Income Tax Appellate Tribunal - Mumbai
Ritesh Singh Acit Circle 3 3 1 Mumbai, ... vs Trend Electronics Limited, Mumbai on 24 December, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E" MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT
MEMBER)
AND
SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER)
ITA No. 5459 to 5460/MUM/2024
Assessment Year: 2017-18 and 2018-19
ACIT Circle 3 3 1, Trend Electronics Limited C/o
Room No. 522, 5th Floor, Aayakar Divyesh Desai Liquidator,
Bhavan, M.K. Road, Churchgate, Vs. Divyesh Desai C/o Moore Singhi
Mumbai - 400020 Advisors LLP, B2, 402, Marathon
Innova, Off Ganapatrao Kadam
Mark, Lower Parel, Mumbai -
400013.
PAN NO. AAACV 5946 R
Appellant Respondent
ITA No. 5461/MUM/2024
Assessment Year: 2018-19
ACIT Circle 3 3 1, Trend Electronics Limited C/o
Room No. 522, 5th Floor, Aayakar Divyesh Desai Liquidator,
Bhavan, M.K. Road, Churchgate, Vs. Divyesh Desai C/o Moore Singhi
Mumbai - 400020 Advisors LLP, B2, 402, Marathon
Innova, Off Ganapatrao Kadam
Mark, Lower Parel, Mumbai -
400013.
PAN NO. AAACV 5946 R
Appellant Respondent
Assessee by : Shri Parth Parikh, Adv.
Revenue by : Shri Leyaqat Ali, Sr. DR
Date of Hearing : 17/10/2025
Date of pronouncement : 24/12/2025
ITA No. 5459 to 5461/MUM/2024 2
Trend Electronics Limited
ORDER
Per: Bench These appeals by the Revenue are directed against three separate orders passed by the Ld. Commissioner Commissioner of Income Tax National Faceless Appeal Centre, Delhi [in short the (Appeals)-National Ld. CIT (A)]. The appeals having ITA No Nos.. 5459 and 5460 of 2024 are arising in relation to the quantum assessment proceedings for assessment a years 2017-18 to 2018-19, 2018 whereas the appeal having ITA No. 5461 of 2024 is connected with the penalty levied under Section 270A of the Income-tax Income Act, 1961 (in short the 'Act') for AY 2018-19.
2. The core issue arising in these appeals is narrow and legal in character, namely, whether the learned CIT(A) was justified in not adjudicating the grounds of appeal during the pendency or culmination of proceedings under the Insolvency and Bankruptcy Code, 2016 ("IBC") before the National Company Law Tribunal ("NCLT").
("NCLT") Since the controversy is common, ITA No. 5459/Mum/2024 is treated as the lead appeal, and the decision herein shall apply mutatis mutandis to the connected appeals.
3. Briefly stated stated, the assessee, a public limited company belonging to the Videocon group, was engaged in the business of manufacturing and trading of electrical and electronic ITA No. 5459 to 5461/MUM/2024 3 Trend Electronics Limited 2017 18, it filed its return of appliances. For Assessment Year 2017-18, income declaring a loss of ₹41,93,16,017/-.. The return was selected for scrutiny and assessment was completed under section 143(3) of the Income Income-tax tax Act, 1961 on 29.11.2019.
3.1 L CIT (A) in the statement of the facts filed, Before the Ld. the assessee ssessee informed that it had filed an application applicat for solvency resolution process before the NCLT under corporate insolvency the Insolvency nsolvency and Bankruptcy Code, 2016 which was adjudicated by the adjudicating authority under Section 7 of the IBC code.
3.2 However, despite notifying by the ld CIT(A) on various dates, interalia,, on 20.02.2020, 08.01.2021, 15.03.2022, 08.09.2023, 27.02.2024 and 10.05.2024, neither 29.12.2022, 08.09.2023, d. CIT (A) nor, any any appearance was made before the Ld. written submission was filed.
filed. The Notices were issued displayed on Income-tax tax Business Application A (ITBA) system, and e-mail ID of the Assessee provided on successfully delivered to e ITBA portal.. However, the assessee neither filed any submission nor made any request for adjournment. Therefore, on the basis of this statement of the facts, the Ld. CIT (A) was of the view process, therefore statutory that assessee was under liquidation process dues to the central government already stands extinguished and therefore allowed the appeal of the assessee. The CIT(A) allowed the he appeal primarily on the premise that, consequent ITA No. 5459 to 5461/MUM/2024 4 Trend Electronics Limited upon liquidation of the assessee as a going concern and its acquisition on a "clean slate" basis, all statutory dues, including tax dues, stood extinguished in terms of the IBC and income-tax n by the Hon'ble Supreme Court in Ghanshyam the law laid down Mishra & Sons (P.) Ltd. The relevant finding of the Ld. CIT (A) is reproduced as under:
under:-
"9.3 9.3 In the case of the appellant, the appeal for the AY 2018-19 2018 19 was also pending before the undersigned. The appellant had replied in the appellate proceedings for the AY 2018-19.
