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Facts
The assessee, Wizcraft International Entertainment Pvt Ltd, is under corporate insolvency proceedings with a moratorium order in effect since 2021 under Section 14 of the IBC. Despite this, the Ld. CIT(A) dismissed the assessee's appeals concerning a quantum assessment for A.Y. 2022-23 and a penalty under Section 271(1)(c) for A.Y. 2014-15, even after being informed of the moratorium.
Held
The Tribunal held that once a moratorium under Section 14 of IBC is in force, no proceedings against the corporate debtor can continue. Citing a similar precedent, the ITAT set aside the Ld. CIT(A)'s orders and remanded both appeals back to the CIT(A) with directions to decide them only after the moratorium period concludes.
Key Issues
Whether assessment and penalty appeals can proceed against a company during a moratorium period under the Insolvency and Bankruptcy Code, and the appropriate action for the appellate authority in such circumstances.
Sections Cited
254(1), 271(1)(c), IBC Section 7, IBC Section 14
AI-generated summary — verify with the full judgment below
PER PAWAN SINGH, JUDICIAL MEMBER;
These two appeals by assessee are directed against the separate orders of ld. CIT(A) / NFAC, both dated17.10.2024 for A.Ys. 2022-23 and 2014- the assessee has challenged the addition in the quantum assessment for AY 2022-23. However, in 271(1)(c) of the Act on 29/03/2023 for A.Y. 2014- 15.
Rival submissions of both the parties have been heard and record perused. At the outset of hearing, the learned authorized representative (Ld.AR) of the assessee submits that assessee company is under liquidation pursuant to order of National Company Law Tribunal (in short, NCLT) on filing petition under section 7 of Insolvency and Bankruptcy Code (IBC) by IDBI Bank Ltd. The Ld.AR of assessee further submits that NCLT had passed moratorium order under section 14 of IBC on 05/04/2021, copy of such order is filed. The Ld.AR of the assessee submits that once order of moratorium is passed, no proceeding against corporate debtor / assessee can be continued. The order of NCLT dated 10/05/2021 was brought in the notice of CIT(A).
Still, the Ld.CIT(A) passed the order against the assessee-company in dismissing the appeal of assessee. The ld CIT(A) sent all the emails at the e-mail of ex-employee , who is no longer working with the assessee company. Thus, the order of CIT(A) may be set aside and appeal may be restored back to the file of CIT(A) with the directions to him to keep the disposal of both the appeals in abeyance till the final disposal of proceedings under IBC before NCLT, Mumbai. The ld AR of the assessee submits that quantum appeal of assessee for AY 2013-14 was allowed by ld CIT(A) vide order dated 31.05.2021, which was challenged before Mumbai Tribunal vide ITA No. 1356/Mum/2021. However, on bringing similar facts to the notice of Tribunal the appeal of revenue is dismissed with the liberty to the AO to file appeal on completion of moratorium period, copy of order of Tribunal dated 06.06.2022 in is also filed.
On the other hand, the learned Commissioner of Income Tax- Departmental representative (ld.CIT-DR) for the revenue supported the order of lower authorities.
We have considered the rival submissions of the parties and gone through the orders of lower authorities. We find that assessee-company is under undergoing corporate insolvency proceedings on filing Petition under section 7 of IDC by Financial Creditor (IDBI Bank Limited) and a moratorium order under section 14 has been passed by NCLT vide its order dated 10.05.2021. Once, order under section 14 of IBC is passed, there is bar of institution of suits, continuation of legal proceedings or execution of any judgement, decree or any order in any court of law.
We find that the assessment order for AY. 2022-23 was completed on 28/04/2024. Appeal before CIT(A) was filed on 29/03/2024. In the statement of facts, while filing appeal before ld CIT(A) it was submitted that the company is under Insolvency proceedings and Shri Sanjay Garg have been appointed as Resolution Professional. Such facts are recorded in para 3 of order of CIT(A). We find that despite taking such facts on record, the appeal of assessee was dismissed.
Similarly, the appeal against penalty levied u/s 271(1)(c) of the Act was also filed before CIT(A) on 02/05/2023. The said appeal was also dismissed by CIT(A) by taking view that despite serving of notice, no submission is filed.
We find that on similar facts and circumstances, the appeal of revenue in quantum assessment in AY 2013-14 has been dismissed by Tribunal with liberty to AO to prefer fresh appeal as soon as moratorium period is over. Considering the facts of the case, the orders passed by Ld.CIT(A) in both the appeals is set aside and the matter is restored back to the file of CIT(A), for both the years with the direction to decide both the appeals when moratorium period is over.
In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose.
In the result, appeal of the assessee is allowed for statistical purpose.
Order was pronounced in the open Court on 25/09/2025 at the time of hearing.