Reliance Home Finance Ltd. Vs PCIT (ITAT Mumbai)
SECTION 263 MUST WAIT OUTSIDE THE IBC MORATORIUM—PCIT CANNOT REVISE WHILE CORPORATE DEBTOR IS UNDER SECTION 14 SHIELD
Summary:
Revision order passed during CIRP
The assessee challenged the PCIT’s revisionary order dated 12.12.2025 passed u/s 263, arising from a reassessment completed u/s 147 r/w section 144B on 25.05.2023.
During the pendency of the tax proceedings, the NCLT, by order dated 16.09.2025, admitted an application filed against the assessee u/s 7 of the Insolvency and Bankruptcy Code, 2016 [IBC] & commenced the Corporate Insolvency Resolution Process [CIRP].
Upon admission of the application, the statutory moratorium contemplated u/s 14 of the IBC came into operation.
The Resolution Professional informed the Income-tax Department about the NCLT order through an email dated 20.11.2025.
Despite the subsisting moratorium, the PCIT proceeded to pass the revisionary order u/s 263 on 12.12.2025.
Additional ground challenges PCIT’s jurisdiction
Before the ITAT, the assessee raised an additional legal ground contending that the PCIT lacked jurisdiction to initiate, continue or conclude revisionary proceedings during the moratorium period.
It relied upon sections 14 & 238 of the IBC.
Section 14 prohibits, among other things, the institution of suits or continuation of pending suits or proceedings against a corporate debtor during the moratorium.
Section 238 gives the IBC overriding effect over anything inconsistent contained in any other law for the time being in force.
The assessee therefore argued that the PCIT’s order, having been passed after commencement of CIRP & during the moratorium, was legally unsustainable.
Income-tax proceedings are not outside the moratorium
The assessee relied principally upon the Bombay High Court’s decision in Smaaash Entertainment Pvt. Ltd. v. ACIT [2025] 176 taxmann.com 837 (Bom.).
In that case, the Bombay High Court held that assessment proceedings under the Income-tax Act could neither be initiated nor continued against a corporate debtor while the moratorium u/s 14 of the IBC remained in force.
The High Court followed the Delhi High Court’s decision in PCIT v. Monnet Ispat and Energy Ltd., where Revenue’s tax appeals were held incapable of continuation during the IBC moratorium.
The Supreme Court dismissed Revenue’s challenge in Monnet Ispat & expressly recognised that, by virtue of section 238, the IBC overrides inconsistent provisions contained in other enactments, including the Income-tax Act.
Income-tax dues, being in the nature of Crown debts, do not enjoy precedence over secured creditors merely because they are payable to the Government.
Revision is also a proceeding against the corporate debtor
The ITAT observed that the protection u/s 14 is not confined to recovery or execution proceedings. The jurisdictional High Court in Smaaash Entertainment had applied the moratorium even to assessment proceedings under the Income-tax Act.
A proceeding u/s 263 may expose the corporate debtor to a fresh or enhanced tax liability by setting aside or modifying an assessment order. It is therefore a proceeding against the corporate debtor for the purposes of the moratorium.
Once the NCLT admitted the section 7 application on 16.09.2025, the PCIT could not validly continue the revisionary proceedings & culminate them in an order on 12.12.2025.
This conclusion became stronger because the Resolution Professional had specifically informed the Department about the CIRP before the revisionary order was passed.
IBC takes the front seat
Section 238 contains a clear non-obstante clause. Where there is inconsistency between the IBC moratorium & continuation of proceedings under another enactment, the IBC prevails.
The Income-tax Department cannot continue ordinary assessment or revisionary proceedings during the statutory pause imposed for orderly resolution of the corporate debtor.
The moratorium is intended to preserve the corporate debtor as a going concern, maintain the status quo & prevent competing proceedings from disrupting the collective insolvency-resolution process.
Accordingly, the PCIT’s order could not be sustained in its present form.
Moratorium suspends the proceeding—it does not necessarily bury it
The Revenue requested that, if the revision order was set aside, liberty should be preserved to revive the proceedings after the moratorium ceased.
The Tribunal accepted this limited request. It noted that the Bombay High Court in Smaaash Entertainment had itself clarified that once the moratorium ended, the Revenue could revive the assessment proceedings if otherwise permissible in law.
Accordingly, the ITAT did not adjudicate the substantive issues forming the basis of revision u/s 263. Nor did it grant the assessee a permanent immunity from lawful proceedings after cessation of the moratorium.
