ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-5(4_ , MUMBAI V. M/S DEWAN HOUSING FINANCE CORPORATION LTD., MUMBAI

MA 99/MUM/2023

AI Insights

The case involves the Asst. Commissioner of Income Tax Central Circle-5(4) as the appellant and Dewan Housing Finance Corporation Ltd. (now Piramal Capital and Housing Finance Ltd.) as the respondent. The core issue revolved around the enforcement of tax liabilities following the approval of a resolution plan under the Insolvency and Bankruptcy Code (IBC) by the NCLT, which was upheld by the NCLAT. The resolution plan included provisions that extinguished all statutory dues, including tax liabilities, not covered in the plan. The Income Tax Appellate Tribunal (ITAT) initially dismissed the appeals based on these orders but later allowed the assessee's appeal through a corrigendum, leading to the current dispute where the department sought to challenge the corrigendum.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26522 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-11-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-11-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 25-01-2023
• Other Referred Cases: Ghanshyam Mishra and Sons Pvt. Ltd vs. Edelweiss Asset Reconstruction Company Limited
• Laws Referred To: Insolvency and Bankruptcy Code, 2016, Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAKOLI GHOSH
• Assessee Lawyers: RONAK DOSHI; PRIYANK GALA
• Keywords: Revised return; Depreciation; Recovery proceedings
• Section: 143(3); 254(2); 101

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER MA No.99/Mum/2023 (Arising out of ITA No.595/Mum/2020) (Assessment Year :2015-16) Asst. Commissioner of Income Tax Central Circle-5(4) Room No.1927, 19th Floor, Air India Building Nariman Point Mumbai- 400 021 Vs. M/s. Dewan Housing Finance Corporation Ltd. (Now known as M/s. Piramal Capital an Housing Finance Ltd.) Warden House 2nf Floor, Sir P.M.Road Fort, Mumbai – 400 101 PAN/GIR No.AAACD1977A (Appellant) .. (Respondent) Assessee by Shri Ronak Doshi & Shri Priyank Gala Revenue by Dr. Kakoli Ghosh Date of Hearing 22/11/2024 Date of Pronouncement 22/11/2024 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid Miscellaneous Application has been filed by the Revenue against Corrigendum order dated 22/06/2022. This Bench while hearing the matter had recorded the entire background and sought for report from the AO. The content of the said order sheet entry reads as under:- MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 2 “In this case insolvency resolution process was initiated against assessee as per IBC. In the resolution plan under the head “Prayers and Reliefs” sought by the applicant before the NCLT, wherein pending income tax proceedings were highlighted including the appellate proceeding before the Tribunal for A.Yrs. 2014-15 and 2015-16. NCLT vide its order dated 07/06/2021 after taking into consideration all the prayers and reliefs sought, accepted the proposal of the resolution plan, whereby applicant had prayed to be relieved of all the pending proceedings against the corporate debtor and the dues payable by it. The NCLT vide its order dated 07/06/2021 accepted the said prayer and relief. Thereafter, in further appeal before the NCLT, the prayer forming part of the resolution plan was allowed which admittedly included impugned appeals pending before this Tribunal for A.Y.2014-15 and 2015-16 and it was categorically held that any statutory dues even if not forming part of the resolution plan shall also stand extinguished. The Tribunal vide its order dated 31/03/2022 both in ITA No. 595/Mum/2020 and 302/Mum/2019 relying upon the judgment of Hon’ble Supreme Court in the case of Ghanshyam Mishra and Sons Pvt. Ltd vs. Edelwess Asset Reconstruction Company Limited reported in 126 taxmann.com 132(SC), wherein the Hon’ble Supreme Court has held that once a resolution plan has been approved by NCLT u/s.31 of the IBC, the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, the members, creditors including the Central Government, any State Government or any local authority and on the date of approval of resolution plan, all such claims which are not a part of the resolution plan shall automatically stand extinguished. Interalia, no tax and statutory dues can be enforced by any of the Government authorities including the Income Tax department. The Tribunal in its order held that the appeal of the assessee for A.Y.2015-16 is dismissed and also the appeal of the Revenue for A.Y.2014-15 is dismissed. Thereafter, the assessee moved a corrigendum that if no tax is due from the MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 3 assessee, then assessee’s appeal should have been treated as allowed. Considering this small mistake, the Tribunal rectified the order by way of corrigendum and held that in the result appeal of the assessee for A.Y.2015-16 is allowed and appeal of the Revenue for A.Y.2014-15 is dismissed. 