The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the demands arising from the assessment and subsequent rectification proceedings had become irrecoverable in view of the NCLT resolution order and its October 15, 2018 cut-off date. 

The bench of Sudhir Kumar (Judicial Member) and M. Balaganesh (Accountant Member) has observed that both the assessment and rectification orders were in relation to the period post the cut-off date. It consequently held that the demands arising from those orders became irrecoverable, applying the principle laid down by the Supreme Court in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.

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The principal issue before the Tribunal concerned a TDS credit of approximately Rs. 88.18 lakh. The Revenue contended that the assessment order had denied the credit, but the computation sheet had inadvertently allowed it. According to the Department, the Assessing Officer subsequently invoked Section 154 to correct this mistake apparent from the record.

The Revenue argued that the rectification did not create any fresh liability. Instead, it merely brought the computation sheet into conformity with the conclusion already recorded in the assessment order. It also contended that the assessee company was active and existing on the MCA portal when the rectification order was passed on March 14, 2024.

The Tribunal examined the company’s history and noted that it had originally been incorporated in 2007 and had subsequently operated under different names within the IL&FS group. Following the NCLT resolution process, EverEnviro Resource Management Private Limited acquired its entire shareholding with effect from April 6, 2021. The company subsequently came to be known as Indo Enviro Integrated Solutions Private Limited from October 12, 2022.

The assessee relied on an NCLT order dated February 2, 2021, which fixed October 15, 2018 as the cut-off date. Under the resolution framework referred to by the Tribunal, claims of creditors, including Central and State Governments and statutory, local, tax and regulatory authorities, relating to periods prior to the cut-off date were to stand unconditionally and fully extinguished.

The assessment order under Section 143(3) was passed on September 30, 2021, while the rectification order under Section 154 was passed on March 14, 2024. Both orders therefore came after the NCLT’s October 15, 2018 cut-off date.

The Tribunal’s conclusion was grounded in the Supreme Court precedent cited in the order. The Supreme Court decision in Ghanashyam Mishra & Sons was relied upon in determining the effect of the resolution process on claims against the company.

Thus, even though the Revenue maintained that the Section 154 proceedings merely corrected the computation of TDS credit and did not introduce a new liability, the Tribunal found that the resulting demands could not be recovered in view of the applicable resolution framework.

The department had challenged the appellate authority’s decision on several grounds. It argued that the Section 154 order should not have been treated as void ab initio, that the rectification corrected an error apparent from the record, and that the NCLT order did not prevent the Department from giving effect to the assessment findings.

The Tribunal ultimately rejected the Revenue’s appeal. At the same time, it dismissed the assessee’s cross-objection.

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