The revisionary order was set aside & the matter restored to the PCIT with liberty to revive or reframe the proceedings after the moratorium ends, subject to:
- The provisions of the IBC;
- The Income-tax Act;
- Limitation & other applicable law prevailing at that time; &
- A reasonable opportunity of hearing to the assessee.
Resolution Professional must inform the PCIT
The ITAT directed the Resolution Professional to intimate the PCIT immediately upon cessation of the moratorium.
Thereafter, if legally permissible, the PCIT may proceed after granting an opportunity through the Resolution Professional or any other person competent to represent the corporate debtor.
All questions on the merits of the proposed revision were expressly kept open.
Decision
The ITAT held that the PCIT could not pass an order u/s 263 during the subsistence of the moratorium u/s 14 of the IBC.
The revisionary order dated 12.12.2025 was set aside & restored to the PCIT, with liberty to revive the matter after cessation of the moratorium, if otherwise permissible in law.
Cases Discussed
- Smaaash Entertainment Pvt. Ltd. v. ACIT [2025] 176 taxmann.com 837 (Bom.)
- PCIT v. Monnet Ispat and Energy Ltd. [2019] 107 taxmann.com 481 (SC)
- Innovative Industries Ltd. v. ICICI Bank
- P. Mohanraj v. Shah Brothers Ispat (P.) Ltd. [2021] 125 taxmann.com 39/167 SCL 327 (SC)/(2021) 6 SCC 258
- S.V. Kandeakar v. V.M. Deshpande (1972) 1 SCC 438
- ABG Shipyard
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
The instant appeal of the assessee filed against the order of the Ld. Principal Commissioner of Income Tax, Mumbai – 8 [for brevity “Ld. PCIT”], order passed under Section 263 of the Income Tax Act, 1961 (for brevity ‘theAct’), for Assessment Year 2017-18, date of order 12.12.2025. The impugned order emanated from the order of the Assessment Unit, Income Tax Department (for brevity ‘Ld. AO’), order passed under Section 147 r.w.s. 144B of the Act, date of order 25.05.2023.
2. The assessee filed the additional ground by challenging the jurisdiction of the Ld. PCIT for passing the order u/s. 263 after the order of the National Company Law Tribunal (NCLT) admitting the application u/s. 7 of the IBC Act against the assessee which is bad in law. The relevant additional ground of the assessee is reproduced as below:
“1. The learned Commissioner of Income Tax (CIT) erred in passing the order u/s.263 of the Act during the moratorium period.
The appellant submits that section 14 r.w.s.238 of the IBC Act prohibits the Income Tax Authorities to institution of suits or continuation of pending suits or proceedings and accordingly the order u/s.263 issued after the order of NCLT admitting the application u/s.7 of the IBC against the appellant is bad in law and ought to be quashed.”
3. The Ld. AR contended that the Hon’ble NCLT, vide order dated 16.09.2025, admitted the application filed against the assessee and, accordingly, the assessee was admitted into the Corporate Insolvency Resolution Process under section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 (“IBC”). The Ld. AR submitted that, upon commencement of the moratorium, no proceedings under the Income-tax Act could be initiated or continued against the assessee during the subsistence of the moratorium. It was further submitted that the Income-tax Department had duly been intimated about the NCLT order through an e-mail dated 20.11.2025 by Mr. Umesh B. Sonkar, the Resolution Professional in the case of the assessee. A copy of the said communication is annexed to the assessee’s paper book.
4. The Ld. AR contended that the identical issue is considered by the Hon’ble Jurisdictional High Court. He respectfully relied on the order of Hon’ble Bombay High Court in the case of Smaaash Entertainment Pvt. Ltd. vs. ACIT reported in (2025) 176 taxmann.com 837 (Bom). The relevant part of the observations of the Hon’ble Bombay High Court is reproduced as below:
“ We have heard learned Counsel for the parties and perused the papers and proceedings in the present Writ Petition. The Hon’ble Delhi High Court in the case of Monnet Ispat and Energy Limited (supro) has clearly held that appeals filed by the Revenue before the High Court challenging the order passed by the ITAT could not proceed in light of the provisions of Section 14 of the IBC, 2016. Since this is a short order, the same is reproduced in its entirety.
“1. The Court has heard the learned counsel for both parties. The provisions of the Insolvency and Bankruptcy Code, 2016 (Code’) and, in particular, Section 14 thereof has been perused.