2. Now Revenue has filed a Miscellaneous Application against said corrigendum order stating that by virtue of NCLT order which resulted into closure of appeal by not getting heard for adjudication of various issues / grounds raised in the appeal which would have resulted into determination of additional tax liability of the refund as per the provisions of the Act. Therefore, it has been prayed that to withdraw the corrigendum passed in assessee’s appeal in ITA No.595/Mum/2020 to be decided on merits. 3. Now before adjudicating this Miscellaneous Application filed by the ld. AO, he has to justify that, once it is an admitted fact that in view of NCLT / NCLAT order in the income tax proceedings, no statutory dues including any kind tax dues for A.Y.2015-16 shall be enforced because it also gets extinguished, then how can tax litigation or tax due can be enforced from the assessee even if assessee was in appeal before the Tribunal. Once no tax dues can be enforced by virtue of NCLT / NCLAT order arising from any order, then the return of income is to be accepted. If the assessee’s appeal is dismissed, can AO enforce demand or adjust refund or not grant refund? If the NCLT / NCLAT order has not been challenged before the superior Court and has attained finality, then ld. AO has to justify as to on what ground assessee’s appeal should be dismissed or the order of the Tribunal should be recalled to be heard on merits. The ld. AO has to submit its report by 30/06/2024 and in case no such clarification is given, Miscellaneous Application against the corrigendum order shall be dismissed. The case is adjourned to 12/07/2024. MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 4 2. In pursuance thereof, the AO has filed following report:- Facts of the case:- 3.1 In this regard it is humbly stated that the miscellaneous application in this case was filed on 25.01.2023 wherein it was prayed to withdraw the corrigendum passed in assessee's appeal in ITA No. 595/Mum/2020. 3.2 The appeal in ITA No 595/Mum/2020 for A.Y. 2015-16 was filed by the assessee against the order passed by Ld. CIT(A)-53, Mumbai in appeal no CIT(A)-53/IT-41/DCCC-5(4)/2018-19 dated 22 11 2019 against the order u/s 143(3) of the Act. Meanwhile the Hon'ble National Company Law Tribunal (NCLT) passed an order on 07.06.2021 wherein the assessee was declared insolvent under the insolvency and bankruptcy code, 2016 and a resolution plan was approved by the Hon'ble NCLT The order was challenged before the Hon'ble National Company Law Appellate Tribunal, New Delhi (NCLAT) After referring to the Orders passed by NCL and NCLAT and decision of Hon'ble Supreme Court in the case of Ghanshyam Mishra & Sons Vs. Edelweiss Asset Reconstruction Limited (Civil Appeal No. 8129 of 2019), the Hon'ble ITAT held that present proceedings could not be continued. Accordingly, the Hon'ble ITAT vide order dated 31.03.2022 in the appeal no. ITA No. 595/Mum/2020 dismissed appeal of the assessee for A.Y 2015-16 and also dismissed appeal filed by the Revenue for A.Y 2014-15. 3.3 Thereafter, the Hon'ble ITAT has passed the Corrigendum dated 22.06. 2022 on the request of the assessee, the same is reproduced as under \"Hence, in view of the above we are unable to accept to the contention of the Ld. DR and accordingly hold that the present proceedings can not be continued. Accordingly, appeal of the assessee for A.Y. 2015-16 is hereby allowed and appeal of the Revenue for A.Y 2014-15 is hereby dismissed. In the result, appeal of the assessee for A.Y. 2015-16 is allowed and appeal of the Revenue for A. Y 2014-15 is dismissed\" MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 5 4. Upon receipt of above mentioned corrigendum, the department filed miscellaneous application wherein it was prayed to pass appropriate orders to rectify/withdraw the corrigendum dated 22.06.2022 passed in the appeal no ITA No. 595/Mum/2020. The Miscellaneous application was filed considering following points. 