble Delhi High Court. 7. Reliance is also placed upon decision of Hon'ble Madras High Court in the case of M/s Dishnet Wireless Limited Vs. ACIT (OSD) (W.P. No. 34668 of 2018) (Copy submitted during hearing). While passing said judgement, Hon'ble Madras High Court had duly taken into consideration judgment of Hon'ble Supreme Court in the case of Ghanshyam Mishra & Sons (P) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657. Recently Division Bench of Hon'ble High Court of Madras in case of CIT Vs. Dishnet Wireless Limited (2024) 165 Taxmann.com 416 has concurred with the view of expressed in aforesaid Writ Petition No. 34668 of 2018. Relevant part of said decision in the case of M/s Dishnet Wireless Limited Vs. ACIT (OSD) (W.P. No. 34668 of 2018)is reproduced as under: "17. The learned Junior Standing Counsel for the respondents further submits that the claim of the Income Tax Department had not crystalized and therefore the question of extinguishment of any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he plan, in the light of the view taken by us, the same cannot be continued. Equally the claims, which are not part of the resolution plan, shall stand extinguished. 23. The above conclusion was arrived based on the conclusion in Paragraph No. 102, wherein the questions framed by the Hon'ble Supreme Court were answered as under:- Conclusion. 102. In the result, we answer the questions framed by us as under:- 102.1. That once a resolution plan is duly approved 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. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. 102.2. The 2019 Amendment to Section 31 of the I&B Code is clarif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the dues of financial Creditors as well as operational Creditors and other stakeholders, the corporate debtor is revived and is made an on-going concern. After Committee of Creditor (COC) approves the plan, the adjudicating authority is required to arrive at a subjective satisfaction that the plan conforms to the requirements as are provided in Sub-Section (2) to Section 30 of the Insolvency and Bankruptcy Code, 2016. 28. Only thereafter, the adjudicating authority can grant its approval to the plan. It is at this stage that the plan becomes binding on the corporate debtor, its employees, members, Creditors, guarantors and other stakeholders involved in the resolution plan. The legislative intent behind this is to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. 29. The Resolution Plan submitted on behalf of the petitioners by the Insolvency Resolution Professional under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 on 21.05.2019 has not contemplated any concession from the Income Tax Department though Notices under Section 148 of the Income Tax Act, 1961 had already been issued d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of resolution plan by Hon'ble NCLT. There is also no evidence produced by the assessee to show that Resolution Professional had made some communication with the jurisdictional Assessing Officer intimating him about ongoing CIRP in the case of assessee company and inquiring about any tax demand likely to be raised for AY 2017-18 despite the fact notice under section 143(2) of the Act was already issued by the AO on 13.08.2018 and was also duly served. The onus was on the assessee acting through RP to make AO aware about resolution proceedings and inquire into demands likely to be raised for AY 2017-18, which were at initial stage and bring the same to the knowledge of Hon'ble NCLT for taking appropriate decision as per the law. The assessee did not bring any evidence to show that RP did not fail in this regard. As a consequence of such failures, there is no document or evidence brought on record by the assessee to show that the adjudicating authority had taken into consideration ongoing assessment proceedings for AY 201718 and its impact before final approval of Resolution plan. Therefore, ratio of above decision of Hon'ble High court of Madras is clearly applicab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al behind 'Clean slate approach' adopted by Indian courts in CIRP matters. The principle of 'Clean Slate' does not have any applicability to the facts of instant appeal as impugned assessment order was finalized and tax demand in question was raised after resolution plan had been approved and moratorium was not in place. Thus, there was no occasion available with the Revenue to lodge any claim with Resolution profession with regard to tax demand for assessment year 2017-18. Further, the company acting through RP had apparently failed to communicate with the Assessing officer during assessment proceedings to intimate about ongoing resolution process, inquiring into demand likely to be raised and bringing the same to the notice of Hon'ble NCLT. Moreover, in case, interpretation given by the assessee is accepted, it would tantamount to giving blanket protection to a corporate debtor assessee from recovery of all demands, which may arise in future in respect of an earlier assessment year due to some tax evasion relating information coming to the knowledge of Income Tax department at a later stage. Such a blanket restriction on operation of provisions of the Income tax Act can ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; Section 5 (8): "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- ............................................................................................. g. Section 5(10): "information memorandum" means a memorandum prepared by resolution professional under sub-section (1) of section 29; Section 5(20): "operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; Section 5(21): "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; Section 30(2): The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for the submission of claims. Section 18(1) of the Code requires the interim resolution professional (IRP) to receive and collate all the claims submitted by Creditors to him, pursuant to the public announcement made under sections 13 and 15. Section 25 (2) (e) requires a resolution professional to maintain an updated list of claims. CIRP regulations require the information memorandum to include details of claims of Creditors. These provisions, read with definitions cited above, envisage submission and collation of all claims - operational debt, financial debt or other debts of FCs, OCs and other Creditors. " 8. We have given thoughtful consideration to the submissions and perused the record. As with regard to the basic