M/s. Cosmic Ferro Alloys Ltd., Kolkata V. DCIT, Circle -1(2), Kolkata

ITA 2017/KOL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2771 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 27-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; TDS
• Section: 143(3); 115JB; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH “C” KOLKATA Before: Shri Rajpal Yadav, Vice President (KZ) and Shri Girish Agrawal, Accountant Member आयकरअपीलसं.य/ ITA No.2017/Kol/2019 Assessment Year:2013-14 Cosmic Ferro Alloys Limited 6, Dr. Meghnad Saha Sarani 3 rd Floor, Southern Avenue Kolkata - 700026 PAN: AACCC1730C बनामV/s. DCIT, Cir-1(2) Aaykar Bhawan P-7 Chowringhee Square Kolkata - 700069 अपीलाथ /Appellant .. यथ /Respondent अपीलाथ क ओरसे/By Appellant Shri Sunil Surana, FCA, Ld. AR यथ क ओरसे/By Respondent Shri Divakar Chakraborty Addl. CIT, Ld. Sr. DR स ु नवाईक तार ख/Date of Hearing 15.03.2022 घोषणाक तार ख/Date of Pronouncement 09.05.2022 आदेश /O R D E R Per Girish Agrawal, Accountant Member: This appeal by the assessee is arising out of the order passed by the Commissioner of Income-tax(Appeals)-16, Kolkata in Appeal No.1105/CIT(A)- 16/Kol/2017-18/C-3(1), Kol dated 28.06.2019 against the assessment order passed by the Assessing Officer, DCIT, Circle-1(2), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.02.2016 for the assessment year 2013-14. 2. The only ground in this appeal relates to confirmation of addition of Rs. 6,16,270/- made on account of sundry balances written off towards excise duty and others, without proper reasoning and justification. 2 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. 3. Shri Sunil Surana, FCA, Ld. AR represented on behalf of the assessee and Shri Divakar Chakraborty, Addl. CIT, Ld. Sr. DR represented the Revenue. 4. Brief facts as culled out from the records are that the assessee is in the business of manufacturing ferro alloys. It e-filed the return on 30.09.2013 which was revised on 14.01.2014 for a total income of Rs. 47,33,384/- and paid income-tax on the book profit of Rs. 5,03,88,957/- u/s 115JB of the Act. Among other things, Ld. AO noted from the profit and loss account that assessee had debited an amount of Rs.14,29,442/- in its profit and loss account towards sundry balances written off. The AO on examination of accounts observed that a sum of Rs. 6,08,854/- was on account of excise duty and for others an amount of Rs. 7,416/- was written off which were not offered for taxation in earlier years. The AO disallowed both the said claims and added back the same, totalling to Rs. 6,16,270/- (Rs. 6,08,854 + Rs.7,416) to the total income of the assessee. Aggrieved, the assessee went into appeal before the Ld. CIT(A) who dismissed the appeal of the assessee by holding that there are no material or new facts offered for consideration. Aggrieved by the order of Ld. CIT(A) the assessee is in appeal before the Tribunal. 5. At the outset, Ld. Counsel for the assessee placed on record that during the course of pendency of this appeal before the Hon’ble Tribunal, certain developments took place which are brought to the notice of the Hon’ble Tribunal by placing on record the following documents during the course of hearing of the appeal – i. Copy of order dated 11.10.2018 pronounced by National Company Law Tribunal (in short ‘NCLT’), Kolkata Bench, Kolkata in the matter of assessee company as a ‘corporate debtor’ vide CP(IB) No. 596/KB/2017 along with CA(IB) Nos. 808, 472, 562/KB/2018 and CA(IB) No. 898/KB/2018 under section 31 of the Insolvency & Bankruptcy Code, 2016 (in short the ‘Code’) read with section 7 & 30 of the Code and Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. 3 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. ii. Copy of Binding Resolution Plan for the assessee company pursuant to the Code by the Resolution Applicant – Consortium of United Tradeco FZC and QVC Exports Pvt. Ltd., submitted to the Resolution Professional and duly approved by NCLT as binding on the Corporate Debtor i.e. the assessee company. iii. Copy of decision by the Co-ordinate bench of ITAT Kolkata in the case of Palogix Infrastructure (P.) Ltd. v. ACIT [2022] 135 taxmann.com 73 (Kol Trib) dated 27.10.2021 dealing with the effect of order of NCLT passed u/s 31 of the Code on the appeal pending before the ITAT of a Corporate Debtor relating to the period prior to approval of resolution plan by NCLT. 5.1 Ld. Counsel apprised the bench that assessee was in default with banks and was taken before Hon’ble NCLT, Kolkata Bench under the Code for which the resolution plan of the resolution applicant was approved by the Committee of Creditors (in short CoC) and Hon’ble NCLT vide order dated 11.10.2018. Both, the resolution plan of the resolution applicant and the order of Hon’ble NCLT, Kolkata Bench are placed on record. He submitted to take note of vital fact relating to the instant appeal that it is for assessment year 2013-14 relating to previous year 2012- 13 which is prior to the date of approval of resolution plan by the Hon’ble NCLT, Kolkata i.e. 11.10.2018. 