THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), AHMEDABAD V. ORIENT SPA (P) LTD., GANDHINAGAR

ITSSA 141/AHD/2016

AI Insights

The case involves the Deputy Commissioner of Income Tax, Central Circle-2(2), Ahmedabad as the appellant and Orient Spa (P) Ltd. as the respondent. The Revenue appealed against the order of the Commissioner of Income Tax (Appeals)-12, Ahmedabad, which had substantially allowed the assessee's appeal for the assessment year 2010-11. The primary contention of the Revenue was regarding various deletions made by the CIT(A) concerning unaccounted investments, disallowances of expenses, and other financial discrepancies. However, the proceedings were complicated by the fact that the assessee company was under liquidation as per an NCLT order, which the Official Liquidator represented in the tribunal. The court had to decide whether to continue the proceedings in light of the liquidation order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470540 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-11-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-11-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2016
• Other Referred Cases: DCIT vs. PKS Limited, Pr. CIT v. Monnet Ispat & Energy Ltd., Pratibha Industries Ltd. v. DCIT
• Laws Referred To: Income Tax Act, 1961, Insolvency and Bankruptcy Code, 2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A P SINGH
• Assessee Lawyers: VIKAS JAIN; OFFICIAL LIQUIDATOR ASSISTED BY CHETAN
• Keywords: Set aside; Liquidation
• Section: 143(3); 132; 153A; 43B; 37(1)

