ACIT Vs MITC Metals Private Limited (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai has set aside the order of the Commissioner of Income Tax (Appeals) [CIT(A)] in the case of ACIT vs. MITC Metals Pvt. Ltd., ruling that the assessment order was not void ab-initio. The dispute pertained to the assessment year 2014-15, where CIT(A) had invalidated the assessment order, citing the initiation of the Corporate Insolvency Resolution Process (CIRP) against the company. The revenue department challenged this decision, arguing that the assessing officer (AO) was not barred from determining tax liabilities even during the insolvency proceedings.
The CIT(A) had based its decision on the Supreme Court’s ruling in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., where it was held that once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code (IBC), all claims not included in the plan are extinguished. However, the Tribunal noted that in the present case, the resolution plan was approved only on July 31, 2023, whereas the assessment order was passed earlier, on May 19, 2023. Citing the Supreme Court’s decision in Sundaresh Bhatt v. Central Board of Indirect Taxes and Customs, ITAT clarified that while tax authorities cannot initiate recovery proceedings during the moratorium period under Section 14 of the IBC, they are still empowered to assess tax dues.
Additionally, ITAT pointed out that in MITC Metals’ own case for the assessment year 2013-14, a co-ordinate bench had previously overturned a similar order by CIT(A). Based on these precedents, the Tribunal held that CIT(A) erred in declaring the assessment order void ab-initio, as the AO had acted within legal limits. The Tribunal, therefore, remanded the matter back to CIT(A) for fresh adjudication in accordance with the law.
While ITAT acknowledged that the issue had largely become academic due to the resolution plan’s approval, it emphasized the need for proper legal evaluation before nullifying assessment orders. The ruling reinforces the principle that assessment proceedings can continue during CIRP, provided no recovery actions are taken. The order was pronounced on December 30, 2024.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been preferred against the impugned order dated 29.05.2024 passed in Appeal no. NFAC/2013-14/10281617 by the Ld. Commissioner of Income– tax(Appeals)/ National Faceless Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”] u/s. 250 of the Income-Tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment year [A.Y.] 2014-15, wherein learned CIT(A) has declared the assessment order dated 19.05.2023 as void ab- initio pursuant to the initiation of corporate insolvency resolution process (CIRP) vide order dated 11.03.2019 passed by NCLT u/s.14 of IBC 2016.
2. When the case was taken up for hearing, appellant revenue represented through learned DR, however none responded for respondent assessee/corporate debtor.
3. Learned DR has drawn the attention of the bench that learned CIT(A) has erred in passing the impugned order merely on the ground that corporate insolvency resolution process has been initiated against the respondent/ corporate debtor.
4. We have perused the impugned order dated 29.05.2024 passed by learned CIT(A). Learned CIT(A) has declared the assessment order dated 19.05.2023 as void ab-initio by taking strength from the judgement dated 13.04.2021 of Hon’ble Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. V. Edelweiss asset reconstruction company Ltd. passed in civil appeal no. 8129/2019, wherein Hon’ble Supreme Court has held that it is only when the resolution plan is approved by the adjudicating authority u/s. 31(1) of the IBC, the claim provided in the resolution plan shall stand frozen and consequently all other dues shall stand extinguished. In the present case, the resolution plan was approved vide order dated 31.07.2023 passed by the adjudicatory authority.
5. At the very outset, we notice that the grounds raised by the revenue are defective. However, we propose to dispose of the matter on the basis of arguments raised by the learned department’s representative. We notice that the assessment order was passed on 19.05.2023 i.e before the approval of resolution plan by the adjudicatory authority on 31.07.2023. Hon’ble Supreme Court in Sundaresh Bhatt, liquidator of ABC shipyard V. Central board of indirect taxes and customs, vide order dated 26.08.2022 passed in civil appeal no. 7667/2021, held that the Income Tax authorities have limited jurisdiction to assess/determine the quantum of income tax dues but have no authority to initiate recovery of such dues at its own during the period of moratorium in violation of section 14 or 33(5) of the IBC as the case may be. It is thus clear that the assessing officer was not barred from determining the dues merely after the initiation of CIRP on 11.03.2019.
6. It is pertinent to mention that in assessee’s own case for A.Y. 2013-14, the co-ordinate bench of this Tribunal vide order dated 03.09.2024 passed in ITA No. 3615/M/2024 has set aside such order passed by learned CIT(A).
7. In view of above, learned CIT(A) has thus erred in treating the assessment order dated 19.05.2023 as void ab-initio which was passed before the approval of resolution plan on 31.07.2023 by the adjudicatory authority. We accordingly set aside the impugned order passed by the learned CIT(A) and restore the matter to the file of learned CIT(A) for adjudicating afresh in accordance with law, although the issue remains only of academic importance in view of aforestated authoritative law.
8. In the result, the appeal filed by the revenue is decided in above terms.
Order pronounced on 30.12.2024.
