Deputy Commissioner of Income Tax, Punjab Vs. Ravinder Kumar Goel, Liquidator. - we are of the considered opinion that the Learned Tribunal has committed an error in holding that the Department had the jurisdiction even to assess the company in liquidation after the liquidation order has been passed.

 NCLAT (16.10.2023) in Deputy Commissioner of Income Tax, Punjab Vs. Ravinder Kumar Goel, Liquidator. [Comp. App. (AT) (Ins) No. 1397 & 1398 of 2022] held that;

• Once moratorium is imposed in term of Section 14 or 33(5) of the IBC as the case may be the respondent authority only has a limited jurisdiction to assess/ determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

• we are of the considered opinion that the Learned Tribunal has committed an error in holding that the Department had the jurisdiction even to assess the company in liquidation after the liquidation order has been passed.

Excerpts of the Order;    

16.10.2023 This appeal is directed against the order dated 28.09.2022 passed by the National Company Law Tribunal, Chandigarh Bench, Chandigarh by which two applications bearing I.A. No. 317 and 535 of 2021, filed under Section 60 (5) of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) by the Liquidator of M/s Supreme Tex Mart Limited (Company under liquidation) against the Deputy Commissioner of Income Tax, Punjab have been allowed.

# 2. Briefly put, the Allahabad Bank filed an application under Section 7 of the Code against M/s Supreme Tex Mart Limited which was admitted on 29.09.2017.

# 3. In the absence of the Resolution Plan, liquidation order was passed on 08.08.2018 and the Appellant filed its claim with the Erstwhile Liquidator which was admitted to the extent of Rs. 7,36, 59,888/-.

# 4. However, after the initiation of the liquidation proceedings, the Appellant- Income Tax Department passed an assessment order pertaining to the assessment year 2018-19 on 13.05.2021 and issued notice under Section 274 r/w Section 271 AAC (1) of the Income Tax Act, 1961 to the company under liquidation.

# 5. Aggrieved against these proceedings, the Liquidator filed the aforesaid two applications before the Tribunal, relying upon Section 33(5) of the Code to contend that after the liquidation order is passed no suit or any other legal proceedings are allowed to be continued by or against the Corporate Debtor, whereas the Appellant- Income Tax Department has assessed the company under liquidation, vide its order dated 13.05.2021, for the assessment year 2018-19 and has also issued a show cause notice on 29.09.2021 which is hit by Section 33(5) of the Code.

# 6. Counsel for the Appellant has vehemently argued that the Appellant is not debarred even under Section 33(5) of the Code to frame the assessment. In this regard, he has referred to a decision of the Hon’ble Supreme court rendered in the case of Sudaresh Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes and Customs [(2023) 1 SCC 472 (SC)] and drew our attention to paragraph 57 (1) of the said judgment, where the conclusion has been drawn by the Hon’ble Supreme Court as under :-

• “57.1 Once moratorium is imposed in term of Section 14 or 33(5) of the IBC as the case may be the respondent authority only has a limited jurisdiction to assess/ determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.”

# 7. On the other hand, Counsel for the Respondent has submitted that the order of the assessment was passed on 13.05.2021 much after the passing of order of liquidation on 08.08.2018, therefore, even the proceedings under Section 33 (5) of the Code are barred.

# 8. We have heard Counsel for the parties and perused the record with their able assistance. The issue involved in this case is as to whether after the initiation of the liquidation proceedings, the Appellant being Department of Income Tax, by virtue of an assessment having been made during the pendency of the liquidation proceedings, can ask the company under liquidation for the Income Tax dues and also issue notice for recovery etc.

# 9. Section 33(5) of the Code specifically bars any kind of legal proceedings by or against the Corporate Debtor after the liquidation order is passed but the Hon’ble Supreme Court in the case of Sudaresh Bhatt (Supra) has made it clear in para 57.1(supra) that even after the imposition of the moratorium or invocation of Section 33 (5) of the Code, as the case may be, the only jurisdiction with the authority is to assess and determine the quantum but it does not have the power to initiate recovery of dues by means of sale/ confiscation as provided.

# 10. In view of the aforesaid decision to which no contrary judgment has been cited, we are of the considered opinion that the Learned Tribunal has committed an error in holding that the Department had the jurisdiction even to assess the company in liquidation after the liquidation order has been passed.

# 11. However, there is no error on the part of the Learned Tribunal where it has held that the Department cannot on the basis of the subsequent order make recovery. With these observations, the present Appeal is disposed off.

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