ACIT, NEW DELHI vs. M/S. GRAND VENEZIA COMMERCIAL TOWERS PVT. LTD., NEW DELHI

At the outset, the ld AR placed on record the order passed by the Hon’ble National Company Law Tribunal (NCLT) in Company Petition IB (IBC) No. 646/PB/2021 dated 4-12-2023 wherein a moratorium has been declared in terms &3817/Del/2017 M/s. Grand Venezia commercial Towers Pvt. Ltd of section 14 of the Insolvency & Bankruptcy Code, 2016 (IBC 2016). Consequently any pending proceedings against the assessee, either at the behest of the assessee or by the income tax department cannot continue. The ld DR before us submitted that the appeal of the revenue cannot be dismissed in view of the provisions of section 14 of the IBC 2016 with respect to the moratorium period. The ld DR referred to the provisions of Rule 26 of ITAT Rules, 1963 and stated that if income tax proceedings fall within the ambit of section 14 of IBC 2016, it will create an anomalous and paradoxical situation and accordingly submitted that the income tax proceedings could continue during the moratorium period also. The ld DR submitted that only the tax recovery proceedings shall not continue but the appeal proceedings could continue.

We are unable to comprehend ourselves to accept to this contention of the ld DR in view of the fact that the provisions of section 14 of the IBC 2016 provides that all the suits or continuation of pending suits or proceedings against a corporate debtor including any judgment or decree or order in any court of law, tribunal, arbitration panel or other authority cannot be passed during the moratorium period. The period of moratorium shall have the effect from the date of such order till the completion of the corporate insolvency resolution process. In the present case, the appeal filed by the assessee as well as by the revenue is an institution of suit against the corporate debtor (i.e. the assessee herein), which is prohibited under section 14 of the IBC 2016. The Hon’ble Supreme Court in the case of Alchemist Asset Reconstruction Company Limited vs Hotel Gaudavan Private Limited reported in 88 taxmann.com 202 (SC) had held that even arbitration proceedings cannot be initiated after imposition of the moratorium under section 14(1)(a) of IBC 2016 had come into effect and it would not be appropriate in law and could not have been allowed to continue.

In view of these overriding provisions of IBC 2016 and the decisions of the Hon’ble Supreme Court referred supra, the appeal filed by the assessee as well as by the revenue cannot be allowed to be continued during the moratorium period. Further, any resolution plan or liquidation order, if any, as decided by the competent authority would be binding on all the stakeholders including the Central Government, State Government or any local authority to whom a debt in respect of the payment of the dues may be owed. Accordingly, this will prevent state authorities, regulatory bodies including tax departments (both direct and indirect) from questioning the resolution plan or liquidation order as well as jurisdiction of tribunals with regard to IBC.

In the result, the appeal of the assessee is dismissed and appeal of the revenue is dismissed.