2. It appears to the Court that Section 238 of the Code is categorical that the Code will apply, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Section 14 (1)(0) of the Code states, inter alia, that on the insolvency commencement date’ the Adjudicating Authority (AA) shall by order declare moratorium for prohibiting “the Institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority.” That the Code will prevail over all other statutes inconsistent therewith has been explained in the recent decision dated 31 August, 2017 of the Supreme Court in Civil Appeal No. 8337-8338/2017 (Innovative Industries Ltd. v/s. ICICI Bank).
3. In the Instant case, the National Company Law Tribunal (NCLT) [which by virtue of Section 5(1) of the Code is the AA] has by its order dated 18th July 2017 admitted the petition under Section 7 of the Code filed by the State Bank of India against the Respondent Assessee and prohibited, Inter alia, “the Institution of suits or continuation of pending suits or proceedings’ against the Respondent. This would include the present appeal by the Income Tax Department (‘Department’) against the order of the Income Tax Appellate Tribunal (ITAT) in respect of the tax liability of the Respondent-Assessee. The Revenue’s appeal before the High Court could not proceed in light of the provisions of Section 14 of the IBC, 2016.
4. Mr. Asheesh Jain, learned Senior Standing counsel for the Revenue, points out that unlike some of the earlier insolvency statutes the Code does not envisage permission being sought from the NCLT for continuation of the continuation of pending proceedings against the Respondent in other fora. In the order dated 18th July 2017 is clear that the moratorium continues “till the completion of the corporate Insolvency resolution process or until this Bench approves the resolution plan under sub-Section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, as the case may be.”
5. Consequently, these appeals are disposed of with liberty to the Appellate-Department to revive them subject to the further orders of the NCLT.
6. Copy of the order be given dasti under the signature of the Court Master.”
(emphasis supplied)
6. This decision of the Delhi High Court was subjected to challenge by the Revenue before the Hon’ble Supreme Court. The Hon’ble Supreme Court proceeded to dismiss the SLP by making a following observations:-
“1. Heard. Delay, if any, is condoned.
2. Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income Tax Act. We may also refer in this connection to Dena Bank v. BhikhabhaiPrabhudas Parekh and Co. and its progeny, making it clear that income tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons:
3. We are of the view that the High Court of Delhi, is, therefore, correct in law. Accordingly, the special leave petitions are dismissed. Pending applications, if any, stand disposed of.”
7. From these two decisions, and which are directly under the provisions of the IT Act, we find that the assessment proceedings could not have been initiated at all or continued while the Moratorium under Section 14 of the IBC, 2016 was in operation.
8. Be that as it may, since the learned Counsel appearing on behalf of the Revenue, relied upon the decision of the Hon’ble Supreme Court in ABG Shipyard (supra), we would have to deal with the aforesaid decision. Firstly, we find that this decision is clearly distinguishable on facts because it is not passed under the IT Act but under the Customs Act, 1962. Secondly, we find that another decision of the Hon’ble Supreme Court in the case of S.V. Kandeakar v. V.M. Deshpande (1972) 1 SCC 438 was relied upon to come to the conclusion that the Customs Department could initiate assessment or reassessment of duties and other levies but could not initiate recovery in violation of Section 14 or 33 (5) of the IBC, 2016. We find that the decision relied upon in the case of V. N. Deshpande (supra) was considered by an earlier Coordinate Bench of the Hon’ble Supreme Court in the case of P. Mohanraj v. Shah Brothers Ispat (P.) Ltd. [2021] 125 taxmann.com 39/167 SCL 327 (SC)/(2021) 6 SCC 258. In that decision also, the decision in V. N. Deshpande’s (supra) case was pressed into service and was distinguished by the Hon’ble Supreme Court. Without noticing the decision passed by the Hon’ble Supreme Court in P. Mohanraj (supra), the Hon’ble Supreme Court, in ABG Shipyard (supro), has relied upon the case of V. N. Deshpande (supra). We, therefore, find that the reliance placed by the Revenue on the decision in ABG Shipyard (supra) is wholly misplaced. Once, we have the decision of the Delhi High Court under the provisions of IT Act and which has the seal of approval of the Hon’ble Supreme Court, we are bound by the those decisions.