2018 The appellant submitted that the company was acquired Mr. Jayprakash Bihani and Mr. as going concern by Mr. Nandkishor Baheti (hereinafter referred as "Auction Purchasers") in e-auction e auction at an agreed consideration Rs.48,05,00,000/ on clean slate basis. of Rs.48,05,00,000/- basis The liquidation order by National Company Law Tribunal and copy of the sale (NCLT) dated 10.02.2023 and certificate dated 07.08.2023 of the appellant were submitted and considered.
9.4. The appellant relied on the order of the Hon'ble NCLT, Mumbai in the case of Gaurav Jain v. Sanjay Gupta [2021] 130 taxmann.com 23 (NCLT--Mum.) it was held that crux of the sale as "going going concern"
concern is that the equity shareholding of ITA No. 5459 to 5461/MUM/2024 5 Trend Electronics Limited the Corporate Debtor was extinguished, and the acquirer would take over the undertaking. The undertaking included the business of the Corporate Debtor, assets, properties, licenses and rights but excluding liabilities.
9.5 Further, Hon'ble Supreme Court in the case of Ghanshyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Construction Co. Ltd. [2021] 126 taxmann.com 132 (SC), (SC) C.A. No. 8129 of 2019 and 1550 to 1554 of 2021, dated dated 13.04.2021 held as under:
"86. As discussed hereinabove, one of the principal objects of I&B Code is, providing for revival of the Corporate Debtor and to make it a going concern. I&B Code is a complete Code in itself. Upon admission of petition under section 7, there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum.
information The resolution applicants submit their plans ITA No. 5459 to 5461/MUM/2024 6 Trend Electronics Limited on the basis of the details provided in the information memorandum. The resolution plans undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the reso resolution applicant, various modifications may be made so as to ensure, that while paying part of the dues of financial creditors as well as operational creditors and other stakeholders, the Corporate Debtor is on going concem.
revived and is made an on-going After CoC CoC approves the plan, the Adjudicating Authority is required to arive at a subjective satisfaction, that the plan conforms to the requirements as are sub section (2) of Section 30 of provided in sub-section the I&B Code. Only thereafter, the Adjudicating Authority can grant its approval to the plan. It is at this stage, that the plan becomes binding on Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution Plan. The legislative intent behind this is, to freeze all the claims so all that the resolution applicant starts on a ITA No. 5459 to 5461/MUM/2024 7 Trend Electronics Limited clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans, would go haywire and the plan wo would be unworkable.
87. We have no hesitation to say, that the word "other stakeholders would squarely cover the Central Government, any an State Government or any local authorities. The legislature, noticing that on account of obvious omission, certain tax authorities authorities were not abiding by the mandate of 1 & B Code and continuing with the proceedings, has brought out the 2019 amendment so as to declaratory and clarificatory in nature and therefore retrospective in operation."
cure the said mischief. We therefore hold, that the 2019 amendment is declaratory and clarificatory in nature and therefore, retrospective in operation.
9.6 The Hon'ble Supreme Court in the case of Ghanshyam Mishra case concluded that, ITA No. 5459 to 5461/MUM/2024 8 Trend Electronics Limited )That once a resolution plan is duly approved by "(i)That the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Gov Government ernment or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;
(ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect;
(iii) Consequently, 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 on which ITA No. 5459 to 5461/MUM/2024 9 Trend Electronics Limited the Adjudicating Authority grants its approval under section 31 could be continued."
9.7 As per the order of the Hon'ble NCLT, Mumbai wherein it ordered for the liquidation of the appellant company Corporate ((Corporate Debtor) Trend Electronics Limited, as going concern, the company was acquired by Mr. Jaiprakash Bihani and Mr. Nandkishore Baheti as auction purchasers, on Clean Slate Basis by a sale certificate dated 07.08.202.
appellant company is
10. Accordingly, as the appellant acquired by the auction purchasers following the order of the Hon'ble NCLT, Mumbai allowing for liquidation of the appellant as going concern on Clean Slate Basis, it's all dues including statutory dues to Central Govt any State Govt., or any local authority, stands extinguished. In view of the above, the appeal of the appellant on additional ground is allowed.