5.2 In the light of vital fact pointed out by the Ld. Counsel as noted above, he further submitted that as per the said order of Hon’ble NCLT, Kolkata (adjudicating authority under the Code) read with Resolution Plan, all dues under the provisions of the Act including taxes, duty, penalties, interest, fines cesses, unpaid tax deducted at source/tax collected at source, whether admitted or not due or contingent whether part of above claim of income tax authorities or not whether part of tax due diligence finding or not, asserted or unasserted, crystallized or un-crystallized, known or known, secured or unsecured, disputed or undisputed, present in relation to any 4 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. period prior to the acquisition of control by the resolution applicant over the company pursuant to this plan shall extinguish by virtue of the order of the adjudicating authority and the company should not be liable to pay any amount against such demand. All assessments or other proceedings pending in case of the company, on the date of the order of the adjudicating authority relating to the period prior to that date, shall stand terminated and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the company by virtue of the order of the adjudicating authority. All notices proposing to initiate any proceedings against the company in relation to the period prior to the date of adjudicating authority order and pending on that date, shall be considered deleted and should not be proceeded against. Post the order of the adjudicating authority, no reassessment/revision or any other proceedings under the provisions of the Act should be initiated on the company in relation to period prior to acquisition of control by the resolution applicant and any consequential demand should be considered non-existing and as not payable by the company. Any proceedings which were kept in abeyance in view of process under the Code or otherwise should not be revived post the order of adjudicating authority. 5.3 Ld. Counsel strongly contended that since the present appeal involving AY 2013-14 relates to the period prior to the acquisition of control by the Resolution Applicant over the company pursuant to the duly approved resolution plan by Hon’ble NCLT, Kolkata, all dues under the provisions of the Act including taxes, duty, penalties. Interest fines, cesses, etc. shall stand extinguished by virtue of the order of the NCLT dated 11.10.2018 and all proceedings including the appellate proceedings pending on the date of the order of the NCLT including the present proceedings relating to the prior period to the date of order shall stand extinguished and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the Company. He thus submitted that in the light of the order of Hon’ble NCLT, Kolkata, dated 11.10.2018 passed in assessee's case, it will be 5 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. appropriate to restore the case to the Ld. AO for taking necessary action in accordance with law. 5.4 To buttress his contentions, Ld. Counsel placed on record the recent decision of the Co-ordinate bench of ITAT Kolkata in the case of Palogix Infrastructure (P.) Ltd. (supra) which has dealt with the identical issue after keeping in view the legal position emanating from the judicial pronouncements of the Hon’ble Supreme Court in the case of – i. Pr. CIT v. Monnet Ispat & Energy Ltd. [Petition for SLP to Appeal (C) No. 6483 of 2018, dated 10.08.2018] ii. Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389 (SC) and iii. Ghanshyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021] 126 taxmann.com 132 (SC) 6. Ld. Sr. DR argued the matter and placed reliance on the order of the Ld. AO. 7. We have heard the rival contentions, perused the material placed on record and gave a thoughtful consideration to the developments apprised to the Bench by the Ld. Counsel which have taken place post filing of appeal before us. From the Resolution Plan of Resolution Applicant viz. M/s. Consortium of United Tradeco FZC and QVC Exports Pvt. Limited, the claim of the resolution applicant was pointed out by the Ld. Counsel in respect of Liabilities / Litigations / Disputes / Appeals with Income Tax Dept which is extracted as under – At Page 46 - “Waiver Approval by NCLT for all Liabilities (including Contingent Liabilities, Disputed Liability, Interest, Penal Interest, Penalty, Interest on Penalty, any kind of Late Fee as well as Taxes) related to Income Tax and any demand related to non-deposit of TDS which may arise out of any Ongoing Disputes Known or in abeyance and Unknown to Resolution 6 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. Applicants upto the end of the Resolution Process be treated as Finally Settled at “NIL Value”. At Page 47 - “Liability which may accrue to Provisions of MAT and Other Sections of Income Tax Act – Waiver by NCLT for any liability (includes Tax, MAT, interest, fine, penalty etc) on Corporate Debtor, Resolution Applicants on account of various actions prospered in the Approved Resolution Plan including but not limited to liabilities, if any, under Sec 56, Sec 43, Sec 28, Sec 115JB and section 79 of the Income Tax Act, 1961.” 