Mahagun (India) Pvt. Ltd. Vs DCIT (ITAT Delhi)
When IBC Rings the Bell, IT Act Must Exit – Insolvency Proceedings Override Tax Law – ITAT Delhi
Both Mahagun (India) Pvt. Ltd. & the Revenue had filed cross-appeals before the Delhi ITAT concerning assessments for AYs 2014-15, 2015-16 & 2016-17. However, during the hearing, it was brought to the Tribunal’s attention that the National Company Law Tribunal (NCLT), New Delhi Bench, had on 05.08.2025, in case IB-112(ND)/2025 – IDBI Trusteeship Services Ltd. vs. Mahagun (India) Pvt. Ltd., admitted an application u/s 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) & initiated Corporate Insolvency Resolution Process (CIRP) against the Assessee company.
Tribunal’s Findings
- The Bench noted that Section 238 of the IBC gives the Code an overriding effect over all other central & state enactments, including the Income-tax Act, 1961.
- The Bench relied on the Supreme Court’s ruling in PCIT v. Monnet Ispat & Energy Ltd., SLP (C) No. 6483/2018 (Order dated 10.08.2018), wherein it was held that: “Given Section 238 of the Insolvency & Bankruptcy Code, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-tax Act.”
- Consequently, all claims of the Income-tax Department must be lodged before the Official Liquidator/Resolution Professional under Section 53(1) of the IBC.
- Since CIRP was already in progress, the ITAT held that all pending appeals of both the Assessee & the Revenue had become infructuous. However, liberty was granted to both sides to seek reinstatement of the appeals once the insolvency proceedings conclude or as permitted by law.
This order reaffirms that once insolvency proceedings commence, tax recovery or assessment disputes must stand subsumed within the IBC framework, ensuring creditor priority as per Section 53 waterfall mechanism – a consistent position following the Supreme Court’s Monnet Ispat precedent.