facts, there is no dispute that on 03.03.2017, an application u/s 10 of the IBC was filed before the Allabahad Bench of NCLT and on 16.03.2016, while admitting the petition, a moratorium u/s 24 of the IBC was made effective. The finalization plan was approved on 17.01.2020 as amended by order dated 04.02.2020. Thus, with regard to all the liabilities of the corporate debtors relating to the period prior to 04.02.2020, the resolution pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or, a Liquidation Order was issued against the Corporate Debtor. It is pertinent to mention that the Hon'ble Appellate Tribunal on the question of the Assessment order passed during the CIRP and Liquidation process has considered the Hon'ble Apex Court decision in Sundaresi Bhatt (supra), which is heavily relied before us by the ld. DR. 13. However, the case before us is not of a failed resolution leading to liquidation but a successful resolution. So the conclusion of DRP that 'the code does not stay any proceedings under the Income Tax Act, 1961 but only states that the claims of the department will be entertained by the Official Liquidator duly appointed.", does not help the department. Inspite of claim of department arising out of assessment concluded during the pendency of IP, being held as unsecured operation debt for liquidation proceedings by the NCLAT, the same is not applicable in case of assessee, where there is successful resolution. 14. Now we are required to consider if still the claim of department can be considered enforceable anymore. The Ld. DR has submitted that assessee or RP had not informed the department, so if no claim was raised before the completion ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tands extended upto 11.12.217 as a going concern the financial statements are prepared. Then, we find that as part of the notes to financial statements for the year ending 31.03.2017 with regard to the head 'Long term borrowings' on page No.25, it is mentioned that the company has defaulted on the principal and interest payments and both the State Bank of India and the Central Bank of India have recalled the loans. Further, the Resolution Professional (RP) had sought claims from the Creditors as on 17.03.2017, i.e., date of admission of CIRP application by NCLT with the last date for submission of claims being 31.03.2017. This fact of insolvency proceedings is again re-asserted as a note to non-current investments on page No.30 and as loans and advances to related parties at page No.32. Then, vide note No.31, it is mentioned in regard to the EXIM Bank revoking counter guarantee, an admission of the claim of EXIM Bank by the Resolution Professional. 18. Further, we find that as Note No.36 of contingent liabilities in sub-clause (5), (6), (7) and (8), it is disclosed that for the different financial years, assessment orders u/s 143(3) have been received and there is pendency of ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der Section 31 could be continued." 21. Thus, definition of "claim" u/s "Section 2 (6) and definition u/s 5(21) of "operational debt", make it very apparent the RP is required to consider 'claims', which may or may not be 'debt'. The ongoing assessment proceedings are likely to give rise to a debt but till same is not crystallized, it continues to be a 'claim' under IBC for which RP, was competent to consider to make it part of operational debt or at least inform the COC and prospective successful resolution applicant. 22. In the case before us the Assessing Officer being made aware of the pendency of insolvency proceedings and Resolution Professional calling for claim of all the operational Creditors, which certainly includes the Department having a claim in respect of dues arising under the Act, then, the Assessing Officer had an opportunity to raise the claim before the Resolution Professional as well as Committee of Creditors. The ld. DR was unable to cite before us any material which would show that the Assessing Officer had at any stage informed the assessee that in spite of insolvency proceedings going on, the assessment for the year under consideration is being taken ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the basis of the information memorandum. The information memorandum, which is required to be prepared in accordance with Section 29 of the I&B Code along with Regulation 36 of the Regulations, is required to contain various details, which have been gathered by RP after receipt of various claims in response to the statutorily mandated public notice. The resolution plan is required to provide for the payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the resolution plan; the implementation and supervision of the resolution plan. It is only after the adjudicating authority satisfies itself that the plan as approved by CoC with the requisite voting share of financial Creditors meets the requirement as referred to in sub-section (2) of Section 30, grants its approval to it. It is only thereafter that the said plan is binding on the corporate debtor as well as its employees, members, Creditors, guarantors and other stakeholders involved in the resolution plan. The moratorium order passed by the adjudicating authority under Section 14 shall cease to operate once the adjudicating authority approves the resolution plan. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the considered view that whatever contentions the ld. DR has made are devoid of any substance. His heavy reliance on the Hon'ble Supreme Court decision in Sundaresh Bhatt (supra) is also of no assistance as in that case the issue was not at all concerning the claim of respondent Central Board of Indirect Taxes and Customs subsequent to the culmination of insolvency proceedings by approval of Resolution Plan. Rather, that was a case of liquidation and in that case, we find that the respondent Department had issued a notice on 04.07.2019 to the corporate debtor u/s 72(1) of the Act for customs dues and the Respondent also filed a concurrent claim of the customs dues before the Interim Resolution Professional, and the petitioner before the Hon'ble Supreme Court, defending the property of company, was the liquidator. Further, the issue in that case examined was with regard to the powers of the Customs Authorities to continue with the determination of quantum of Customs Duties and other levies and to that extent, the Hon'ble Supreme Court recognized the powers but also held that after assessment the respondent authority has to submit its claim concerning customs dues/operational debts i....