7.1 From the perusal of the order of NCLT, Kolkata dated 11.10.2018 in the assessee’s own case being a Corporate Debtor under the Code, we note that the assessee company was in default with Banks and was taken before NCLT under the Code. After deliberation, resolution plan of the resolution applicant was approved by the CoC and the same was duly proved by the NCLT, Kolkata Bench on 11.10.2018. Relevant extracts from the order of NCLT, Kolkata (supra) are reproduced herein below for ease of reference – “8. In view of above, I have gone through the Resolution Plan submitted for my approval. In Part-A of the Resolution Plan, I found that the provision is made for payment of insolvency resolution process costs, It appears to be somewhat at higher side because provision of amount of Rs. 12.20 crores is made to incur resolution costs, which includes fees of resolution professional amounting to Rs. 6.33 crores (page 29). However, since it is approved by the CoC and this authority has no reason to doubt wisdom of CoC, I hold that the provisions of section 30(2)(a) of I & B Code is complied with. The plan also provides that repayment of debts of operational creditor (page 33). In para 2(e) of the plan at page 63 states the modalities suggested for management of the affairs of the Corporate Debtor and it also provides mechanism for effective supervision and implementation of the plan. In view of this, I hold that the provisions of section 30(2)(b) and 30(2)(c) of I & B Code are complied with. One, Mr. Nitesh Kumar sworn an affidavit on behalf of the resolution applicant stating that the resolution applicant, Consortium of United Tradeco FZC and OVC Exports Pvt. Limited does not suffer from any disqualification as stated under section 29A of the I & B Code. The plan does not contravene any provisions of law and the same is in conformity with the provisions of I & B code. Resolution Professional has produced the certificate under Regulation 39(4) of the I & B Code in Form H stating that the plan is in conformity with all legal requirements. The Resolution Plan submitted for approval of this Authority complies with all the requirements stated under 7 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. section 30(2) of the I & B code. Hence, I approve this plan for the Corporate Debtor and proceed to pass the following order: ORDER The Resolution Plan of M/s. Consortium of United Tradeco FZC and QVC Exports Pvt. Limited which is approved by the CoC with 95.86% voting percentage, is hereby approved under provisions of section 31(1) of the Insolvency & Bankruptcy Code, 2016, which will be binding on the Corporate Debtor, its employees, members, creditors, coordinators and other stakeholders involved in the Resolution Plan.” 7.2. We have gone through the order of the Co-ordinate bench of ITAT Kolkata in the case of Palogix Infrastructure (P.) Ltd. (supra), relevant extracts of which are reproduced herein below for ease of reference – “7. The issue involved in the additional ground raised by the assessee relates to the effect of the order delivered by the National Company Law Tribunal, Kolkata Bench on 12-2-2018 approving the resolution plan on the proceedings in the case of the assessee for AY 2010-11, which is involved in the present appeal. The said order is passed under the Insolvency and Bankruptcy Code, 2016, section 238 of which reads as under:- "The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other la for the time being in force or any instrument having effect by virtue of any such law". 8. The provisions of the Insolvency and Bankruptcy Code, 2016 thus are given overriding effect and as held by the Hon'ble Supreme Court while disposing in the case of Pr. CIT v. Monnet Ispat & Energy Ltd. [Petition for Special Leave to Appeal (C) No(s). 6483 of 2018, dated 10-8-2018], it is obvious that the Insolvency and Bankruptcy Code, 2016 going by section 238 will override anything inconsistent contained in any other enactment, including the Income-tax Act, 1961. A reference in this regard was made by the Hon'ble Supreme Court to their Lordships earlier decision in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. 2000 taxmann.com 2145, wherein it was clarified that Income-tax dues, being in the nature of crown debts, do not take precedence over secured creditors, who are private persons. 9. In the case of Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365, Hon'ble Supreme Court held that the core objective of the Code is to readapt the corporate debtor monetarily and for 8 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. that purpose to protect the corporate debtor's assets from further dilution. But to fully accomplish the said purpose, the creditors must be barred from bringing up belated claims against a successful resolution applicant striving to resurrect the corporate debtor. Elaborating further, their Lordships observed that if the Government Departments are just going to bring up their claims after the company is transferred over to a successful resolution applicant, then intent with which the Code was incorporated will never be achieved. 10. In the case of Ghanashyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021] 126 taxmann.com 132/166 SCL 237, it was held y the Hon'ble Supreme Court that a bare reading of section 31(1) of the Code is enough to establish that once the resolution plan receives the assent of adjudicating authority, it shall be binding on all the respective entities, including corporate debtor and its employees, members, creditors, guarantors and other stakeholders. The said section 31 was subsequently amended in 2019 to clarify that the term "other stakeholders” include Central Government, State Government, and other local bodies, and this amendment has been held by the Courts as having retrospective effect being clarificatory and declaratory in nature. 