Hi Tech Grain Processing Private Limited-In Liquidation Vs DCIT (ITAT Delhi)
ITAT Delhi quashes assessment on Company under Liquidation – IBC moratorium overrides Income Tax Proceedings
Delhi ITAT quashed assessments framed against a company which was already under liquidation, holding that the moratorium & liquidation provisions contained in the Insolvency & Bankruptcy Code, 2016 override the Income Tax Act.
Assessee had filed return of income for AY 2013-14 declaring total income of Rs.5.63 crore. Subsequently, the case was reopened u/s 147 on the basis of alleged accommodation entries of Rs.26.35 crore & assessment was completed with additions. Meanwhile, NCLT, by order dated 31.10.2019, had already admitted Corporate Insolvency Resolution Process (CIRP) against the Assessee & imposed moratorium u/s 14 of the Code. Further, on 13.04.2022, NCLT ordered liquidation of Assessee company. Despite the operation of moratorium & liquidation, AO proceeded to pass the assessment order on 02.12.2019 making additions of Rs.26.35 crore. Similar action was taken for AY 2022-23.
The case of the Assessee was that once CIRP & later liquidation were ordered, no assessment or other proceedings could be initiated or continued against the corporate debtor by virtue of the overriding provisions of IBC. Reliance was placed on the judgment of the Hon’ble Supreme Court in CIT Vs. Moser Baer India Ltd., Civil Appeal No. 4704 of 2024, which had categorically held that proceedings under the Income Tax Act cannot continue once moratorium is in force. The liquidator also submitted that all physical assets had already been sold & proceeds distributed to creditors in accordance with Section 53 of IBC, leaving the company without means to meet tax demands.