Judgement Text

"IT(SS)A 141/Ahd/2016 Assessment Year: 2010-11 Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH, AHMEDABAD BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./ IT(SS)A 141/Ahd/2016 (िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण वष\u0005 वष\u0005 वष\u0005 वष\u0005 / Assessment Year: 2010-11) Deputy Commissioner of Income Tax, Central Circle-2(2) Ahmedabad. Vs. Orient Spa (P) Ltd. Canbay Square, GIDC Electronic Estate, Sector-25, Gandhinagar Pin- 380044 Gujarat. [PAN – AAACO9963B (Appellant) (Respondent) Assessee by Shri Vikas Jain, Official Liquidator assisted by Shri Chetan Agrawal Revenue by Shri A P Singh, CIT-DR Date of Hearing 07.11.2024 Date of Pronouncement 12.11.2024 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: The present appeal is filed by the Revenue against the order dated 28.01.2016 passed by the Commissioner of Income Tax (Appeal)-12, Ahmedabad, (in short ‘the CIT(A)’), for the assessment year (A.Y.) 2010-11 in respect of order u/s 143(3) read with section 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). IT(SS)A 141/Ahd/2016 Assessment Year: 2010-11 Page 2 of 8 2. The brief facts of the case are that the assessee was engaged in the business of providing Spa and Wellness services and was associated as integral part of Neesa group. The return of income for A.Y. 2010-11 was filed by the by the assessee on 15.10.2010 declaring total income of Rs.30,62,961/-. A search action u/s 132 of the Act was carried out in the group associates of Neesa Group on 08.09.2010 and the assessee was also covered under the search. Pursuant to the search, the assessment was completed u/s 153A r.w.s.143(3) of the Act on 17.09.2013 at total income of Rs.2,80,34,310/-. 3. Aggrieved with the order of the AO the assessee had filed an appeal before he first appellate authority which was decided by Ld. CIT(A) vide the impugned order and the appeal of the assessee was substantially allowed. 4. Now the Revenue is an appeal before us. The following grounds have been taken in this appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.1,09,22,120/- on account of unaccounted investment. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.10,37,505/- on account of disallowance of discount expenses. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.24,55,061/- on account of unexplained investment in M/s Gujarat Syscom Technologies Pvt. Ltd. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.1,00,100/- on account of interest disallowance. IT(SS)A 141/Ahd/2016 Assessment Year: 2010-11 Page 3 of 8 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.50,00,000/- on account of unexplained cash. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.1,54,888/- on account of addition u/s 43B of the Act. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.33,147/- made u/s 37(1) of the I.T. Act. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.50,59,452/- on account of rent expenses. 9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the Rs.2,01,240/- on account of commission expenses overlooking the non-genuineness of the expenditure. 10. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the AO. 11. It is, therefore, prayed that the order of CIT(A) be set aside and that of the AO be restored to the above extent. 5. Sri A P Singh the Ld. CIT-DR informed that the assessee company is under process of liquidation. He had drawn our attention to the report of the AO dated 04.11.2024. The AO in his report has intimated that the assessee had filed an application u/s 33(1)(2) read with 34 of Insolvency and Bankruptcy Code, 2016 for initiation of liquidation proceedings. The NCLT vide I.A. No. 98 of 2020 in C.P.(I.B.) No.509/10/NCLT/AHM/2018 dated 29.06.2020 had passed order that the Corporate Person i.e. the assessee stands liquidated with effect from the date of order i.e. 29.06.2020. The AO has further informed that once the company is liquidated no proceeding can be undertaken and that the pending proceeding also cannot be continued. IT(SS)A 141/Ahd/2016 Assessment Year: 2010-11 Page 4 of 8 6. Shri Chetan Agrawal, Ld. AR of the assessee submitted that since the Hon’ble NCLT had ordered liquidation of the company/corporate debtor the present proceeding was not sustainable. He further submitted that the IBC, 2016 had an overriding effect on the provisions of the Income Tax Act, 1961 and that once liquidation order was passed, neither any fresh suit or legal proceeding can be initiated against the corporate debtor nor the pending proceeding can be continued. In this regard he has relied upon the decision of the ITAT, Kolkata in the case of DCIT vs. PKS Limited in ITA N0. 1139,1140,1141 & 1801/KOL/2018 dated 9th August 2024. 7. We have carefully considered the rival submissions. The Revenue has submitted that the assessee’s case is covered u/s 33(1)(2) read with sec. 34 of Insolvency and Bankruptcy Code, 2016 (IBC) and liquidation process was initiated. It was pointed out in the course of hearing that the assessee had filed an application for dissolution of the company before the NCLT which was rejected vide order dated 29.06.2020 and liquidation process was started. Sri Vikas G Jain was appointed as an Official Liquidator. The copy of order of NCLT was not brought on record and it was informed that the assessee had filed an appeal against the order of the NCLT before the appellate authority i.e. NCLAT. Further developments in this matter have also not been brought on record. Be that as it may, the fact remains that the assessee company is in the process of liquidation and this fact has not been denied by either of the parties. The liquidation proceedings had commenced as per the order of NCLT, Ahmedabad. When the Official Liquidator was appointed by the NCLT, the assessee company had become defunct and the Official Liquidator had stepped into the shoes of the assessee. We also note that during the moratorium period specified u/s. 14(1)(a) of the IBC, there was no representation in the matter and the cases were IT(SS)A 141/Ahd/2016 Assessment Year: 2010-11 Page 5 of 8 adjourned on various hearings. Sh. Vikas Jain, the Official Liquidator has attended the hearing on 17th October, 2024 and on 07th November, 2024 and confirmed the liquidation proceeding in the case of the assessee company. We have to, therefore, decide whether the present proceeding can be continued in the wake of liquidation process of the assessee company. 8. The assessee has submitted that the IBC, 2016 had an overriding effect on the provisions of the Income Tax Act, 1961 and that once liquidation order was passed neither any fresh suit or legal proceeding can be initiated nor the pending proceeding can be continued against the liquidated company. The provision of section 33(5) of the IBC, 2016 stipulates as under: (5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: This provision makes it amply clear that once a liquidation order was passed it was not possible to initiate any suit or other legal proceedings against the corporate debtor. Thus, when no fresh suit or proceeding can be initiated against the liquidated company, it is imperative that the pending suit or legal proceeding also cannot be processed or pursued, parallel to the proceeding under the IBC, 2016. Further, there is no dispute to the fact that in case of parallel proceedings under the Income Tax Act and IBC, the IBC has an overriding effect over the provisions of the Act. In the case of Pr. CIT v. Monnet Ispat & Energy Ltd. [2019] 107 taxmann.com 481 (SC) the Hon'ble Apex Court had observed that as per section 238 of IBC, the IBC Code will override anything inconsistent contained in any other enactment, including the Act. The said provision of section 238 of IBC reads as under: IT(SS)A 141/Ahd/2016 Assessment Year: 2010-11 Page 6 of 8 238. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. The fact that the provision of IBC has an overriding effect is also acknowledged in section 178(6) of the Act, which is as under: (6) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force except the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016). 9. An identical issue was involved in the case of M/s PKS Limited (supra) wherein the coordinate bench of ITAT, Kolkata held that the appeal proceedings before the Tribunal cannot be sustained in view of liquidation order of NCLT Kolkata. In the case of Pratibha Industries Ltd. v. DCIT [2022] 142 taxmann.com 295 (Mumbai - Trib.) also an identical view was taken. To reproduce from the said order: 5. Therefore, we are of the considered opinion that no suit or other legal proceedings shall be initiated by or against the corporate debtor which is also applicable for pending proceedings and the Proviso to section 33(5) also provides prior approval of the Adjudicating Authority to be obtained by the Official Liquidator. 6. Pertinently, it is also to be observed that in case of parallel proceedings under Income- tax Act, 1961 and IBC, 2016, the IBC has an overriding effect over the provisions of the Income-tax Act which has been decided by Hon'ble Apex Court in Pr. CIT v. Monnet Ispat & Energy Ltd. [2019] 107 taxmann.com 481 wherein the Hon'ble Apex Court had observed that as per section 238 of IBC, the IBC Code will override anything inconsistent contained in any other enactment, including the Income-tax Act. It is also trite to peruse section 178 of the Income-tax Act, 1961 which has been amended for the purpose of preventing any conflict with provisions of IBC Code which is reproduced as under:— … 7. From the above observation and also by the decisions of co-ordinate bench of this Tribunal, we hereby dismiss the cross appeals filed by the Revenue and the Assessee with the liberty to the appellants/Official Liquidator to recall the present order when the IT(SS)A 141/Ahd/2016 Assessment Year: 2010-11 Page 7 of 8 occasion warrants. The issue of limitation in filing fresh appeal, if need be, has already been dealt with in the judgment of Hon'ble Supreme Court in New Delhi Municipal Council v. Minosha India Ltd. [2022] 138 taxmann.com 73. 10. In view of the above facts and respectfully following the decisions of Coordinate Benches of the Tribunal, we hereby dismiss the appeal filed by the Revenue. At the same time the appeal filed by the assessee against the liquidation order of NCLT is still pending with the NCLAT. Therefore, a liberty is given to the Revenue/Official Liquidator to request for recall of the present order when the occasion so arises. 11. In the result the appeal of the Revenue is dismissed. Order pronounced in the open Court on this 12th November, 2024. Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 12/11/2024 आदेश की \u0007ितिलिप अ\rेिषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, True Copy उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद "