DCIT, MUMBAI vs. PRABHAT TECHNOLOGIES INDIA LIMITED , MUMBAI

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: C BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER

ITA 7996/MUM/2025 (िनधा�रण वष�/Assessment Year: 2016-17) DCIT Prabhat Technologies India 218, 2nd Floor, Aaykar Bhavan, Limited Churchgate, Unit 402, Western Edge 1, Mumbai-400020, Western Express Highway Vs. Maharashtra Borivali (E) Mumbai-400066, Maharashtra अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: AAECP2288G

अपीलाथ� �ारा/Appellant represented by: Shri Rajdeep Singh, CIT DR ��थ� �ारा/Respondent represented by: Shri Nishit Gandhi and Ms. Angel More, Advocates

सुनवाई की तारीख / Date of conclusion of hearing: 28.07.2026 घोषणा की तारीख / Date of pronouncement: 13.10.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by Revenue is against the order of ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide Order No. ITBA/NFAC/S/250/2025-26/1081007045(1) dated 22.09.2025 passed against the assessment order by Assessment Unit of Income-tax Department, u/s. 143(3) r.w.s. 147 r.w.s. 144B of the Income-tax Act, 1961 (‘the Act’) dated 22.05.2023, for Assessment Year 2016-17.

1) Whether on the facts and circumstances of the case, the Ld CIT(A) is justified in ignoring the decision of the Honble Madras High Court in WP No 34668/2018 in the case of Dishnet Wireless Ltd Vs Assistant Commissioner of Income Tax (OSD) wherein it was held that the provisions of insolvency and Bankruptcy code, 2016 (IBC) cannot be interpreted in a manner which is inconsistent with any other low in the time being in force. Accordingly, therefore Corporate Insolvency Resolution Plan (CIRP) sanctioned and approved cannot impinge on the rights of the Income Tax Department to pass any fresh assessment order u/s 148 read with sections 143(3) and 147 of the Income Tax Act, 1961. 2) Whether on the facts and circumstances, the Ld. CIT(A) is justified in ignoring the judgment dated 26.08.2022 of the Honble Apex Court of India in Civil Appeal No 7667 of 2021 in the case of Sundaresh Bhatt, Liquidator of ABG Shipyard Vs Central Board of Indirect Taxes and Customs wherein the Honble Supreme Court of India held that the authorities can only take steps to determine the tax, interest, fines OR any penalty which is due. However, the authority cannot enforce a claim for recovery of levy of interest on the tax due during the period of moratorium. 3) The order of the CIT(A) is contrary to facts and law and deserves to be set aside.

2.1 Ground nos. 1 and 2 raised by Revenue are inter-connected and refer to a singular legal issue, viz., whether ld. CIT(A) erred in holding the reassessment order dated 22.05.2023 to be null and void in view of the moratorium operating against assessee in terms of section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'IBC'), pursuant to the order dated 10.10.2019 passed by the National Company Law Tribunal, Mumbai Bench (hereinafter referred to as 'NCLT'). Ground no. 3 is general in nature and does not call for any separate adjudication. 2.2 Accordingly, grounds no. 1 and 2 are taken up together for adjudication. 3. Brief facts of the case are that assessee, hereinafter also referred to as 'PTIL', is a company engaged in the business of manufacturing and distribution of telecom, electronics and data products, having product portfolio of mobile handsets, CCTV, wireless dongles, GPS tracker and accessories. It filed its return of income on 17.10.2016, reporting total income at Rs. 1,42,39,190/- under normal provisions of the Act and book profit at Rs. 1,82,56,503/- u/s 115JB. As tax payable was more under normal provisions of the Act as compared to section 115JB of the Act, total income was considered as per normal provisions.

3.1 The case was selected for scrutiny and assessment was completed u/s 143(3) on 28.12.2018. Appeal of assessee against the said order was dismissed by ld. CIT(A) vide order dated 16.12.2022.

