I-T Dept is not permitted to recover any amount from taxpayer by going against NCLT’s Directions: Bangalore ITAT

Read order: ASSISTANT COMMISSIONER OF INCOMETAX, BANGALORE vs. M/s OLIVE LIFESCIENCES PVT LTD

LE Staff

Bengaluru, July 30, 2021: While dismissing the Revenue Department’s appeal pertaining to recovery of tax arrears from a taxpayer as not maintainable, the Bangalore ITAT has held that the Revenue Department cannot recover any amount exceeding Rs one lakh pursuant to directions issued by the NCLT. 

The Coram of George George K (Judicial Member) & B R Baskaran (Accountant Member), by taking into consideration the tax value involved, observed that the Department’s appeal being below the monetary limit specified under the Board Circular No. 17/2019 dated 8th August, 2019, merits dismissal. 

In the instant case, cross appeals have been filed as a result of the Revenue Department’s bid to recover tax arrears from the taxpayer, and the taxpayer’s inability to pay up the duty demanded.

The Coram found that the Supreme Court in the case of CIT vs Moser Baer India Limited [Civil Appeal No. 4704 of 2014 dated July 21, 2020] observed that even if the revenue has to succeed in its appeal, the assessee is not in a position to pay the outstanding tax arrears. 

The Supreme Court after considering the tax value involved, deemed it appropriate to dismiss the tax appeal leaving the question of law for adjudication at appropriate stage, noted the Tribunal. 

Further, the Rajasthan High Court in the case of Ultra Tech Nathdwara Cement Ltd. vs UOI had held that NCLT’s order is binding and any recovery of an amount in excess of the specified amount in the NCLT’s order is totally illegal and arbitrary. 

Similarly, Andhra Pradesh & Telangana High Court in the case of Leo Edibles & Fats Limited vs Tax Recovery Officer had held that the Income Tax Department cannot claim any priority merely because of fact that order of attachment was issued long before initiation of liquidation proceedings under Code against the company, added the Coram. 

Again, the Madras High Court in the case of Official Assignee vs T.R. Bhuvaneswari had held that the Official Assignee need not go before Central Board of Direct Taxes praying for waiver of interest u/s 234A, 234B and 234C as Insolvency Court itself can consider question of waiver of interest in terms of power conferred u/s 7 of Presidency Towns Insolvency Act, 1909. 

Thus, the Tribunal noted that the judicial pronouncements had laid down a dictum that NCLT orders are binding and the Revenue Department cannot recover any amount other than specifically mentioned in the said order. 

Hence, the Bangalore Tribunal concluded that the Revenue Department being not in a position to recover any amount exceeding Rs. 1 lakh in the facts of this case, no useful purpose would be served in adjudicating the issue raised in this appeal. 

Therefore, taking into consideration the tax value involved, the ITAT dismissed the Department’s appeal being below the monetary limit specified under the Board Circular No. 17/2019 dated 8th August, 2019. 

However, the issue raised in this appeal is left open to be decided in appropriate case.