ITAT Mumbai Holds Tax Appeals Infructuous After Company's Liquidation And Sale As Going Concern

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that no effective adjudication survives in income tax appeals filed by EMI Transmission Limited after the company underwent liquidation under the Insolvency and Bankruptcy Code (IBC).

It noted that the company had been sold as a going concern and the liquidation proceedings had been closed by the National Company Law Tribunal (NCLT).

A bench of Judicial Member Amit Shukla and Accountant Member Girish Agrawal was hearing EMI Transmission Limited's appeals for assessment years 2011-12 to 2018-19 against orders sustaining various income tax additions.

The tribunal observed, "In view of the foregoing discussion, and having regard to the subsequent developments which have taken place under the IBC culminating in the sale of the Corporate Debtor as a going concern and closure of the liquidation proceedings by the NCLT, we hold that no effective adjudication now survives in these appeals against the Corporate Debtor in its present form. Consequently, without expressing any opinion on the merits of the additions made for the respective assessment years, all the appeals are held to have become infructuous and are disposed of accordingly, subject to the clarification contained in the preceding paragraph."

EMI Transmission informed the tribunal that, after filing the appeals, it underwent insolvency proceedings and was later sold as a going concern. The NCLT also closed the liquidation proceedings after approving the sale.

The tribunal held that the developments under the IBC had fundamentally changed the legal character of the corporate debtor.

It observed that examining the tax additions would serve no practical purpose because no effective adjudication now survived against the company in its present form.

Referring to the Supreme Court's ruling in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., the tribunal observed that once proceedings under the IBC attain finality, the enforcement and treatment of liabilities must be governed by the statutory framework of the IBC and the judicial orders passed under it.

The tribunal clarified that its ruling was confined to the corporate debtor. It observed that the Revenue remains free to initiate or continue proceedings against the erstwhile promoters, directors, key managerial personnel or any other persons, if such proceedings are otherwise permissible in law.

For Assessee: Madhur Agrawal a/w. Shri Ravikant Pathak

For Revenue: Amrita Singh, CIT DR