3.2 Meanwhile, the case was reopened u/s 147 and notice u/s 148 was issued on 31.07.2022, as recorded at page 2 of the assessment order. Assessee did not file its return of income in response to the said notice. The reasons, as reproduced by ld. AO in the assessment order, are extracted below for ready reference: "On perusal of the tax audit report it is noticed that the assessee company has not paid the employees contribution to P.F. of Rs. 2,10,592/- before the due date. Similarly employees contribution to ESI of Rs.36,967/- has also not been deposited by the due date. The same is required to be disallowed under section 36(1)(va) of the IT Act. The total amount involved in this regard is Rs.2,47,559/-. On perusal of the records, it is noticed that the assessee has trade payable amounting to Rs. 63,51,53,913/- for which the assessee provided only the names of the parties along with the amounts outstanding only. It is found that the identity, capacity and genuineness in respect of the outstanding liabilities amounting to Rs. 63,51,53,913/- has not been proved."

3.3 Ld. AO issued notice u/s 142(1) dated 18.01.2023 with date of compliance as 23.01.2023, to which no response was received. Thereafter, notice (AU-1) dated 06.04.2023 was issued with date of compliance as 10.04.2023, to which a part response was filed on 10.04.2023. A letter dated 10.04.2023 was then issued for non- response, to which part responses were filed on 18.04.2023 and 19.04.2023. Show cause notice dated 12.05.2023 was issued with date of compliance as 17.05.2023 (typed as '17.05.203' in the assessment order), to which a part response was filed on 16.05.2023. 3.4 In response, vide reply filed online on 19.04.2023, it was submitted on behalf of assessee by Shri Rajendra K. Bhuta, Interim Resolution Professional (hereinafter referred to as 'IRP'), that assessee has been admitted into insolvency by order of NCLT dated 10.10.2019. Ld. AO recorded in the assessment order that assessee is a corporate debtor in proceedings instituted before NCLT, Mumbai Bench by Paramount Consultant & Corporate Advisors P. Ltd. and that assessee furnished copy of NCLT order dated 10.10.2019, which reads as under, extracted below for ready reference: "That this bench as a result of this prohibits: (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel, or other authority:"

3.5 Assessee further stated, as reproduced by ld. AO in the assessment order, as under: "We would like to further state that we are covered under moratorium in the terms of Insolvency and Bankruptcy Code, 2016 as per Section 14 of the said Act, which means during this period no proceedings can be initiated or instituted against the Corporate Debtor. The order of moratorium shall have effect from the date of order till the completion of the Corporate Insolvency Resolution process. In the view of the notices mentioned above cannot be proceeded with. In the view of the above the proceedings will be kept in abeyance and no variations are accepted."

