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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi dated 11.11.2025 arising from the assessment order under Section (hereinafter referred as 'u/s') 143(3) r.w.s. 144 of the Income-Tax Act, 1961 (hereinafter referred as 'the Act') dated 21.12.2019 passed by ACIT, Circle 18(2), Delhi for the Assessment Year 2016-17.
The Assessee has raised the following grounds of appeal:
1.That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals), National Faceless Appeals Centre ['CIT(A)'] erred in not quashing the assessment order dated 27.12.2019, as being illegal and bad-in-law.
1.1That the CIT(A) erred in not appreciating that once the resolution plan stood approved by the National Company Law Tribunal ('NCLT') vide order dated 28.01.2021 r.w. order dated 11.03.2021, the assessment order dated 27.12.2019 for a period prior to commencement of Corporate Insolvency Resolution Process ('CIRP') lost its sanctity, and consequently, the CIT(A) should have quashed the order and directed the assessing officer to accept the returned income.
1.2That the CIT(A) erred in passing the impugned order remand the matter back to the assessing officer without appreciating that the assessment proceedings initiated and/ or the order passed during the application of moratorium period under section 14 of the Insolvency and Bankruptcy Code, 2016 ('IBC'), is illegal and bad in law.
2.That on the facts and circumstances of the case and in law, the impugned order dated 11.11.2025 in a mechanical manner without consideration of the detailed objections filed and without granting opportunity for personal hearing, in gross violation of principles of natural justice, is illegal land bad in law.
Without prejudice, on MERITS
3.That on the facts and circumstances of the case, the assessing officer erred in disallowing freight and forwarding expenses to the extent of Rs.5,43,09,395 treating the same to be unexplained.
4.That on the facts and circumstances of the case and in law, the assessing officer erred in disallowing the deduction claimed under section 35(2AB) of the Act without providing any reason for the same.
5.That on the facts and circumstances of the case and in law, the assessing officer erred in making addition of Rs.35.67,53,806 under section 68 of the Act in respect of increase in sundry creditors by treating the same to be unexplained.
6.That on the facts and circumstances of the case and in law, the CIT(A)/ assessing officer erred in levying/ charging interest under section 234B and 234C of the Act.
7.That on the facts and circumstances of the case and in law, the CIT(A)/ assessing officer erred in initiating penalty under section 271(1)(c) of the Act.”
Brief facts of the case are that the return of income filed by the assessee on 29.11.2016 declaring a loss of Rs.35,67,53,806/-. A notice under section 143(2) was issued on 05.07.2017 for initiation of assessment proceedings. On 29.10.2016 an order passed by TPO without any variation. On account of consistent losses and inability to service debts, Corporate Insolvency Resolution Proceedings ('CIRP') under the provisions of the Insolvency and Bankruptcy Code, 2016 ('IBC') were initiated against the assessee on 27.08.2019 at the instance of operational creditor(s) by the National Company Law Tribunal ('NCLT') and Resolution Professional was appointed. Further, in terms of section 14(1) of the IBC, moratorium was declared prohibiting "institution of suits or continuation of pending suits or proceedings pending against the corporate debtor....". Thereafter, an order dated 27.12.2019 was passed by the assessing officer under section 144 of the Act. Aggrieved assessee filed appeal before the ld. CIT(A) on 17.01.2020 against the aforesaid assessment order. Intimation of initiation of CIRP process and operation of moratorium by the Resolution Professional to the Income-tax Department was issued on 27.01.2020 and on 28.09.2020 Resolution Plan submitted before the NCLT as under:
Any liability arising in respect of assessments/ appellate or other proceedings which are under process stands permanently settled/extinguished.
No further proceedings shall be undertaken/ initiated for reduction of loss or to raise any demand in respect of payment of tax.
It has been similarly stated under the head "Extinguishment of Claims" @pg 152 of PB and "Reliefs, concessions and prayers"
Resolution Plan explicitly provided that the appellant would be entitled to avail any incentive, advantage, tax holiday, grants, refunds, benefit of income tax losses/ depreciation and other such benefits relatable to the period on or before the Effective Date Resolution Plan was approved by NCLT on 28.01.2021 and Rectification to the aforesaid order dated 28.01.2021 issued by NCLT. For which, reply dated 09.10.2024 and 10.11.2025 filed with the CIT(A) duly intimating the officer about the CIRP proceedings and consequent deemed resolution of the appeal filed by the assessee and on 11.11.2025 impugned order passed by the CIT(A) setting aside the matter to Assessing Officer for de-novo adjudication.
Aggrieved by the order of the ld. CIT(A), assessee is now in appeal before us.
Before us, ld. Counsel for the assessee stated that NCLT has accepted the Corporate Insolvency Resolution Proceedings (‘CIRP’) under the provisions of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) vide NCLT order dated 28.01.2021. It is submitted that the Insolvency Resolution Process was initiated by NCLT and Resolution Professional was appointed on 27.08.2019 and therefore, under the provision of Section 14(1) of the IBC, moratorium was declared prohibiting “institution of suits or continuation of pending suits or proceedings pending against the corporate debtor”. Against this backdrop, it is submitted that the order passed by Assessing Officer under section 144 of the Act dated 27.12.2019 cannot be sustained as it was passed after the moratorium was declared on 27.08.2019. The assessee relied on the decision of Hon. Bombay Court in the case of Smaaash Entertainment Pvt. Ltd. vs. ACIT [2025] 176 Taxmann.com 837 (Bom.)
On the other hand ld. DR relied on the order of the ld. CIT(A).
We have heard the rival submissions and perused the material available on record. We find that the NCLT appointed the Resolution Professional on 27.08.2019 and under the provision of Section 14(1) of the IBC, moratorium was declared prohibiting “institution of suits or continuation of pending suits or proceedings pending against the corporate debtor”. Thereafter, the Assessing Officer passed the order under section 144 of the Act dated 27.12.2019. In the Resolution Plan, the NCLT has ordered that pending the occurrence of the effective date, no Govt. Authority shall be entitled to take, initiate or continue any steps or proceedings against the company or its assets. The said Resolution Plan was duly approved by Delhi Bench of the NCLT vide order dated 28.01.2021. In such circumstances, the AO is precluded from initiating any proceedings under the IT Act following the decision of Hon’ble Supreme Court in the case of PCIT vs. Monnet Ispat and Synergy Limited SLP (C) No.6483/2018 which held that the provisions of IBC would override the Income Tax Act as under
"Delay, if any, is condoned. Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-Tax Act. We may also refer in this Connection to Dena Bank vs. Bhikhabhai Prabhudas Parekh and Co. & Ors. (2000) 5 SCC 694 and its progeny, making it clear that income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons.
We are of the view that the High Court of Delhi, is, therefore, correct in law. Accordingly, the Special Leave Petitions are dismissed." (Emphasis supplied)
We further note that Hon. Bombay Court in the case of Smaaash Entertainment Pvt. Ltd. vs. ACIT (supra) has categorically held that assessment proceedings under the provisions of the Act could not be initiated at all or continued while the Moratorium under Section 14 of the IBC, 2016 was in operation as under:
We have heard learned Counsel for the parties and perused the papers and proceedings in the present Writ Petition. The Hon'ble Delhi High Court in the case of Monnet Ispat and Energy Limited (supra) has clearly held that appeals filed by the Revenue before the High Court challenging the order passed by the ITAT could not proceed in light of the provisions of Section 14 of the IBC, 2016. Since this is a short order, the same is reproduced in its entirety
This decision of the Delhi High Court was subjected to challenge by the Revenue before the Hon'ble Supreme Court. The Hon'ble Supreme Court proceeded to dismiss the SLP by making a following observations:-
From these two decisions, and which are directly under the provisions of the IT Act, we find that the assessment proceedings could not have been initiated at all or continued while the Moratorium under Section 14 of the IBC, 2016 was in operation.
To the similar effect are the following decisions:
Alchemist Asset Reconstruction Co. Ltd. vs. Hotel Gaudavan (P.) Ltd [2017] 88 taxmann.com 202 (SC)
Srei Equipment Finance Ltd. vs. ACIT [2022] 327 CTR 1 (Cal)@pgs 14-23 of CLPB
Hi Tech Grain Processing Private Limited vs. DCIT: ITA No.:. 1580 & 1581/Del/2025 (Del. Trib.) - @pgs 24-29 of CLPB
ACIT vs. Vayam Technologies Ltd.: [2026] ITA No.:5281/Del/2024 (Del. Trib.) -@pgs 30-32 of CLPB
In view of the aforesaid judicial precedents, and in view of the NCLT order dated 28.01.2021, as moratorium was declared on 27.08.2019, the AO was precluded from passing any order. In view of such factual matrix, the order passed by Assessing Officer under section 144 of the Act dated 27.12.2019, cannot be sustained as it was passed after the moratorium was declared. We therefore, set aside the order of the assessing officer. Accordingly, appeal is allowed.
In the result, appeal filed by the assessee in ITA No.8422/DEL/2025 is allowed.