The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the Income Tax Department cannot continue appellate proceedings against a company undergoing the Corporate Insolvency Resolution Process (CIRP), holding that the statutory moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) bars such proceedings during its subsistence.

The bench of Satbeer Singh Godara (Judicial Member) and M. Balaganesh (Accountant Member) referred to the Supreme Court’s decision in PCIT v. Monnet Ispat & Energy Limited, wherein the apex court held that once insolvency proceedings are initiated, proceedings under the Income Tax Act against the corporate debtor remain stayed owing to the moratorium provisions of the IBC.

The Department had challenged the order of the Commissioner of Income Tax (Appeals), which had deleted additions relating to disallowance of deduction under Section 80-IB of the Income Tax Act and certain expenditure claimed by the company.

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The Income Tax Department had contested the deletion of an addition of ₹9.33 crore made on account of disallowance under Section 80-IB. It also questioned the relief granted by the appellate authority in respect of ₹6.86 lakh towards welfare and training expenses and ₹2.94 lakh towards business development expenses.

Before the Tribunal could examine the merits of the appeal, the assessee raised a preliminary objection regarding its maintainability. It informed the Bench that the National Company Law Tribunal (NCLT) had admitted the company into the Corporate Insolvency Resolution Process on 25 March 2022, resulting in the commencement of a statutory moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. A copy of the NCLT order was also placed before the Tribunal.

The assessee argued that Section 14 of the IBC prohibits the institution or continuation of proceedings against the corporate debtor during the moratorium period. It further relied upon Section 238 of the IBC, which gives the Code an overriding effect over other laws, including the Income Tax Act.

Relying on this settled legal position, the Bench observed that the overriding provisions of the Insolvency and Bankruptcy Code leave no scope for continuing appellate proceedings against the corporate debtor during the moratorium.

The Tribunal held that the Revenue’s appeal was not maintainable during the continuance of the moratorium imposed under the Insolvency and Bankruptcy Code. Accordingly, it dismissed the appeal without examining the merits of the additions challenged by the Department.

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