3.6 Ld. AO recorded that technical assistance on the legal issue was sought from the Technical Unit of the Department vide letter dated 05.05.2023 and reminder dated 12.05.2023, but no reply was received. Ld. AO then reproduced the Technical Assistance Report submitted by the Technical Unit in another case pending before NCLT being assessed in the same office, which, inter alia, refers to the decision of Hon'ble Madras High Court in Dishnet Wireless Ltd. v. ACIT (OSD), [2022] 139 taxmann.com 493 (Mad) and of Hon'ble Supreme Court in Sundaresh Bhatt. The relevant portion reproduced by ld. AO is extracted below for ready reference: "1. The legal advice sought above pertains to the only issue whether the proceedings for the year under consideration can be continued or not in the light of the final order of the Hon'ble NCLT. 2. Section 14 of the IBC provides for a moratorium which only restricts actions against the assets of the assessee-debtor. The moratorium is intended to restrain proceedings which are in the nature of debt recovery. Assessment proceedings, per se, cannot be presumed to have an adverse impact on the assets of the corporate debtor as they may or may not result in additional demand. In the event of additional demand being raised, the recovery thereof is an entirely different matter falling in a separate arena. It is evident that the intent of section 14 is to restrict only those proceedings which diminish or reduce the assets of the assessee and passing of an assessment order does not have such an impact. 3. The word "moratorium" means a legally authorized period of delay in the performance of a legal obligation or the payment of a debt. In this light, the effect of section 14 of the IBC cannot conceivably be stretched to mean the permanent cessation of assessment proceedings, particularly in the context of the limitation dates governing such proceedings. In other words, it may not be tenable to hold that assessment proceedings, which are required to be completed within the timelines specified in the Income-tax Act and are incapable of being revived subsequently in the absence of any enabling provision, get fatally hit by the word "moratorium" deployed in section 14 of the IBC. 4. In the recent Hon'ble Madras High Court ruling in the case of Dishnet Wireless Ltd. v. ACIT LTS-505-HC-2022(MAD), wherein the Revenue had issued reassessment notice under section 148 of the IT Act right after the CIRP was voluntarily initiated by the CD and a Writ was filed by the CD, it was held that, the moratorium did not preclude the Department from re- opening the concluded assessment proceedings in the exercise of powers conferred u/s 148 of the Act. The argument advanced by the Revenue was that the initiation of proceedings under section 148 of IT Act would not fall under the ambit of section 14 of the Code which restricts initiation or continuation of proceedings during the moratorium period. The Revenue further argued that since the claims were yet to be crystallized, they could not be said to be extinguished owing to the approval of resolution plan. 4.1 The Hon'ble Madras High Court ruled that where proceedings for re- opening of assessment under section 148 of the Income Tax Act, 1961 were initiated against the company when company's voluntary application for CIRP u/s 10 of the IBC 2016 is pending before NCLT for admission, it was incumbent for the company to have ensured proper notice to the Income Tax Department (ITD) and obtained appropriate concession in Corporate Insolvency Resolution Plan. Where that was not done and claims of the Income Tax Department were not considered by the NCLT, while approving the Resolution Plan, the question of abatement of rights of the Income Tax Department cannot be countenanced. In such circumstances, moratorium under IBC 2016 does not bar the Income Tax Department to re-open assessment and pass any fresh Assessment Order under Section 148 read with Sections 143(3) and 147 of the Income Tax Act, 1961. (Dishnet Wireless Ltd. vs. Asst CIT (2022] 139 taxmann.com 493 (Mad. HC) 5. Further, reliance may be placed on decision of the Hon'ble Supreme Court in the case of Sundaresh Bhatt Vs. CBIC in Civil Appeal No. 7667 of 2021 dated 26.08.2022 (though it pertains to indirect taxes, the principle laid down is applicable to Direct Taxes cases as well), wherein it was held that once the moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority is not ousted of its jurisdiction to assess/determine the quantum of customs duty and other levies though it will not have the power to initiate recovery of dues. 6. In view of the discussions above, this office is of the opinion that the Assessing Officer can determine the quantum and assess the income, however, recovery may not be pursued till the finalisation of the liquidation proceedings."

3.7 On the above basis, ld. AO concluded in the assessment order as under: "In view of the above and in the time barring schedule of the faceless e- proceedings, no option is left for the Assessing Officer but to complete the assessment proceedings well in time. The current proceedings is not affected by the order of Hon'ble NCLT since the same is not related to any depletion/confiscation of assets of the assessee company. Accordingly, order is being passed."

3.8 On merits, ld. AO noted that assessee had deposited employees' contribution to PF and ESIC after the due dates prescribed under the respective enactments, viz., PF of Rs. 2,07,118/- (for months 4/2015, 5/2015, 7/2015 and 2/2016) and ESIC of Rs. 36,967/- (for months 4/2015, 5/2015, 8/2015 and 2/2016), aggregating Rs. 2,44,085/-. Ld. AO added the said amount to total income u/s 36(1)(va). We note that the reasons recorded refer to PF contribution of Rs. 2,10,592/- and aggregate amount of Rs. 2,47,559/-, whereas the amounts tabulated by ld. AO at para 4.2 and added at para 4.2.5 of the assessment order are Rs. 2,07,118/- and Rs. 2,44,085/-, respectively. 3.9 Further, ld. AO noted that, as per Note 8 of the balance sheet, assessee has shown trade payables of Rs. 63,51,51,914/-. Assessee was asked to furnish party-wise details in the prescribed format and duly reconciled contra confirmations of each party, including all parties with outstanding of more than Rs. 50 lakh, so as to prove identity, capacity and genuineness of the outstanding liabilities. Assessee relied upon NCLT order dated 10.10.2019 and did not furnish the details. Ld. AO accordingly treated the entire trade payables of Rs. 63,51,51,914/- as unverifiable, non-genuine/unproved trade payable and added the same to total income (para 4.3.4 of the assessment order). We note that the reasons recorded refer to trade payables of Rs. 63,51,53,913/-, as against Rs. 63,51,51,914/- added in the assessment order. 3.10 The aforesaid additions of Rs. 2,44,085/- and Rs. 63,51,51,914/- aggregate to Rs. 63,53,95,999/-. Ld. AO also initiated penalty proceedings u/s 271(1)(c), 271F and 271(1)(b). The assessment was thus completed vide order dated 22.05.2023 u/s 143(3) r.w.s. 147 r.w.s. 144B. 4. Aggrieved, assessee went in appeal before ld. CIT(A). Ld. CIT(A) noting that assessee had furnished NCLT order dated 10.10.2019 and had stated that it was covered under moratorium in terms of section 14 of IBC, relied at para 5.3 on the decision of jurisdictional Hon'ble Bombay High Court in Smaaash Entertainment Pvt. Ltd. v. ACIT Circle 16(1), (2025) 7 TMI 1241 (Bombay), the relevant portion of which, as reproduced by ld. CIT(A), is extracted below for ready reference: "... 6. 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:- "1. Heard. Delay, if any, is condoned.

4.1. Ld. CIT(A) further observed that once a moratorium is in effect under section 14 of IBC, proceedings under the Act cannot be initiated or continued. Ld. CIT(A) further noted that section 238 of IBC gives the said Code overriding effect over inconsistent provisions in other laws, including the Act and therefore, held that the assessment order is null and void and allowed the appeal of assessee. Aggrieved, Revenue is in appeal before the Tribunal. 5. Ld. CIT DR supported the grounds of appeal and submitted that ld. CIT(A) erred in ignoring the decision of Hon'ble Madras High Court in Dishnet Wireless Ltd. (supra) and of Hon'ble Supreme Court in Sundaresh Bhatt (supra). It was submitted that assessment proceedings are not in the nature of recovery, that they may or may not result in additional demand and that, as per the Technical Assistance Report relied upon by ld. AO, assessment can be completed during moratorium, recovery alone being deferred. 5.1 Per-contra, Ld. Counsel for assessee supported the order of ld. CIT(A) and submitted that the notice u/s 148 and the assessment order dated 22.05.2023 were issued and passed while the moratorium declared by NCLT vide order dated 10.10.2019 was in operation and are therefore void ab initio. 6. We have heard both the parties and perused the material on record. We have also given our thoughtful consideration to the submissions made as well as the judicial precedents referred before us. 6.1 The issue arising in grounds no. 1 and 2 raised by Revenue is whether the assessment proceedings initiated by notice u/s 148 dated 31.07.2022 and culminating in the assessment order dated 22.05.2023 u/s 143(3) r.w.s. 147 r.w.s. 144B of the Act could be validly initiated and completed against assessee, a corporate debtor, while the moratorium in terms of section 14 of IBC pursuant to NCLT order dated 10.10.2019 was in operation. 6.2 At the outset, we note the factual position emerging from the assessment order itself. i) Assessee furnished before ld. AO the copy of NCLT order dated 10.10.2019, which prohibits the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority. ii) The replies to notice u/s 142(1) and to the show cause notice were filed through Shri Rajendra K. Bhuta, IRP. iii) Notice u/s 148 was issued on 31.07.2022 and the assessment order was passed on 22.05.2023, both after NCLT order dated 10.10.2019. iv) Ld. AO has neither doubted the existence of NCLT order dated 10.10.2019 nor recorded any finding that the moratorium had ceased to operate 6.3. Ld. AO proceeded on the view that the proceedings are not affected by NCLT order as they do not relate to depletion or confiscation of assets. Revenue has also not brought to our notice any order of NCLT approving a resolution plan, lifting the moratorium or directing liquidation of assessee. 6.4 We further note that ground no. 1 raised by Revenue proceeds on the footing of a 'Corporate Insolvency Resolution Plan (CIRP) sanctioned and approved', and the order of ld. CIT(A) also expands CIRP as 'Corporate Insolvency Resolution Plan'. CIRP stands for Corporate Insolvency Resolution Process and there is nothing on record to show that any resolution plan was sanctioned or approved in the case of assessee as on the dates of notice u/s 148 and of the assessment order. The factual assumption in ground no. 1 to that extent is not borne out of the record. 6.4 Moratorium in terms of section 14 of IBC, as reflected in para 1 of NCLT order prohibits the institution of suits or continuation of pending suits or proceedings against the corporate debtor in any court of law, tribunal, arbitration panel or other authority. Further, section 238 of IBC provides as under, extracted below for ready reference: "238. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 6.5 Hon'ble Delhi High Court in the decision reported at [2024] 158 taxmann.com 72 (Delhi) in the case of Rishi Ganga Power Corporation Ltd. vs. ACIT has held that “Where National Company Law Tribunal admitted insolvency petition against assessee but revenue in terms of Insolvency and Bankruptcy Code, 2016 had not lodged its claim with RP, revenue could not enforce assessment order and demand notice”. 6.6 Respectfully following the aforesaid decision of Hon'ble Delhi High Court and the decision of jurisdictional Hon'ble Bombay High Court in Smaaash Entertainment Pvt. Ltd. (supra), we are of the considered view that assessment proceedings could not have been initiated or continued against assessee while the moratorium under section 14 of IBC was in operation. In Smaaash Entertainment Pvt. Ltd. (supra), Hon'ble Bombay High Court, on the strength of the decision of Hon'ble Delhi High Court affirmed by Hon'ble Supreme Court by dismissal of the SLP on the basis of section 238 of IBC, quashed the notices issued in the course of the assessment proceedings, the assessment order, the notice of demand and the consequential show cause notices for penalty. The said decision binds us, being rendered by the jurisdictional High Court. 6.7 In so far as ground no. 1 is concerned, Revenue has relied upon Dishnet Wireless Ltd. (supra). On the strength of the Technical Assistance Report, the said decision concerned a reassessment notice u/s 148 issued when the voluntary application of the company for CIRP u/s 10 of IBC was pending admission before NCLT and the question considered was the abatement of claims of the Income-tax Department upon approval of the resolution plan. In the present case, notice u/s 148 was issued on 31.07.2022, long after NCLT order dated 10.10.2019, and no approval of any resolution plan is on record. Thus, Dishnet Wireless Ltd. (supra) is distinguishable on facts. 6.8 In so far as ground no. 2 is concerned, Revenue has relied upon Sundaresh Bhatt (supra) for the proposition that the authority can determine the tax during moratorium but cannot enforce recovery. The very same decision was relied upon by the Revenue before Hon'ble Bombay High Court in Smaaash Entertainment Pvt. Ltd. (supra), wherein it was held that the reliance on the said decision is wholly misplaced, firstly because it arose under the Customs Act, 1962 and not under the Act and secondly because the decision in V. N. Deshpande (supra) on which it was founded had been distinguished in P. Mohanraj (supra), which was not noticed. Ld. CIT(A) has rightly followed the said view and distinguished Sundaresh Bhatt (supra). Since we are bound by the decision of jurisdictional Hon'ble High Court, we find no merit in this contention of Revenue. 6.9 The Technical Assistance Report relied upon by ld. AO is an opinion of the Technical Unit rendered in another case and does not bind this Tribunal. The reasoning therein that moratorium restricts only recovery or proceedings diminishing assets of the corporate debtor, runs contrary to the decision of jurisdictional Hon'ble High Court, which has held that assessment proceedings themselves could not be initiated or continued during the moratorium. Likewise, the time barring schedule of faceless proceedings cannot confer jurisdiction on ld. AO where the statute, in terms of section 14 read with section 238 of IBC, prohibits the proceedings. The question as to what remedy, if any, is available to Revenue upon the moratorium coming to an end is not before us and we express no opinion thereon. 6.10 In view of the above, we find no infirmity in the finding of ld. CIT(A) that the assessment order dated 22.05.2023 is null and void. Grounds no. 1 and 2 raised by Revenue are accordingly dismissed. Ground no. 3 being general and consequential, requires no separate adjudication. Since the assessment order itself is held to be void ab initio, the merits of the additions of Rs. 2,44,085/- u/s 36(1)(va) and Rs. 63,51,51,914/- on account of trade payables are not examined and are left open. 7. In the result, the appeal filed by Revenue is dismissed.

Order is pronounced in the open court on 13 October, 2026

Sd/- Sd/- (Saktijit Dey) (Girish Agrawal) Vice President Accountant Member Dated: 13 October, 2026 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, ABHINAV ANANT Digitally signed by ABHINAV ANANT GAVANDE GAVANDE Date: 2026.10.24 12:43:04 +05'30' (Dy./Asstt.Registrar) ITAT, Mumbai