Dismissal of Income Tax Appeal Due to Ongoing NCLT Proceedings in Case ITA 1229/DEL/2022

Dismissal of Income Tax Appeal Due to Ongoing NCLT Proceedings in Case ITA 1229/DEL/2022

In a significant judgment delivered by the Income Tax Appellate Tribunal (ITAT), Delhi Bench, the appeal filed by the Assistant Commissioner of Income Tax (ACIT), Central Circle-2, Noida, against Swati Health and Education Services Pvt. Ltd., Delhi, for the assessment year 2009-10 was dismissed. This case, bearing the number ITA 1229/DEL/2022, was closely watched for its implications on how legal proceedings before the National Company Law Tribunal (NCLT) interact with tax assessment appeals.

Background of the Case

The crux of the appeal revolved around the order passed by the Commissioner of Income Tax (Appeals)-4, Kanpur, dated 14.02.2022. The appeal was against the deletion of additions made by the Assessing Officer in respect of loans received and share application money introduced by the assessee. Such additions were pivotal in the assessment year 2009-10 for Swati Health and Education Services Pvt. Ltd.

During the appellate proceedings, it was brought to light that a parallel legal battle was being fought by the assessee in the NCLT. Specifically, for the same assessment year (2009-10), the Tribunal, in ITA No. 651/Del/2022, dismissed the assessee’s appeal on the grounds that the matter had reached the NCLT, Principal Bench, New Delhi, under case reference IB-1035(PB)/2020 dated 4.03.2022. An application in terms of section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, was admitted by NCLT, which imposed a moratorium as envisioned under the provisions of section 14(1) of IBC. This turn of events rendered the tax appeal infructuous.

Arguments and Proceedings

Both parties presented their arguments with the appellant, represented by Shri Markandey Kumar Singh, advocate, and the department by Shri B. M. Singh, Sr. D. R. The focal point of the discussion was whether the ongoing NCLT proceedings should affect the outcome of the income tax appeal. The appellant urged for the dismissal of the appeal citing the Tribunal’s disposition towards the matter in a related appeal for the same assessment year.

On the other side, although the Department of Revenue had no serious objection to following the Tribunal’s decision for the assessment year 2009-10, it requested that liberty be given to revive the appeals after the conclusion of proceedings before the NCLT.

Final Judgment and Implications

After careful consideration of the submissions and the circumstances surrounding the NCLT proceedings, the ITAT decided to dismiss the appeal as infructuous. However, it granted liberty to the parties to seek revival of these appeals upon the final conclusion of the proceedings before the NCLT.

This decision underscores the influence of NCLT proceedings on related tax appeals and emphasizes the importance of resolving matters in a harmonious manner. The judgment delivered on 26.04.2023, establishes a precedent for the dismissal of appeals in cases where parallel proceedings in the NCLT have a significant bearing on the matter at hand.

Conclusion

The ITAT’s decision to dismiss the appeal by ACIT against Swati Health and Education Services Pvt. Ltd. delineates the intricate relationship between tax law and insolvency proceedings. It highlights the judicial prudence exercised in ensuring that ongoing NCLT proceedings are given due consideration, thereby avoiding contradictory outcomes in related legal matters.

Dismissal of Income Tax Appeal Due to Ongoing NCLT Proceedings in Case ITA 1229/DEL/2022