4. Before us, appearances were entered on behalf of both the Resolution Professional and the new management. It was clarified that the resolution/liquidation process had concluded ITA No. 5459 to 5461/MUM/2024 10 Trend Electronics Limited and the new management was authorised to pursue the proceedings. The principal submission advanced on behalf of the assessee was that, in view of sections 31 and 32A of the IBC and the binding precedents of the Hon'ble Supreme Court, no proceedings in respect of past tax dues could continue after approval of the acquisition plan by the NCLT. It I was further contended that the Revenue had already lodged its claims before the NCLT, which stood admitted, and therefore the Income tax Act were rendered appellate proceedings under the Income-tax infructuous. Relevant part of his submission is reproduced as under:-
"8. As per Section 31 of the IBC, if the NCLT is satisfied that the CoC have met the requirements of law while arriving at a draft resolution plan, it shall, by order, approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central debt in respect of the Government, to whom a debt payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed. This provision essentially embodies the clean slate principle.
9. Elucidating the objective of Section 31(1) of IBC, IB it was held in the case of Essar Steel India Limited ITA No. 5459 to 5461/MUM/2024 11 Trend Electronics Limited Vs Satish Kumar Gupta (2020) 8 SCC 531, 531 that it meant to ensure that the successful resolution applicant (or, as the case may be, the Auction Purchaser) starts running the business of the corporate de debtor btor on a fresh slate. It was also specifically held that the resolution applicant (or, as the case may be, the Auction Purchaser) cannot suddenly be faced with 'undecided' claims after the resolution plan submitted by him is approved by NCLT as it would lead lead to uncertainties in how much amount would be payable by the resolution applicant (or, as the case may be, the Auction Purchaser).
10. In Ghanashyam Mishra & Sons Pvt Ltd Vs Edelweiss Asset Reconstruction Co Ltd (2021) 9 SCC 657, 657 it was held that on the date of approval of resolution plan (or, as the case may be, the Acquisition Plan) by the NCLT, all claims for the past period, shall stand extinguished and no person, will be entitled to initiate or continue any proceedings in respect to a claim, which is i not part of the said plan.
plan. Further, all the dues including the statutory dues owed to the Government if not part of the resolution plan, Government, ITA No. 5459 to 5461/MUM/2024 12 Trend Electronics Limited shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the NCLT grants its approval under Section 31 of IBC could be continued.
11. Similarly, in Vaibhav Goel Vs Deputy Commissioner of Income Tax 2025 (3) TMI 1052 (SC),, following the law laid down in Ghanashyam Mishra (supra), (supra), it was held that all the dues including ng the statutory dues owed to the Central Government, shall stand extinguished and no proceedings could be continued in respect of such dues for the period prior to the date on which the NCLT grants its approval under Section 31 of IBC.
12. Similarly, in urli Murli Industries Ltd Vs Assistant Commissioner of Income Tax (2022) 441 ITR 8 (Bom) (Bom),, it was held that the aim and object of IBC is to revive the Corporate Debtor by putting quictus to the claims against it. Providing certainty to the resolution applicant of 'no' claims in future against the Corporate Debtor appears to be the essence of the resolution.
13. Therefore, the present appeal is liable to be dismissed.
ITA No. 5459 to 5461/MUM/2024 13 Trend Electronics Limited Since the Revenue had already lodged its claims for AY 2017-18 2017 18 and AY 2018-19 2018 before the NCLT, the present appeals cannot be continued:
3.1 He e further submitted submit evenue has already lost that since Revenue its claim for AY 2017 2017-18 and 2018-19, 19, before the NCLT the present appeals cannot be continued. Relevant part of his submission is repro produced as under:-
"14. At this juncture, it is relevant to note that the Revenue had in fact intimated the Assessee's 2017 18 and AY 2018- outstanding demand for AY 2017-18 2018 19 to the NCLT and the same was admitted by the NCLT on 17.10.2019 during the CIRP stage. As per of the Insolvency and Bankruptcy Regulation 12(2) of Board of India (Liquidation Process) Regulations, 2016, here a stakeholder does not file a fresh claim during the liquidation stage, the claim filed and admitted during the CIRP is deemed to have been filed in liquidation as well.