9. In view of the foregoing discussion, the above Writ Petition is allowed in terms of prayer clause (0) which reads as under:-
“(a):- that this Hon’ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, Order or direction, calling for the records of the Petitioner’s case and after going into the legality and propriety thereof, to quash and set aside the notice under section 143 (2) of the Act dated 01.06.2023 (“Exhibit C”), all notices issued in the course of the assessment proceedings, assessment order passed u/s. 144 of the Act dated 28.03.2024 (Exhibit K) and the impugned notice of demand under section 156 of the Act dated 28th March 2024 (Exhibit L) as well as the consequential showcause notices for levy of penalty.”
10. Once the Moratorium under Section 14 ceases, the Revenue is free to revive the assessment proceedings, if they are otherwise entitled to in law.
11. Rule is made absolute in the aforesaid terms. However, in the facts and circumstances of the case, there shall be no order as to costs.”
5. The Ld. DR supported the order of the Revenue authorities and contended that appropriate liberty may be granted to the Revenue to initiate or revive the proceedings after cessation of the moratorium period, in accordance with law.
6. We have heard the rival submissions and perused the material available on record. The short legal issue raised by the assessee through the additional ground is whether the revisional proceedings under section 263 of the Act could have been continued and culminated in an order during the subsistence of the moratorium declared under section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). It is an undisputed fact that the Hon’ble NCLT, vide order dated 16.09.2025, admitted the application under section 7 of the IBC against the assessee and initiated the Corporate Insolvency Resolution Process. The Resolution Professional had also intimated the Income-tax Department about the said proceedings by e-mail dated 20.11.2025.
7. Section 14 of the IBC, read with the overriding provision contained in section 238 thereof, prohibits, inter alia, the institution or continuation of proceedings against the corporate debtor during the currency of the moratorium. The Hon’ble Jurisdictional High Court in Smaaash Entertainment Pvt. Ltd. v. ACIT reported in (2025) 176 taxmann.com 837 (Bom.), after considering the decision of the Hon’ble Delhi High Court in PCIT v. Monnet Ispat and Energy Ltd.[IT Appeal No. 543 of 2017, dated 04/09/2017] and the order of the Hon’ble Supreme Court affirming the same, has held that assessment proceedings under the Income-tax Act could neither be initiated nor continued while the moratorium under section 14 of the IBC was in operation. In line with the recent judgment of the Hon’ble Supreme Court in the case of PCIT vs. Monnet Ispat and Energy Ltd reported in [2019] 107 taxmann.com 481 (SC) upholding the overriding nature and supremacy of the provisions of the IBC Code 2016 over any other enactment in case of conflicting provisions, by virtue of a non obstante section 238 of IBC Code 2016, the proposed amendment in IBC Amendment Bill 2019, provides that the bankruptcy resolution or liquidation arrived at under IBC shall be binding on central, state and local governments including the income tax and other similar tax authorities. The Hon’ble Bombay High Court has, however, expressly observed that once the moratorium ceases, the Revenue would be free to revive the proceedings, if otherwise permissible in law.
8. In the present case, the impugned revisional order under section 263 was passed after commencement of the moratorium pursuant to the order of the Hon’ble NCLT dated 16.09.2025. Therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in Smaaash Entertainment Pvt. Ltd. (supra), the impugned revisional order cannot be sustained in its present form. At the same time, we find merit in the submission of the Ld. DR that appropriate liberty may be preserved in favour of the Revenue after cessation of the moratorium.
9. Accordingly, without expressing any opinion on the merits of the issues forming the subject matter of revision under section 263 of the Act, we set aside the impugned revisional order and restore the matter to the file of the Ld. PCIT. The Ld. PCIT shall be at liberty to revive and reframe the revisional order/proceedings after cessation of the moratorium under section 14 of the IBC, subject to and in accordance with the provisions of the IBC, the Income-tax Act and the law applicable at the relevant point of time. All issues on merits are expressly kept open.
10. The Resolution Professional is directed to intimate the Ld. PCIT regarding cessation of the moratorium immediately upon the moratorium coming to an end in accordance with law, so that the Ld. PCIT may thereafter proceed in the matter, if otherwise permissible in law, after affording reasonable opportunity of being heard to the assessee through the Resolution Professional or other person competent to represent the corporate debtor.
11. In view of the above, the additional ground raised by the assessee is disposed of in the aforesaid terms.
12. In the result, the appeal of the assessee bearing ITA No. 1759/Mum/2026 is allowed for statistical purposes.
Order pronounced in the open court on 08th day of September 2026.