11. Keeping in view the legal position emanating from the discussion made above in the light of judicial pronouncements of the Hon'ble Supreme Court, it is thus clear that the order passed by the National Company Law Tribunal under section 31 of the Insolvency and Bankruptcy Code, 2016 has overriding effect over anything inconsistent contained in the Income-tax Act and it shall be binding on all the respective entities including other stakeholders, which include Central Government, State Government and other Local Bodies. As per the said order delivered in the case of the assessee-company affirming the Resolution Plan, all dues under the provisions of the Income-tax Act including taxes, duty, penalties, interest, fines, cesses, unpaid tax deducted at source/tax collected at source, whether admitted or not, due or contingent, whether part of above claim of income tax authorities or not, whether part of tax due diligence finding or not asserted or unasserted, crystallized or uncrystallized, known or known, secured or unsecured, disputed or undisputed in relation to any period prior to the acquisition of control by the resolution applicant over the company pursuant to this plan shall extinguished by virtue of the order of the adjudicating authority and the company should not be liable to pay any amount against such demand. Further, all assessments or other proceedings pending in case of the company, on the date of the order of the adjudicating authority relating to the period prior to that date, shall stand terminated and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the company by virtue of the order of the 9 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. adjudicating authority. Furthermore, all notices proposing to initiate any proceedings against the company in relation to the period prior to the date of adjudicating authority order and pending on that date, shall be considered deleted and should not be proceeded against. Post the order of the adjudicating authority, no reassessment/revision or any other proceedings under the provisions of the Income-tax Act should be initiated on the company in relation to period prior to acquisition of control by the resolution applicant over the Company pursuant to this plan shall stand extinguished by virtue of order of the National Company Law Tribunal and the assessee-company should not be liable to pay against such demand. 12. Since the present appeal involving AY 2010-11 relates to the period prior to the acquisition of control by the Resolution Applicant over the company pursuant to this plan, all dues under the provisions of the Income-tax Act 1961 including taxes, duty, penalties. Interest fines, cesses, etc. shall stand extinguished by virtue of the order of the National Company Law Tribunal and all proceedings including the appellate proceedings pending on the date of the order of the National Company Law Tribunal including the present proceedings relating to the prior period to the date of order shall stand extinguished and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the Company. In the light of the order of the National Company Law Tribunal (NCLT) dated 12-2-2018 passed in assessee's case, we deem it fit to restore the case for the assessment year under consideration before us to Assessing Officer for taking necessary action in accordance with law.” 8. Unhesitatingly, in our mind, we are convinced by the appraisal of the Ld. AR about subsequent developments in the case of the assessee under the Code before the NCLT, Kolkata and find that the issue discussed is no longer res integra. In the present set of facts where the impugned year i.e. AY 2013-14 relevant to financial year 2012-13 relates to a period prior to the date of order of NCLT, Kolkata which is dated 11.10.2018, we are inclined to restore the present matter to the file of Ld. AO for taking necessary action in accordance with the law, which on the same issue was similarly dealt by the Co-ordinate bench of ITAT Kolkata (supra), keeping in view the legal position emanating from the judicial pronouncements of Hon’ble Supreme Court referred (supra) under the similar set of facts and law. Accordingly, appeal of the assessee is allowed for statistical purpose. 10 ITA No. 2017/Kol/2019 AY 2013-14 Cosmic Ferro Alloys Ltd. 9. In the result, the appeal of the assessee is allowed for statistical purpose. Order is pronounced in the open court on 09 th May, 2022 Sd/- Sd/- (RAJPAL YADAV) (GIRISH AGRAWAL) Vice President (KZ) Accountant Member Dated: 09.05.2022 *PP. Sr. PS Copy of the order forwarded to: 1.Assessee – M/s. Cosmic Ferro Alloys Limited 6, Dr.MeghnadSahaSarani, 3 rd Fl., Souther Avenue, Kolkata-26. 2.Revenue –DCIT, Cir-1(2), AaykarBhawan, P-7 Chowringhee Sq., Kolkata-700 069.. 3.CIT, Kolkata. 4. CIT(A) 5. DR, ITAT, Kolkata, (sent through e-mail).. True Copy By Order Assistant Registrar ITAT, Kolkata Bench, Kolkata