15. Accordingly, once the Revenue's claims for the relevant years stood admitted and were liable to be considered by the liquidator for distribution in accordance with the waterfall mechanism under the ITA No. 5459 to 5461/MUM/2024 14 Trend Electronics Limited IBC, the same claims cannot now be re re-agitated through the present appellate proceedings.
Without prejudice, the instant proceedings cannot be continued qua the new management of the Assessee pursuant to liquidation under IBC:
3.2 e further submitted that instant proceeding cannot be He continued qua the management of the assessee pursuant to the on under IBC code. Relevant part of his submission liquidation submissi is reduced as under:-
under .......
"16. Reference may also be made to Section 32A(2) of IBC which inter alia states that no action shall be taken against the pro perty of the corporate debtor property (i.c, the Assessee herein) in relation to an offence committed prior to the commencement of the CIRP, where such property is covered under:
a. A resolution plan approved by the NCLT under Section 31 of IBC, which results in the change in control of the corporate debtor d to a person who was not a promoter or in the management or control of the corporate debtor or a related party of such a person.
ITA No. 5459 to 5461/MUM/2024 15 Trend Electronics Limited b. Sale of liquidation assets to a person who was not a promoter or in the management managem or control of the corporate debtor or a related party of such a person.
17. The objective of Sections 32A of IBC ensure maximization of value of the Corporate Debtor by allowing a resolution applicant to submit the resolution plan/Acquisition Plan without with being concerned about various imponderables or unspecified liabilities. It entitles the resolution applicants to take over the corporate debtor on a fresh slate.
18. Section 32A(2) of IBC ensures that no action would be taken against any property of the th corporate debtor in relation to any offense that may have been committed by the erstwhile management of the corporate debtor prior to the initiation of the CIRP. It similarly extends that warranty in respect of the properties of the corporate debtor once a resolution plan stands approved or in case of a sale of liquidation assets.
19. As held in Nitin Jain, Liquidator PSL Limited Vs Enforcement Directorate 287 (2022) DLT ITA No. 5459 to 5461/MUM/2024 16 Trend Electronics Limited 625,, Section 32A was inserted in IBC to ensure that neither the resolution nor the liquidation liquidation process once set into motion and fructifying and resulting in a particular mode of resolution coming to be duly accepted and approved, comes to be bogged down or clouded by unforeseen or unexpected claims or events. The IBC essentially envisages the process of resolution or liquidation to move forward unhindered.
20. On a cumulative reading of Sections 31, 32A and other provisions of IBC, it is apparent that the legislative intent behind liquidation sale process is to ensure that the successful ac acquirer quirer starts from a clean slate. This is also in line with the general objective of IBC (as occurring in its preamble) to maximize value of assets of persons under liquidation, to promote entrepreneurship and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues.
21. Accordingly, no action can be initiated through the present proceedings against the current management of the Assessee. In any event, the new management, having acquired the Company on a ITA No. 5459 to 5461/MUM/2024 17 Trend Electronics Limited going concern and clean slate basis from the erstwhile management, management, is not in a position to furnish the requisite documentary evidence to substantiate the claim for deductions.
Proceedings can continue against the Assesssee only when moratorium is in force; however, after approval of Acquisition Plan by NCLT, the present proceedings must abate:
3.3 Further,, he submitted that proceeding could continue against the assessee however, after approval of the acquisition plan by the NCLT, the present proceeding must abate. Relevant para of his submission is reduced as under:
under:-
"22. It is submitted that the Supreme Court has unequivocally held in Sundaresh Bhatt, Liquidator of ABG Shipyard Vs Central Board of Indirect Taxes and Customs 2022 (381) ELT 731 (SC), (SC), that when moratorium under Sections 14 ax authorities can only and 33(5) of IBC is in force, ttax assess/determine the quantum of customs duty but cannot initiate recovery of dues by means of sale/confiscation.
ITA No. 5459 to 5461/MUM/2024 18 Trend Electronics Limited
23. However, once the CIRP or as the case may be, the liquidation is concluded, no proceedings can continue as held in the case of Ghanashyam Mishra (supra).
24. In the instant case, since liquidation of the Assessee on clean slate basis was approved by the NCLT vide its order dated 26.06.2023, no proceedings in respect of past tax dues can be continued. Therefore, the ins instant tant proceedings (for AY 2017-18 18 and Ay 2018 19) is liable to be dismissed.
