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Facts
The assessee filed appeals against CIT(A) orders for A.Y. 2016-17 and 2017-18 concerning quantum additions/disallowances and penalties under Section 271(1)(c), Section 144, and Section 143(3). The assessee is undergoing Corporate Insolvency Resolution Process (CIRP), and the NCLT had declared a moratorium under Section 14 of the IBC, prohibiting continuation of proceedings against it, yet the CIT(A) proceeded ex-parte.
Held
Following a precedent set in *Spentex Industries Ltd.*, the Tribunal set aside the CIT(A) orders and remanded the matters back to the CIT(A) for fresh adjudication. The CIT(A) is directed to decide the issues in light of the precedent and natural justice, once the moratorium imposed by NCLT is lifted or clarified. The appeals were ultimately allowed for statistical purposes.
Key Issues
The key legal issue was whether income tax appeals can proceed against an assessee for whom a moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) has been declared by the NCLT.
Sections Cited
271(1)(c), 144, 143(3), 7 (IBC), 14 (IBC), 14(1) (IBC)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “H” DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI SUDHIR KUMAR
Sr. ITA/CO Nos. Appeal A.Y. CIT(A) Order Assessment Remarks No. dated Order/ penalty order dated 1. 935/Del/2023 Assessee 2016-17 CIT(A), Delhi- Penalty order Penalty Order 31 order dated dated under section 27.01.2023 28.06.2019 271(1)(c) of the Income Tax Act, 1961. 2. 936/Del/2023 Assessee 2017-18 CIT(A), Delhi- assessment Assessment 31 order dated order dated Order under 27.01.2023 10.12.2019 section 144 of the Income Tax Act, 1961. 3. 937/Del/2023 Assessee 2016-17 CIT(A), Delhi- Penalty order Assessment 31 order dated dated Order under 27.01.2023 25.12.2018 section 143(3) of the Income Tax Act, 1961.
The assessee has raised its grievance by respective grounds of appeal seeking to challenge the additions/disallowances in the quantum assessment relevant to A.Y. 2016-17 and imposition of penalty under Section 271(1)(c) of such quantum additions. Similar challenge has been placed towards quantum additions in A.Y. 2017-18.
When the matter was called for hearing, none appeared for the assessee. It is seen from the case record that several opportunities have been given to the assessee. The matter was accordingly proceeded ex-parte.
4. The ld. DR for the Revenue relied upon the respective orders of the lower authorities.
5. It is seen from the first appellate order passed in all the three captioned appeals that the orders have been passed ex-parte. It is further noted from the first appellate order that the assessee is stated to have gone into insolvency proceeding and the NCLT Delhi Bench vide order dated 01.03.2019 declared moratorium in terms of Section 14 of IBC whereby it has prohibited the institution of suit or continuation of pending suits or proceedings against the assessee including the execution of any judgment, decree or order in any Court of law, Tribunal, Arbitration panel or Other authority. Despite such position, the CIT(A) has proceeded ex-parte against the assessee in all the three cases.
6. As further noted, the appeal before the Tribunal against such appellate orders in the respective appeal has been filed by the Resolution Professional appointed by the NCLT. The order passed by the NCLT declaring moratorium is not available before the Tribunal.
The Tribunal in the case of Spentex Industries Ltd. vs. ACIT in & ors., order dated 25.04.2024 has decided the issue as under:
“3. In view of the aforesaid, we proceed to dispose of the appeals ex-parte qua the assessee after hearing learned Departmental Representative and based on the materials available on record. It is observed, certain financial creditors of the assessee company filed application under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the assessee before the National Company Law Tribunal (NCLT), since, the assessee had failed to repay the debt liability. Post filing of the present appeals, the NCLT principal bench, New Delhi, has passed an order on 03-01-2020 admitting the application of the financial creditors and initiating CIRP against the assessee. Further, upon admission of the application of the financial creditors, moratorium under section 14(1) of the IBC has been imposed. A copy of the aforesaid order of learned NCLT is available on record.
Thus, in view of the moratorium granted by NCLT, all proceedings in any court of law, Tribunal etc. cannot continue. That being the position in law, no useful purpose is going to be served in keeping the appeals pending. Therefore, in our view, these appeals need to be consigned to the records.
In view of the aforesaid, we dismiss these appeals in limine. However, liberty is granted to the parties to seek revival of the appeals, in case, order of NCLT is either reversed or modified by any higher judicial Authority or if there is any change in factual or legal position or if it is necessary to do so in the interest of the parties.
In the result, the captioned appeals are dismissed for statistical purposes.”
In such peculiar backdrop, it is in fitness of things that the order of CIT(A) is set aside and restored to the file of the CIT(A). The CIT(A) shall adjudicate the issue afresh in the light of the decision rendered by the Co-ordinate Bench of the Tribunal in the case of Spentex Industries Ltd. (supra) and in accordance with law. The principles of natural justice shall be observed while adjudicating the issue arising in the appeal.
In the result, all the captioned appeal of the assessee are allowed for statistical purposes. Order pronounced in the open Court on 19th June, 2024.