4.1 Brief background of the case:- 4.1.1 The assessee had filed its return of income on 31.03.2015 declaring total loss of Rs. 100,70,16,074/- and refund of Rs. 228,12,37,861/- was claimed in the ITR. Later, the assessee filed revised return of income wherein it declared total loss of Rs. 101,87,76,664/-, the refund claim was also revised to Rs. 236,40,67,780/ The assessee arrived at loss of Rs 101,87,76,664/-after claiming upfront deduction of premium on issue of Zero Coupon Bonds of Rs. 1100,95,76,517/ Subsequently the assessment was completed u/s 143(3) on 27.12.2017 with the assessed income of Rs 649,85,99,380/- In the assessment order the claim of upfront deduction of premium on issue of Zero Coupon Bonds made by assessee was denied and it was granted deduction on pro-rata basis of Rs. 2,33,40,89,580/- Moreover, the assessee has suo moto withdraw the claim for excess amount of Rs, 8,67,54,86,937/-(being in addition to the amount already debited in the books) during the assessment proceeding as mentioned below:- 11. For Assessment year 2015-16, the claim has been put up in the return of income of Rs. 1100,95,76,517 being the amount of total premium on Zero Coupon Bonds claimed which includes the pro rata amount debited in the books of Accounts in Securities Premium account of Rs. 2,33,40,89,580. In order to avoid litigation on the issue and in order to buy peace of mind to conserve the companies resources, it is being decided to withdraw the claim for the excess amount of Rs. 8,67,54,86,937 (being in addition to the amount already debited in the books) for this assessment year. under the normal provisions and at also not making this claim in future assessment years. Further it is to be noted that the said withdrawal of claim is also made under the MAT provisions for Rs. 11,00,95,76,517 being the amount of premium deducted from \"book profit\" but not claimed in the Profit & Loss account. Revised MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 6 computation has been attached as Annexure 1. This withdrawal shall not attract penalty in view of the reasons detailed here below. Consequent to assessment, tax of Rs. 230.88,73,929/- was determined as payable by the assessee in place of refund of Rs. 236,40,67,780/- claimed in the revised return of income. 4.12 Against the additions & disallowances made in assessment order, the assessee has filed an appeal before the CIT(A), and the CIT(A) had confirmed the disallowance of premium on Zero Coupon Bond of Rs. 867,54,86,937/-made by the AO on merit. 4.1.3 Further, it is observed that the assessee had withdrawn the claim of carried forward business loss of Rs. 101,87,76,664/- for the AY 2015- 16(Revised Return) for set-off against the income for the AY. 2016-17, as effected nullified by the withdrawal of the excess deduction of Rs 867,54,86,937/- in the revised return of income filed on 31.03.2018 after the completion of assessment u/s 143(3) dated 27.12.2017 for the AY 2015-16, which also establishes that the contention of revenue is accepted by the assessee on merits. Further the above cited issue is also decided in favour of the revenue by the Id. CIT(A) on merit. 4.1.4 Also, on merits similar issue in A.Y. 2013-14 and 2014-15 were decided in favour of the revenue and the assessee had accepted the additions made in these A. Ys. 4.2 The Hon'ble ITAT decided the appeal on the basis of order passed by Hon'ble NCLT on 07.06.2021 and order of Hon'ble NCLAT dated 12.07.2021 wherein it was directed that all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, which is not part of the resolution plan, shall extinguished. On the basis of the order the Hon'ble ITAT held that the appeal proceedings could not be continued In order to close the appeal proceedings, the Hon'ble ITAT had dismissed both the appeals ie appeal filed by the assessee for A.Y. 2015-16 and appeal filed by the revenue for A.Y. 2014-15. MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 7 4.3 However, on receipt of miscellaneous application filed by the assessee, the Hon'ble ITAT issued corrigendum wherein it was stated that the assessee's appeal was allowed and revenue appeal was dismissed. Allowing the appeal of the assessee means allowing all the grounds raised in the appeal One of the grounds raised by the assessee was related to Disallowance of upfront deduction of premium on issue of Zero coupon Bonds of Rs. 11,00,95,76,517/- and instead granting deduction of on pro rata basis of Rs. 2,33,40,89,580/-. Whereas the assessee during the course of assessment proceedings, had itself withdrawn the excess deduction of Rs. 867,54,86,937/- on the same issue. This passing of corrigendum make assessee eligible for tax refund of Rs. 236,40,67,780/- Crores for AY 2015-16(which is not the intent of Hon'ble ITAT order) on the issue which has been accepted