2018-19) Adjudication proceedings and criminal proceedings are independent in nature:
3.4 He further submitted that if the Income tax D Income-tax Department wishes to continue proceeding in relation to old management, it can continue without adjudicating the appeals. Relevant para of his submission is reduced as under:-
25. It is submitted that even if the present appeals are disposed of, there would be no bar in law to initiate prosecution, if any, required under the law, against the erstwhile management of the Company.
In this regard, reliance is placed on the case of Radheshyam Kejriwal Vs State of West Bengal (2011) 333 ITR 58 (SC) wherein it was ITA No. 5459 to 5461/MUM/2024 19 Trend Electronics Limited categorically held that adjudication proceedings procee and criminal proceedings are independent in nature to each other and that the finding in the adjudication proceedings against the person facing prosecution is not binding on the proceedings for criminal prosecution.
26. Similarly, in P Jayappan Vs SK Perumal, First Income Tax Officer (1984) 149 ITR 696 (SC),, it was held that a mere expectation of success in some proceeding in appeal under the IT Act cannot come in the way of the institution of the criminal proceedings. This is because, in principle, he result of proceeding under the IT Act would not the be binding on the criminal court. The criminal court has to judge the case independently on the evidence placed before it.
27.In light of the above, it is submitted that disposal would not come in the way of of the instant appeals would a potential launch of prosecution, if any, required under the law, against the erstwhile management of the Assessee-Company."
Assessee 3.5 The learned Departmental Representative, on the other hand, submitted that appellate proceedings under und the Income-
tax Act are confined to determination of tax liability and do not ITA No. 5459 to 5461/MUM/2024 20 Trend Electronics Limited recovery. Relying upon the decision of the Coordinate amount to recovery Bench in Doshian Water Solutions Private Limited in ITA no. 78/Mum/2018 it was argued that there is no legal bar under the IBC to continuation of appellate proceedings, and that the embargo under sections 14 and 33(5) of the IBC operates only against coercive recovery and not for continuing with the appeals. He submitted that appeals before the Ld Ld. CIT (A) might lt in refund of the tax collected, if any, if matter goes in result su mitted that on the favour of the assessee company. Further submitted basis of the concealment oncealment or evasion of tax by the then confirmation of the order of management of the company, and confirmation such an evasion before the ITAT, becomes basis for considering of prosecution in respect of the old management, and therefore, these appeals should be decided to their logical end.
4. We have carefully considered the rival submissio submissions and perused the record. The CIT(A) allowed the appeal solely on the ground that, upon completion of the insolvency process and transfer of the company to new management on a clean slate basis, no tax proceedings could survive. In doing so, the CIT(A) oceeded on the assumption that continuation of appellate proceeded proceedings themselves was impermissible under the IBC.
4.1 This approach, in our considered view, is legally unsustainable. The Coordinate Bench of this Tribunal in Doshion Veolia Water Solutions Pvt.
Pv (supra), after an
Ltd.(supra)
ITA No. 5459 to 5461/MUM/2024 21
Trend Electronics Limited
exhaustive examination of the statutory framework and binding precedents, including S.V. Kondaskar v. V.M. Deshpande (AIR 1972 SC 878), Sundaresh Bhatt, Liquidator of ABG Shipyard v.
Tak has CBIC, and PCIT (Customs) v. Rajendra Prasad Tak, unequivocally held that assessment and appellate proceedings merely quantify or determine the tax liability and do not partake the character of recovery proceedings proceedings. Such proceedings, therefore, do not fall within the mischief of the moratorium under sections 14 or 33(5) of the IBC.
4.2 The Hon'ble Supreme Court has consistently drawn a clear distinction between determination of dues and enforcement or recovery thereof.
thereof. While the IBC overrides the Income-tax Income Act in matters of recovery and prioritisati on of claims, it does prioritisation not denude the tax authorities of jurisdiction to assess or determine the correct tax liability, including through appellate proceedings. The quantified dues, if any, thereafter form part of the claims to be dealt with strictly in acc accordance ordance with the waterfall mechanism under section 53 of the IBC.
4.3 The principle of "clean slate", as explained in Ghanshyam Ltd., operates at the stage of enforceability Mishra & Sons (P.) Ltd., and recovery of past claims against the successful resolution applicant pplicant or auction purchaser. It does not prohibit adjudication or determination of such claims, particularly ITA No. 5459 to 5461/MUM/2024 22 Trend Electronics Limited where such determination may also have collateral statutory consequences.
