AO can determine tax liabilities even during insolvency proceedings: ITAT Mumbai

ACIT Vs MITC Metals Private Limited (ITAT Mumbai)

Income Tax Appellate Tribunal (ITAT) Mumbai has set aside the order of the Commissioner of Income Tax (Appeals) [CIT(A)] in the case of ACIT vs. MITC Metals Pvt. Ltd., ruling that the assessment order was not void ab-initio. The dispute pertained to the assessment year 2014-15, where CIT(A) had invalidated the assessment order, citing the initiation of the Corporate Insolvency Resolution Process (CIRP) against the company. The revenue department challenged this decision, arguing that the assessing officer (AO) was not barred from determining tax liabilities even during the insolvency proceedings.

The CIT(A) had based its decision on the Supreme Court’s ruling in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.,where it was held that once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code (IBC), all claims not included in the plan are extinguished. However, the Tribunal noted that in the present case, the resolution plan was approved only on July 31, 2023, whereas the assessment order was passed earlier, on May 19, 2023. Citing the Supreme Court’s decision in Sundaresh Bhatt v. Central Board of Indirect Taxes and Customs, ITAT clarified that while tax authorities cannot initiate recovery proceedings during the moratorium period under Section 14 of the IBC, they are still empowered to assess tax dues.