NCLT Ahmedabad (27.05.2020) in Deputy Commissioner of Income Tax V/s Bhuvan Madan RP for Diamond Power Infrastructure Ltd. & Anr. [I.A. No. 672 of 2019 in C.P. (I.B.) No. 137/NCLT/AHM/2018 ] held that;
8.1 This Adjudicating Authority is of the considered view that once the CIRP is triggered and moratorium is imposed, all the legal proceedings, execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority are prohibited against the Corporate Debtor except supply of essential goods or services to the Corporate Debtor.
8.3 The present application has been preferred by the Applicant to seek permission from this Adjudicating Authority to carry out the assessment proceedings under Section 153A read with 281B of the Income Tax Act. Considering the necessity of the assessment of tax, the prayer of the Applicant is accepted to the extent of only doing assessment for the AY 2013-14 to 2019-20.
8.4 It is also made clear that the Income Tax Department cannot proceed/file case against the Corporate Debtor without prior permission from this Adjudicating Authority.
8.6 On the other hand, the Resolution Professional is directed to extend his full cooperation to the Income Tax Department in their assessment of tax of the Corporate Debtor.
8.7 The Income Tax Department may file their claim, if any, as an Operational Creditor with the Resolution Professional of the Corporate Debtor in time. The Resolution Professional may examine the claim of the Income Tax Department in accordance with the provisions of the Code.
Excerpts of the order;
# 1. The Applicant is the Deputy Director of Income Tax, Central Circle - 3, Vadodara Resolution Professional of Diamond Power Infrastructure Limited against whom Corporate Insolvency in C.P. (I.B.) No. 137/NCLT/AHM/2018 Resolution Process (hereinafter referred to as CIRP) were initiated by Bank of India and admitted by this Bench vide order dated 24.08.2018. Mr. R.D. Choudhary appointed as the Interim Resolution Professional by this Bench was replaced by Sri Bhuvan Madan, by the CoC in its meeting held on 24th September, 2018 and confirmed by this Bench vide its order dated 23.10.2018.
# 2. It is stated that present application has been preferred with a view to seek permission from this Bench for carrying out the assessment proceedings for the assessment years A.Y. 2013-14 to A.Y. 2019-20. It is stated that Applicant has issued notice under Section 153A of the income Tax Act on 25.10.2018 as the period for carrying out aforesaid assessments is going to expire on 30.09.2020. The Applicant further states that if the assessment is not concluded within the statutory period, it would cause grave injustice to the Applicant and the Government Exchequer. Notice under section 153A of the Income Tax Act is annexed with the application as Annexure R1.
# 3. It is further stated that if the assessment under section 153A is not concluded within the said statutory time limit, the entire proceedings shall lapse. It is further stated by the Applicant that they have unearthed major discrepancies against the Corporate Debtor which has led the Applicant to assess the Corporate Debtor under the Income Tax Act.
# 4. It is further stated that since resolution professional has been appointed in the matter and a moratorium has been declared under section 14 of the Code, the Applicant is constrained to prefer this application before this Bench to seek permission to continue with the assessment proceedings under section 153A of the Act.
# 5. It is submitted that a search was conducted on 10.04.2018 under section 132 of the Income Tax Act at the business premises of the Corporate Debtor viz. DPIL along with other individual groups who are in connection with the Corporate Debtor. Besides, the other agencies like CBI and Enforcement Directorate also seized certain data from the business premises of the Corporate Debtor. The Applicant further submits that on the basis of preliminary analysis of the material being seized by the Applicant, certain discrepancies were noticed which would lead to crystallization of the huge demand of Tax under the Income Tax Act. The discrepancies being
(i) wrongful claim of depreciation of Rs. 165.48 crores on Plant and machineries
(ii) Rs. 391.52 crores transferred for non-business purposes,
(iii) Rs. 48.25 crores transferred and rotated in the form of share capital and
(iv) sale of products in cash through the distributors and therefore, it is thought fit to carry out the assessment proceedings under section 153A of the Income Act read with 281B of the Income Tax Act.
# 6. It is submitted by the Applicant that Section 14 of the Code clearly stipulates an embargo from carrying out any legal proceedings resultantly the Applicant has preferred this application seeking permission to permit the Income Tax Authorities to proceed with the provisions of Section 153A of the Income Tax Act read with 281B of the Income Tax Act with the prayers to applicant to carry out the proceedings under section 153A read with 281B of the Income Tax Act.
# 7. Observations:
7.1 This Adjudicating Authority has observed that during the search operations against the Corporate Debtor, the Income Tax Department has found many discrepancies in the accounts of the Corporate Debtor which may lead to huge tax demandon the Corporate Debtor, in case assessment proceedings for the A.Y. 2013-14 to 2019-20 of the Corporate Debtor are carried out, otherwise there will be grave injustice to the interests of the Applicant as well as the Government Exchequer.
7.2 This Adjudicating Authority has also observed that CIRP proceedings have already been commenced against the Corporate Debtor vide order dated 24.08.2018 of this Adjudicating Authority and moratorium has been imposed under Section 14 of the Code.
# 8. Judgment:
8.1 This Adjudicating Authority is of the considered view that once the CIRP is triggered and moratorium is imposed, all the legal proceedings, execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority are prohibited against the Corporate Debtor except supply of essential goods or services to the Corporate Debtor.
8.2 The Insolvency and Bankruptcy Code, 2016 was enacted with a view to bring about a complete reorganization and insolvency resolution of Corporate Debtors in a time bound manner and to inspire life into a Corporate Debtor struggling to repay its debts, Section 238 was inserted in the Code. Provisions of this Section 238 override other laws as decided by the Hon'ble Supreme Court in Duncans Industries Ltd. v. A. J. Agrochem,
8.3 The present application has been preferred by the Applicant to seek permission from this Adjudicating Authority to carry out the assessment proceedings under Section 153A read with 281B of the Income Tax Act. Considering the necessity of the assessment of tax, the prayer of the Applicant is accepted to the extent of only doing assessment for the AY 2013-14 to 2019-20.
8.4 It is also made clear that the Income Tax Department cannot proceed/file case against the Corporate Debtor without prior permission from this Adjudicating Authority.
8.5 It is also made clear that problems should not be there during assessment work for the Resolution Professional in completing the CIRP in time.
8.6 On the other hand, the Resolution Professional is directed to extend his full cooperation to the Income Tax Department in their assessment of tax of the Corporate Debtor.
8.7 The Income Tax Department may file their claim, if any, as an Operational Creditor with the Resolution Professional of the Corporate Debtor in time. The Resolution Professional may examine the claim of the Income Tax Department in accordance with the provisions of the Code.
8.8 The instant IA is disposed of accordingly with observations.
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