4.4 The relevant finding of the Tribunal in Doshion Veolia Ltd.(supra) is reproduced as under:
Water Solutions Pvt. Ltd.(supra),
13. It appears that since no resolution plan was approved by "13.
the committee e of creditors of corporate debtordebtor within the corporate insolvency resolution process. On the direction of the committee of creditors, the Resolution Professional moved an application for initiating liquidation process of corporate debtor, which was allowed by adjudicating authority as above. a We take further guidance from the judgment dated 26.08.2022 passed by another three judges bench of Hon'ble Supreme Court in Civill Appeal al No. 7667 of 2021, Sundaresh Bhatt, Liquidator of ABC Shipyard V. Central Board of Indirect Taxes and Customs, wherein wh ble Apex Court, vide paras 43,44,45 Hon'ble & 54, has held as under
under":
"43, In the above context, the judgment of this Court in S.V. Kondaskar v. V.M. Deshpande, AIR 1972 SC 878, is extremely relevant. In that case, this Court, while interplay of Section 446 of the expounding the interplay Companies Act 1956 (bankruptcy provision) with the Income Tax Act, 1961, held as follows:
"7 Looking at the legislative history and the scheme e of the Indian Companies Act, particularly the language of Section 446, read as a whole, it appears to us that the expression sub section (1) and "other legal proceeding" in sub-section sub section the expression "legal proceeding" in sub-section (2) convey the same sense and the proceedings sub sections must be such as can in both the sub-sections appropriately be dealt with by the winding up Inco e Tax Act is, in our opinion, a court. The Income complete code and in is s particularly so with respect to the assessment and re- re assessment of income tax with which alone we w are concerned in the present case. The fact that ITA No. 5459 to 5461/MUM/2024 23 Trend Electronics Limited after the amount of tax payable by an assessee has been determined or quantified its realization from a company in liquidation is governed by the Act because the income tax payablele also being a debt d has too ITA no 78/MUM/2018 Doshion VeoliaVeo a Water Solution P. Ltd.
rank pari par passu with other ther debts due from the company does not mean that the assessment proceedings ceedings for computing the amount of tax proce dings must be held to be such other legal proceedings as can only be started or continued with the Section 446 leave of the liquidation court under Section of the Act. The liquidation court, in our opinion, cannot annot perform the functions unctions of Income Tax Officers while whi essing the amount of tax assessing payable by the assessees asse ssees even if the assessees be the company which is being wound up by made by the Income Tax the Court. The orders made Officer in the course of assessment or reassessment proceedings are subject to appeal to the higher hierarchy under the Income Tax Act. There are also provisions for reference to the High Court and for appeals from the decisions of the High Court to the Supreme Court and then there are provisions for revision by the Commissioner of Income In Tax. It would lead to anomalous consequences if the winding up court were to be held empowered to transfer the assessment as proceedings to itself and assess the company as income tax. The appe lant by Shri argument on behalf of the appellant Desai is that the winding up court rt is empowered in its discretion dis to decline to ssessment proceedings in a given transfer the assessment case but the power on the plainplain language of Section 446 of the Act must be held to vest in that court to be exercised only if considered expedient. We are not impressed by this argument. The language of Section 446 must be so construed as to eliminate such start tartling investing the winding up court consequences as investing ITA No. 5459 to 5461/MUM/2024 24 Trend Electronics Limited with the powers of an Income Tax Ta Officer conferred en him by the income Tax Act, because in our view the legislature could not have intended such a result.
result
8. The argument that the proceedings for assessment or re-assessment of a company which is being wound up can only only be started of continued with the leave of the liquidation court is also, on the scheme both of the Act and of the Income Tax Act, unacceptable. We have not been shown any principle on which the liquidation court should be vested with the power to stop assessment proceedings for determining ermining the amount of tax payable by y the company which is being ing wound up. The liquidation court would have full power to t scrutinise the claim of the revenue after income determined and its payment tax has been determined demanded from the liquidator. It would be open to the liquidation court thee is decide how far under the law the amount of income tax ta determined by the Department should be determined cepted as a lawful liability on the funds of the accepted compan ompany in ITA no. 78/MUM/2018 Doshion shion Veolia Water Solution P. Ltd.
