Appeal Dismissal of DCIT vs. Era Infra Engineering in the Context of Insolvency – ITA 1506/DEL/2022

Appeal Dismissal of DCIT vs. Era Infra Engineering in the Context of Insolvency – ITA 1506/DEL/2022

The case ITA 1506/DEL/2022 involves the appeal filed by the Deputy Commissioner of Income Tax, Central Circle-29, Delhi (DCIT) against the respondent, Era Infra Engineering Ltd., Delhi, concerning the assessment year 2017-18. This detailed analysis aims to shed light on the legal proceedings, arguments presented, and the final judgment rendered by the Income Tax Appellate Tribunal (ITAT) Delhi Bench.

Background of the Case

The appeal arises from the order of the Commissioner of Income Tax (Appeals)-27, New Delhi, against the order of assessment passed under section 143(3) of the Income-tax Act, 1961, dated 30.12.2019 by the Assessing Officer, Central Circle-17, Delhi. The main contention revolves around various grounds raised by the Revenue, including issues related to the disclosure of Contingent Assets, the onus of proof on the assessee, and the interpretation of accruals under the Indian Accounting Standards and CBDT notifications.

Arguments and Proceedings

During the hearings, several key points were debated, including whether Era Infra Engineering Ltd. appropriately disclosed Contingent Assets in its balance sheet, the responsibility of the assessee to substantiate claims during assessment, and the definitions of accruals. Additionally, the appeal touched upon the assessee’s non-compliance during assessment proceedings under section 153A of the Income-tax Act, 1961, and the impact of the corporate insolvency resolution process (CIRP) initiated against the company under the Insolvency and Bankruptcy Code, 2016 (IBC).

Final Judgment and Implications

The bench, comprising Shri C.M. Garg, Judicial Member, and Shri M. Balaganesh, Accountant Member, concluded that since Era Infra Engineering Ltd. was undergoing insolvency proceedings as of a National Company Law Tribunal (NCLT) order dated 08.05.2018, the appeal by the Revenue could not be maintained in its current format. According to the IBC, once insolvency resolution proceedings begin, no pending legal proceedings can continue against the corporate debtor. The Tribunal dismissed the Revenue’s appeal as not maintainable, highlighting the legal framework surrounding corporate insolvency and its implications on tax litigation.

Conclusion

This case ITA 1506/DEL/2022 serves as a significant reference for understanding how insolvency proceedings can influence and halt tax-related appeals and assessments against a company. The dismissal of the DCIT’s appeal by the ITAT underscores the comprehensive approach of the legal system in handling cases where corporate insolvency intersects with tax liabilities, ensuring that insolvency proceedings take precedence as mandated by the IBC 2016.

Order pronounced in the open court on 28.06.2023.

Appeal Dismissal of DCIT vs. Era Infra Engineering in the Context of Insolvency – ITA 1506/DEL/2022