by the assessee during assessment proceedings and the same issue is adjudicated in favor of the revenue in present AY by Ld. CIT(A) on merits which was not discussed on merits by Hon'ble ITAT. 4.4 Section 254(2) of the Act allows Hon'ble ITAT to correct or rectify any omission or error by amending and adding something to the order without subtracting anything from the main order. The order cannot be rectified by amending the order by way of allowing the appeal of the assessee which was dismissed in the course of deciding the appeal of the assessee. The Hon'ble Supreme Court in the case of Commissioner of Income Tax (IT-4), Mumbai Vs M/s Reliance Telecom Limited held that \"the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that\" 5. In view of the above, the corrigendum passed by the Hon'ble ITAT allowing the appeal filed by the assessee, is erroneous and therefore, this office filed miscellaneous application for correction of error and to restore earlier order passed by Hon'ble ITAT vide its order dated 31.03.2022 which will nullify demand raised and also make assessee ineligible for any refund. 3. As noted in the order sheet entry dated 31/05/2024, assessee in the Resolution Plan before the NCLT had sought for following relief:- MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 8 “2. To provide relief to the Company from all past litigations up to the date of implementation of this Resolution Plan pending at different levels and provide waiver from all tax dues including interest, penalty & prosecution for all historic disclosed tax dues and undisclosed tax dues. All pending notices, assessment order, pending summons and pending assessments (including those set out in the table below) towards the Company would be treated as closed. Further no action would be taken for any action/transaction carried out before the Implementation date It is clarified that no tax (including interest & penalty) would be paid for any liability or claim raised or non-compliance for period up to the Implementation Date. Further, any re-assessment. revision or other proceedings under the provisions of the Income Tax Act would be deemed to be barred in relation to any period prior to the Implementation Date, by virtue of the order of the NCLT approving this Resolution Plan and the Company or the Resolution Applicant shall at no point of time be, directly or indirectly, held responsible or liable in relation thereto. Assessment year Nature of proceedings Appellate Authority 2014-15 Tax proceedings Income Tax Appellate Tribunal 2014-15 Penalty proceedings Commissioner of Income- fax (Appeals) 2015-16 Tax proceedings Income Tax Appellate Tribunal 2015-16 Penalty proceedings Commissioner of Income- Tax (Appeals) 2017-18 Tax proceedings Commissioner of Income Tax (Appeals) 2017-18 Penalty proceedings Assessing Officer 2017-18 Recovery proceedings Assessing Officer 2018-19 NA Tax proceedings Summons under section 131 of the Income Tax Act dated 01 February 2019 and 30 May 2019 Assessing Officer Deputy Director of Income Tax (Investigation), Mumbai ---------------- MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 9 5. On approval of resolution plan, all expenses claimed by the Company in the preceding eight years and returns as submitted or not submitted to be treated as assessed and all carry forward losses and depreciation to be treated as allowed. 4. Approving the said resolution plan NCLT passed the following order. The relevant portion of which is reproduced hereunder:- “The Application IA No. 449 of 2021 in CP 4258 of 2019 be and the same is allowed. The Resolution Plan annexed to the Application is hereby approved. It shall become effective from this date and shall form part of this order. (i) It shall be binding on the Corporate Debtor, its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force is due, guarantors and other stakeholders involved in the Resolution Plan. (ii) The approval of the Resolution Plan shall not be construed as waiver of any statutory obligations/liabilities of the Corporate Debtor and shall be dealt by the appropriate Authorities in accordance with law. Any waiver sought in the Resolution Plan, shall be subject to approval by the Authorities concerned in the light of the decision of Hon'ble Supreme Court in the matter of Ghanshyam Mishra and sons vs. Edelweiss Asset Reconstruction Company Limited. a. As prayed by the Resolution Applicant, since approx. 