liquidation. At that stage the winding up court can fully safeguard the interests of the company and its creditors under the Act. Incidentally, it may be pointed out that at the Bar no English decision was brought to our notice under which the assessment proceedings control ed by the winding up were held to be controlled court. On the view that we have taken, the decisions in the case of Seth Spinning Mills Ltd., L (In Liquidation) (1962) 46 ITR 193 (Punj) (P Supra) (Supra) and nd the Mysore Spun Silk Mills Ltd., Lt (In Liquidation) (1968) 68 ITR 295 (Mys) (supra) do not seem to lay down the correct rule of law come Tax Officers must obtain leave that the Income of the winding up court for commencing of ITA No. 5459 to 5461/MUM/2024 25 Trend Electronics Limited continuing assessment or re-assessment r ment proceedings."
44. Therefore, this Court held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context.
45. From the above discussion, we hold that the respondent could only initiate assessment or re-
r assessment of the duties and other o levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC. The interim in Resolution Professional, Resolution Professional or o the liquidator, as the case cas may be, has an obligation to ensure nsure that assessment is legal and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive.
54. On the basis of the above discussions following are our conclusions:
i) Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quan 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
ii) After er such assessment, the respondent respo authority has to submit its claims (concerning customs dues operational debt) in terms of the procedure laid down, in strict ITA No. 5459 to 5461/MUM/2024 26 Trend Electronics Limited compliance of the time periods ITA no.
78/MUM 2018 Doshion Veolia Water Solution P. Ltd.
L prescribed under the IBC, before the adjudicating authority.
iii) In any case,
ca the IRP/RP/liquidator can
immediately secure goods from the respondent authority to be dealt with appropriately, in terms of the IBC."
IBC
14. Hon'ble 6432 6433 of ble Apex Court in Civil appeal no. 6432-6433 2023, principal commissioner of custom V. Rajendra Prasad Tak and others, vide order dated 30.10.2023, has explicitly held that the dues of the central board of indirect taxes and custom department of revenue, are to be paid in accordance with the waterfall mechanism as provided u/s. bankruptcy code s. 53 of the insolvency and bankruptcy 2016. This dictum is equally applicable in respect of the dues of the central board of direct taxes, department of revenue.
15. In view of aforesaid discussion and law laid down by Apex Court in Sundaresh Bhatt (Supra), we hold that the provisions of IBC 2016 would prevail over the Income Tax Act. However, Income Tax authorities have limited jurisdiction to assess/determine the quantum of Income Tax dues but have no authority to initiate recovery of such does at its own during the period ium in violation of Section 14 or 33(5) of of moratorium the IBC as the case may be. be. The Income Tax Authorities are like any other creditor, may stake their claim before liquidator in the statutory limitation period provided under the IBC. Such claims can be considered in accordance with the waterfall mechanism provided u u/s.
gation, an appeal is 53 of IBC. As in the case of civil litigation, treated as the continuation of a suit, the outcome of these appeals would also result in the determination of revenue's tax dues only. There is thus no legal impedimentnt ITA no. 78/MJM/2018 Doshion Veolia Water Solution P. Ltd. in deciding these appeals,, which would amount to determination of tax dues only. In the light of what has been held by us hereinabove. We now proceed to decide the instant matter on merit.
ITA No. 5459 to 5461/MUM/2024 27 Trend Electronics Limited 4.5 In the present case, therefore, the CIT(A) erred in law in declining to adjudicate the grounds of appeal on merits and in allowing the appeal solely on the basis of the completion of insolvency proceedings.
4.6 In view of the foregoing,, and respectfully following the binding decision of the Coordinate Bench in Doshion Veolia Ltd., we set aside the impugned orders of Water Solutions Pvt. Ltd., the CIT(A) and restore the matters to his file for fresh adjudication on merits, merits in accordance ce with law, after affording reasonable opportunity of hearing to the assessee.
5. The facts and circumstances in the other two appeals are also identical and therefore those two appeals are also set aside and restored to the file of the Ld. CIT (A) for deciding afresh.
6. In the result, all the three appeals are allowed for statistical purpose.
purpose Order pron pronounced ounced in the open Court on 24/12/2025.
Sd/-
Sd/ Sd/-
(RAJ KUMAR CHAUHAN)
CHAUHAN OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 24/12/2025
ITA No. 5459 to 5461/MUM/2024 28
Trend Electronics Limited
Tarun Kushwaha
Sr. Private Secretary
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai