PCIT Vs Subhlabh Steels Private Limited (Calcutta High Court)
Calcutta High Court has dismissed an appeal filed by the Income Tax Department against Subhlabh Steels Pvt. Ltd., citing the ongoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), 2016. The Revenue had challenged an order of the Income Tax Appellate Tribunal (ITAT), Kolkata, which had set aside a Section 263 order passed by the Principal Commissioner of Income Tax (PCIT). The case pertained to the Assessment Year 2013-14, where the PCIT had sought to revise the Assessing Officer’s (AO) order on the grounds that the books of accounts were rejected without applying a reasonable net profit (NP) rate.
The Court observed that an application for liquidation had been filed against Subhlabh Steels before the National Company Law Tribunal (NCLT), Kolkata, by Chaitanya Alloys Pvt. Ltd., an operational creditor. The NCLT, through its order dated December 9, 2021, had admitted the insolvency plea and imposed a moratorium under Section 14 of the IBC, effectively barring all legal proceedings, including tax appeals, against the corporate debtor. Given this statutory restriction, the Revenue’s appeal could not be entertained by the Court.
The Insolvency Resolution Professional (IRP), representing the company, argued that under Section 238 of the IBC, its provisions override other laws, including the Income Tax Act. The Calcutta High Court relied on the Supreme Court’s ruling in PCIT v. Monnet Ispat and Energy Ltd. (SLP No. 6483 of 2018, decided on August 10, 2018), where the Apex Court had upheld the precedence of IBC over tax recovery proceedings. The Supreme Court had clarified that once insolvency proceedings are initiated, all tax-related matters must be handled within the framework of the IBC.