80% of workforce is from the sister concern of DHFL namely DHFL Sale and Services Ltd (DSSL), we direct DSSL to continue to provide manpower services to the Corporate Debtor as per the existing terms and conditions at least for a year or till the expiry of the contract period whichever is later and notice period for termination should be at least 6 months by either side. b. It is also to be noted that while granting NoC by RBI, the status of the Corporate Debtor is changed from Deposit MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 10 taking Housing Finance Company to Non Deposit taking Housing Finance Company. c. Reverse merger of the Successful Resolution Applicant Piramal Capital & Housing Finance Limited into and with DHFL, the Corporate Debtor is prima facie approved by this Adjudicating Authority. (iii) The Memorandum of Association (MoA) and Articles of Association (AOA) shall accordingly be amended and filed with the Registrar of Companies (ROC), Mumbai, Maharashtra for information and record. The Resolution Applicant, for effective implementation of the Plan, shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed. (iv) The moratorium under Section 14 of the Code shall cease to have effect from this date. (v) The Applicant shall supervise the implementation of the Resolution Plan and file status of its implementation before this Authority from time to time, preferably every quarter. (vi) The Applicant shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the IBBI along with copy of this Order for information. (vii) The Applicant shall forthwith send a certified copy of this Order to the CoC and the Resolution Applicant, respectively for necessary compliance. 4. However, with regard to NCLT direction as given in para (ii) above, the said direction was challenged before the National Company Law Appellate Tribunal, New Delhi vide order dated 12/07/2021, gave the following directions and amended the said direction in following manner:- 7. (A) In view of the above, we direct that in place of the above impugned Para (ii) in the impugned order, the direction shall be: MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 11 All the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date of Adjudicating Authority was granting its approval under Section 31 could be continued. (B) We substitute this direction in place of Para (ii) of the Operative Order of impugned order. 5. Now, once the Resolution plan which has been approved by the NCLT and NCLAT that there would be no tax liability or claim which can be raised by the Corporate debtor i.e. the Income Tax department and all the expenses claimed by the company in the preceding 8 years and the return of income including for the impugned A.Y. 2015-16 shall be treated as „assessed income‟ and all the carry forward losses and depreciation has to be allowed. This interalia means that the return income of the assessee stands accepted and consequently any disallowance or addition made in the case in the hands of the assessee in the course of assessment proceedings / appellate proceedings which were challenged before the Tribunal no longer survives and neither the ld. AO can enforce any demand or ask the assessee to pay any tax liability even if the appeal of the assessee is dismissed on merits. In fact the effect of the order of NCLT and NCLAT has to be given which will result into accepting the return income. It was in this background the Tribunal had passed the corrigendum stating that assessee‟s appeal is “allowed”. Reason being, deciding the appeal on merits would be infructuous exercise, because ultimately by virtue of the order by NCLT / MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 12 NCLAP no demand or tax can be enforced and the return of income of the assessee was directed to be accepted as „assessed income‟. In that scenario, any such addition or disallowance which was challenged by the assessee before this Tribunal stands automatically deleted and nothing can be decided against it. It is also a matter of fact that the order of the NCLT and NCLAT had attained finality and which is binding on any tax authority including the Tribunal. Precisely for this reason we had sought for the report from the AO however, there is no comment by the AO and the reply given therein is purely elusive. Accordingly, Miscellaneous Application filed by the department is dismissed. 6. In the result, Miscellaneous Application filed by the department is dismissed. Order pronounced on 22nd November, 2024. Sd/- (AMARJIT SINGH) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 22/11/2024 KARUNA, sr.ps MA No. 99/Mum/2023 Dewan Housing Finance Corporation Limited 13 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "