TaxTMI 
TaxTMI 
2026 (7) TMI 305
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....ered the legal character of the Corporate Debtor and have rendered adjudication of the issues on merits wholly academic. It was, therefore, urged that before embarking upon the individual additions made in the respective assessment years, it would be necessary to examine the legal consequences flowing from the proceedings undertaken under the IBC and the orders passed by the NCLT, as the answer to that issue would determine whether any effective adjudication now survives in these appeals. 2. The sequence of events, emerging from the material placed before us, assumes considerable significance. It transpires that an application under Section 7 of the IBC came to be admitted by the NCLT vide order dated 11.04.2019, whereupon the Corporate Insolvency Resolution Process commenced against the assessee company. Consequent thereto, an Interim Resolution Professional was appointed, who subsequently continued as the Resolution Professional, and public announcement inviting claims from the stakeholders was issued in accordance with the statutory provisions. Simultaneously, expressions of interest were invited from prospective resolution applicants with the avowed object of exploring the p....
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....sets of the Corporate Debtor but also, wherever possible, to preserve the business as a functional commercial undertaking through a statutory transfer under the supervision of the Adjudicating Authority. 5. Proceeding further, it was pointed out that in furtherance of the aforesaid statutory objective, the Liquidator issued an e-auction process information document and public notice dated 19.10.2022 inviting bids for sale of the Corporate Debtor as a going concern. The auction documents themselves expressly stipulated that the sale was being undertaken in terms of Regulation 32(e) of the Liquidation Process Regulations and not by way of sale of isolated assets. Pursuant thereto, the e-auction process was conducted, wherein M/s L7 Hi-Tech Private Limited emerged as the successful bidder by offering a consideration of Rs. 6.60 crores. The entire sale consideration was thereafter deposited with the Liquidator within the prescribed time and the sale stood confirmed in favour of the successful bidder in accordance with the procedure prescribed under the IBC. Thus, what ultimately came to be transferred was not merely certain assets of the company but the Corporate Debtor itself as a ....
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....tion of the Corporate Debtor, sale as a going concern and eventual closure of liquidation stands duly supervised and culminated through judicial orders passed by the competent Adjudicating Authority. 8. The Ld. Counsel, drawing strength from the aforesaid factual developments, submitted that these subsequent events have completely altered the legal landscape in which the present appeals are required to be examined. According to him, the additions impugned before us pertain to assessment years much prior to commencement of the Corporate Insolvency Resolution Process and indisputably relate to the period when the affairs of the company were under the control of its erstwhile promoters and management. However, after completion of the statutory liquidation process and transfer of the Corporate Debtor as a going concern pursuant to the orders of the NCLT, the company now represents an altogether different commercial entity under a new management, and the legal consequences flowing from the completed proceedings under the IBC cannot be ignored while adjudicating these appeals. It was, therefore, urged that before examining the merits of the individual additions made by the Assessing O....
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.... is demonstrated that the Corporate Debtor has undergone liquidation and has thereafter been transferred as a going concern pursuant to judicial orders passed by the NCLT, the legal consequences flowing from such statutory process cannot remain divorced from the adjudication under the Income Tax Act. The issue, therefore, is not whether the additions originally made by the Assessing Officer were justified on merits, but whether, in the wake of the completed liquidation process and the subsequent transfer of the Corporate Debtor, any effective adjudication on those additions now survives against the Corporate Debtor in its present form. 12. Before examining the legal implications flowing from the judicial precedents cited before us, it would be apposite to first advert to the findings recorded by the NCLT itself. A bare perusal of the order dated 08.12.2023 reveals that the Adjudicating Authority undertook a detailed examination of the entire liquidation process commencing from the sale of the Corporate Debtor as a going concern, the terms incorporated in the e-auction process information document, the rights flowing in favour of the successful bidder and the statutory consequenc....
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.... Corporate Insolvency Resolution Process, liquidation of the Corporate Debtor, sale as a going concern and eventual closure of liquidation has culminated in judicial orders passed by the Adjudicating Authority, all of which admittedly continue to hold the field. 15. Another aspect which assumes significance is that the record placed before us does not indicate that any of the aforesaid orders passed by the NCLT have either been stayed, modified or reversed by any appellate forum. Equally, no material has been brought on record by the Revenue to demonstrate that the findings recorded by the Adjudicating Authority have ceased to operate or have otherwise lost their binding efficacy. So long as the orders passed by the competent forum under the IBC continue to subsist, the legal consequences flowing therefrom cannot be ignored while exercising appellate jurisdiction under the Income Tax Act. The Tribunal, while deciding appeals under the Income Tax Act, undoubtedly exercises jurisdiction within the four corners of that enactment; however, it cannot proceed on an assumption contrary to judicial orders validly passed under another special statute governing the legal status of the Cor....
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.... as a going concern, the sale has received judicial approval, consequential directions have been issued by the NCLT, the sale consideration has already been distributed in accordance with Section 53 and finally the liquidation proceedings themselves have been formally closed. Thus, the legal transformation of the Corporate Debtor is not founded merely on theoretical propositions flowing from the statute but upon completed judicial proceedings whose legal consequences continue to govern the rights and obligations of all stakeholders. 19. Another feature which cannot be overlooked is that the assessments giving rise to the present appeals relate entirely to a period much prior to commencement of the Corporate Insolvency Resolution Process. The alleged tax liabilities sought to be adjudicated are, therefore, referable to the affairs of the company when it was under the control and management of the erstwhile promoters. The present management has stepped into the company only by virtue of a statutory acquisition effected through the liquidation mechanism. To insist upon continuation of appellate proceedings against the Corporate Debtor, notwithstanding the completed statutory proces....
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.... 22. We also find merit in the contention of the Ld. Counsel that the liabilities forming the subject matter of the present appeals admittedly pertain to the period when the affairs of the company were under the control and management of its erstwhile promoters. The additions made by the Assessing Officer relate to assessment years much prior to commencement of the proceedings under the IBC and, therefore, arise entirely out of transactions and events attributable to the previous management. After completion of the statutory liquidation process, the successful bidder has stepped into the shoes of the Corporate Debtor only by virtue of a judicially supervised acquisition as a going concern. The foundation upon which such transfer rests is that the liabilities of the Corporate Debtor are to be dealt with within the statutory framework of the IBC itself. To continue adjudication against the Corporate Debtor in respect of pre transfer liabilities, notwithstanding the completed liquidation process and the specific directions issued by the NCLT, would not only overlook the statutory consequences flowing from the IBC but would also render the judicial orders passed by the Adjudicating Au....
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....the NCLT or had obtained any order staying their operation. Equally, nothing has been brought on record to show that the statutory consequences flowing from the completed liquidation proceedings stand diluted in any manner. In such circumstances, the Tribunal is required to proceed on the basis of the legal position obtaining on the date of adjudication and not on the basis of the position which existed when the appeals were originally instituted. Judicial notice cannot be shut out from subsequent statutory developments which have a direct bearing on the relief that can effectively be granted in appellate proceedings. 26. Having regard to the entirety of the facts and circumstances discussed hereinabove, we are of the considered opinion that any adjudication on the merits of the additions made by the Assessing Officer would, in the peculiar facts of the present case, remain purely academic. The enforceability of such adjudication against the Corporate Debtor stands eclipsed by reason of the completed statutory process under the IBC and the judicial orders passed by the NCLT governing the legal status of the Corporate Debtor after its transfer as a going concern. It is well settl....