Loading judgment…
Facts
The assessee, Gayatri Projects Limited, faced a best judgment assessment for AY 2016-17 with a significant addition under section 14A read with Rule 8D. The company subsequently entered Corporate Insolvency Resolution Process (CIRP) via an NCLT order. The CIT(A) dismissed the assessee's appeal *in limine*, citing the overriding effect of IBC, leading to a delay of 576 days in filing the appeal to the Tribunal.
Held
The Tribunal condoned the delay in filing the appeal. It held that while the IBC moratorium bars recovery of tax, it does not bar the determination of tax liability. The CIT(A) should have either kept the appeal in abeyance or continued proceedings to determine liability without recovery. The CIT(A)'s order dismissing the appeal *in limine* was set aside, and the matter was remitted back for reconsideration.
Key Issues
1. Condonation of delay in filing an appeal to the Tribunal due to CIRP and operational challenges. 2. Whether CIT(A) can dismiss an appeal *in limine* for a company undergoing CIRP, particularly regarding the determination versus recovery of tax liability under IBC and Income Tax Act.
Sections Cited
80IA, 143(3), 147, 148, 142(1), 144(1), 14A, 178(6), Rule 8D of I.T. Rules, 1962, 14 of IBC Code, 2016, 33(5) of IBC Code, 2016
AI-generated summary — verify with the full judgment below
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.1110/Hyd./2025 Assessment Years 2016-2017 Gayatri Projects Limited, Hyderabad – 500 082. The DCIT, Circle-2(1), vs. Telangana. Hyderabad. PAN AAACG8040K (Appellant) (Respondent) For Assessee : Sri S. Rama Rao, Advocate For Revenue : Dr. Narendra Kumar Naik, CIT-DR Date of Hearing : 03.09.2025 Date of Pronouncement : 24.09.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the assessee against the Order dated 12.09.2023 of the learned CIT(A)- National Faceless Appeal Centre [in short “NFAC], Delhi, relating to the assessment year 2016-2017.
At the very outset, there is a delay of 576 days in filing the appeal before the Tribunal. The assessee has filed petition seeking for condonation of delay explaining the 2 ITA.No.1110/Hyd./2025 reasons that, the Company is under Corporate Insolvency Resolution Process [in short “CIRP”] which was commenced by the National Company Law Tribunal [in short “NCLT”], Hyderabad vide order dated 15.11.2022 and Resolution Professional was appointed who is required to manage the operations of the Company as a “going concern”. Further, due to the commencement of CIRP, many employees particularly all the Senior Personnel in Finance and Taxation Department have left the organization and is currently operating with very limited staff. Further, the appellant company has received the order of the learned CIT(A) by dismissing the appeal in limine. Thereafter, a revised claim was received from Income Tax Department vide email dated 06.01.2025 and also penalty was levied for the years where appeal was dismissed in limine. Thereafter, the assessee company has approached his Counsel for taking action under Income Tax Act in view of the settled legal position with respect to adjudication of income tax appeal for Companies under Corporate Insolvency Resolution Proceedings [in short “CIRP”] by virtue of Order
3 ITA.No.1110/Hyd./2025 of ITAT, Mumbai in the case of Varun Resources Ltd., vs., ITO [2024] 164 taxmann.com 748 [Mum.Tribu.]. The appellant company accordingly pleaded that the delay in filing of appeal is not with a deliberate intention or gross negligence and is not an intentional fact and also the delay in filing of appeal will not benefit the assessee company in any manner. The Learned Counsel for the Assessee, therefore, submitted that, the delay of 576 days in filing the appeal before the Tribunal may please be condoned in the interest of justice and admit the appeal for adjudication.
Dr. Narendra Kumar Naik, learned CIT-DR, on the other hand, did not dispute the contents explained by the assessee in it’s petition for condonation of delay of 576 days in filing the appeal before the Tribunal. However, strongly opposed for condonation of delay in filing the appeal within the prescribed date before the Tribunal.
We have heard both the parties and perused the petition filed by the assessee seeking for condonation of 576 days in filing the appeal before the Tribunal. We find that,
4 ITA.No.1110/Hyd./2025 the reasons explained by the assessee in it’s petition are seems to be genuine and bonafide by taking note of chronology of events furnished by the assessee. The Hon’ble Supreme Court in the case of Collector, Land Acquisituon vs., MST Katiji [1987] 167 ITR 471 (SC) has laid down certain principles for condoning the delay and also directed the lower courts to follow a lenient approach for condoning the delay. Going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra), there is no dispute if an appeal is dismissed on account of technicalities, a meritorious case may be thrown- out of judicial review. Therefore, while condoning the delay, the courts must have a liberal approach or lenient approach considering the reasons given by the petitioners or appellants. Therefore, going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra) and also considering the submissions of the assessee, we condone the delay of 576 days in filing the appeal before the Tribunal and admit the appeal for adjudication.
5 ITA.No.1110/Hyd./2025 5. Brief facts of the case for that, the assessee company viz., “Gayatri Projects Limited, Hyderabad” engaged in the business of construction and building of infrastructure projects/facilities, filed it’s return of income for the assessment year 2016-2017 on 12.10.2016 admitting income of Rs.24,76,28,630/- after claiming deduction under section 80IA of the Income Tax Act, 1961 [in short "the Act"]. of Rs.58,14,26,419/-. The case was selected for scrutiny and the assessment has been completed under section 143(3) of the Income Tax Act, 1961 [in short "the Act"] on 23.01.2018, determining the total income of the assessee company at Rs.89,87,85,042/-.
5.1. The assessment has been, subsequently reopened and under section 147 of the Act and notice under section 148 of the Act dated 31.03.2021 was issued and served on the assessee company. In response to notice under section 148 of the Act, the assessee company has not furnished return of income. Therefore, notice under section 142(1) of the Act dated 22.11.2021 was issued and served on the assessee company. Once again there was no compliance
6 ITA.No.1110/Hyd./2025 from the assessee company. Therefore, the assessment has been completed under best judgement assessment in terms of section 144(1) of the Act and determine the total income of the assessee company at Rs.140,62,85,042/- by making addition of Rs.50,75,00,000/- Under sec.14A read with Rule-8D of I.T. Rules, 1962 towards disallowances of expenses relatable to exempt income.
Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A) on 27.04.2022. Before the CIT(A), the assessee company contended that, Corporate Insolvency Resolution Proceedings has been initiated in terms of provisions of Insolvency and Bankruptcy Code, 2016 by Order from the NCLT, Hyderabad dated 15.11.2022. The appellant company through Insolvency Resolution Professional [in short “IRP”] submitted that, through insolvency Resolution Professional that, sufficient time is required to furnish relevant information called-for by the learned CIT(A). The learned CIT(A) without considering the request of the assessee- company dismissed the appeal filed by the assessee-
7 ITA.No.1110/Hyd./2025 company by following decision of ITAT, Mumbai-D Bench, Mumbai by holding that, once corporate insolvency process was initiated, then, no proceedings can be initiated against the assessee company before the Tribunal or any Income Tax Authority in any proceedings because, Insolvency and Bankruptcy Code, 2016 has overriding effect on all the acts including Income Tax Act, which has been specifically provided under section 178(6) of the Act as amended with effect from 01.11.2016. Therefore, dismissed appeal filed by the assessee company in limine.
Aggrieved by the order of the learned CIT(A), the assessee company is now, in appeal before the Tribunal.
Sri S. Rama Rao, Advocate-Learned Counsel for the Assessee, referring to the Order passed by the NCLT, Hyderabad dated 15.11.2022 submitted that, Corporate Insolvency Resolution Process has been initiated against the assessee company and the NCLT, Hyderabad has passed order and moratorium has been granted with effect from the date of the Order 15.11.2022. Further, as per the provisions of section 178(6) of the Income Tax Act, 1961, and relevant
8 ITA.No.1110/Hyd./2025 IBC provisions, there is no bar in determining tax liability of the assessee company, but the recovery cannot be made. The learned CIT(A) without appreciating the relevant facts, has simply dismissed the appeal filed by the assessee company in limine, even though, there is no bar for continuing the proceedings and determining tax liability or keeping appeal in abeyance till disposal of the application filed before NCLT, Hyderabad under IBC Code, 2016. Therefore, he submitted that, since the learned CIT(A) has dismissed the appeal of the assessee company ‘in limine’ without considering the relevant facts, the matter may be remitted back to the learned CIT(A) to decide the issue in accordance with law. In this regard, he relied upon the decision of ITAT, Mumbai F-Bench, Mumbai in the case of M/s. Varun Resources Limited, Mumbai vs., ITO-5(3)(1), Mumbai, order dated 27.05.2024.
Dr. Narendra Kumar Naik, learned CIT-DR for the Revenue, on the other hand fairly agreed that, the learned CIT(A) has dismissed the appeal filed by the assessee company ‘in limine’ by considering certain judicial
9 ITA.No.1110/Hyd./2025 precedents. However, the fact remains that, on the claim made by the assessee company, there are two options for the CIT(A), i.e., (i) he may keep the appeal in abeyance till disposal of application filed before the NCLT is resolved or (ii) continue the proceedings and determine the tax liability, but, the Department cannot recover the outstanding demand till the application is disposed of. Therefore, the matter may be remitted back to the file of CIT(A) to consider the issue in accordance with law.
We have heard both the parties, perused the material on record and had gone through the orders of the authorities below. We find that, Corporate Insolvency Resolution Process [in short “CIRP”] has been initiated in the case of the assessee company with effect from 15.11.2022 vide order of NCLT,, Hyderabad and the NCLT, Hyderabad in CP(IB) No.308/2007/HDB./2022 and the NCLT, Hyderabad Bench, Hyderabad has granted moratorium to proceedings including Income Tax proceedings from the date of the Order i.e., from 15.11.2022. Therefore, as per the Order of the NCLT,
10 ITA.No.1110/Hyd./2025 Hyderabad Bench, Hyderabad, dated 15.11.2022, the moratorium granted to the assessee company is in operation and during the moratorium period, no proceedings can be initiated or continued against the assessee company, except, continuing the pending proceedings for determination of the tax liability. Once moratorium is in place, the Department cannot recover any tax liability from the corporate debtor, since, the provisions of IBC Code, 2016 has over-riding effect on other laws including Income Tax which is very clear from section 178(6) of the Income Tax Act, 1961. In the present case, the assessee company has filed appeal before the learned CIT(A) on 27.04.2022 when the moratorium granted by the NCLT, Hyderabad was in operation. Therefore, in our considered view, the learned CIT(A) shall have two options i.e., (i) to keep the proceedings before him in abeyance or (ii) to continue the proceedings for determination of tax liability without any recovery of tax. In the present case, the learned CIT(A) without considering the relevant facts, has simply dismissed the appeal filed by the assessee company ‘in limine’ by following decision of 11 ITA.No.1110/Hyd./2025 ITAT, Mumbai Bench, Mumbai Order dated 08.06.2022, however, not referred the case. On the other hand, the assessee company has relied upon the decision of ITAT, Mumbai F-Bench, Mumbai in the case of M/s. Varun Resources Limited, Mumbai vs., ITO-5(3)(1), Mumbai, Order dated 27.05.2024 (supra), where the law has been considered and after considering the relevant facts, it has been held that, the presence of IBC Code, 2016 would prevail over Income Tax Act, 1961. However, Income Tax Authorities have limited jurisdiction to assess/determine the quantum of income tax dues, but, have no authority to initiate recovery of such dues on it’s own during the period of moratorium in violation of section 14 or 33(5) of IBC Code, 2016. In our considered view, the law is very clear, in as much as, once the moratorium is granted to the corporate debtor, then, the Income Tax Department cannot proceed to recover any dues, but, there is no bar under the IBC Code, 2016 or under the Income Tax Act, 1961, to continue the proceedings to determine the tax liability. In the present case, the learned CIT(A) without appreciating
12 ITA.No.1110/Hyd./2025 the relevant facts, has simply dismissed the appeal filed by the assessee company ‘in limine’. Thus, we set aside the Order of the learned CIT(A) and restore the issue back to the file of learned CIT(A) and also direct the learned CIT(A) to reconsider the issue in light of our discussion given hereinabove in the preceding paragraphs. Accordingly, the grounds of appeal of the assessee are allowed for statistical purposes.
In the result appeal of the assessee allowed for statistical purposes.
Order pronounced in the open Court on 24.09.2025.