Case Law Details
Suchi Paper Mills Limited Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, allowed the assessee’s appeal and quashed reassessment proceedings initiated during the operation of a moratorium declared under the Insolvency and Bankruptcy Code, 2016 (IBC).
The case arose from reassessment proceedings for Assessment Year 2019-20, wherein a notice under Section 148 of the Income Tax Act, 1961 was issued on 11.04.2023. The assessee submitted that the Corporate Insolvency Resolution Process (CIRP) had already commenced and the National Company Law Tribunal (NCLT), by order dated 12.09.2022, had declared a moratorium under Section 14 of the IBC. The assessee also placed on record the NCLT order and a public notice published in a newspaper regarding the insolvency proceedings.
It was argued that once the moratorium came into effect, no fresh proceedings could be initiated against the company under the Income Tax Act. The assessee further contended that publication of the public notice was sufficient and no separate intimation to the Assessing Officer was required.
The Department opposed the appeal, submitting that the fact of insolvency proceedings before the NCLT had not been brought to the notice of either the Assessing Officer or the Commissioner (Appeals), and that this information was disclosed for the first time before the Tribunal.
After examining the record, the Tribunal noted that the appeal had been filed through the Insolvency Professional and that the NCLT had declared a moratorium under Section 14 of the IBC on 12.09.2022. The Tribunal observed that, following the declaration of moratorium, proceedings against the assessee company could not have been initiated. It also found that a public notice had been issued and that no separate intimation to the Assessing Officer was required.
Relying on the decision of the Bombay High Court in Smaaash Entertainment Private Limited v. ACIT and other judicial precedents referred to therein, the Tribunal held that assessment proceedings could not be initiated or continued during the operation of a moratorium under Section 14 of the IBC. Consequently, the assessment order passed under Sections 144 read with 147 of the Income Tax Act was held invalid and was quashed. The appeal was allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-3, Noida [in short ‘the CIT(A)’] dated 17.11.2025, for Assessment Year 2019-20.
2. Shri Vipin Garg, appearing on behalf of assessee submits that reassessment proceedings have been initiated against the assessee and notice u/s 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was issued on 11.04.2023. On the said date, Corporate Insolvency Resolution Process had already started against the assessee company and moratorium was declared in terms of section 14 of the Insolvency & Bankruptcy Code, 2016 (in short ‘IBC’) by the order of National Company Law Tribunal dated 12.09.2022. He placed on record copy of the NCLT order dated 12.09.2022 and public notice published in Indian Express newspaper. He submitted that since public notice regarding the assessee’s Insolvency Resolution Process had already been published in the newspaper, there was no requirement for any separate notice to be given by the assessee to the Assessing Officer (AO) in this regard. He further pointed that once moratorium u/s 14 of the Insolvency and Bankruptcy Code, 2016 was declared, no fresh proceedings could have been initiated against the assessee company under Income Tax Act. In support of his submissions, he placed reliance on the decision of Hon’ble Bombay High Court in the case of Smaaash Entertainment Private Limited vs. ACIT, reported as 176 taxmann.com 837, and the decision of the Coordinate Division Bench of the Tribunal in the case of Hi Tech Grain Processing P. Ltd. vs. DCIT, in ITA Noṣ.1580 & 1581/Del/2025 for AY 2013-14 & 2022-23 decided on 29.08.2025. He thus prayed for quashing the reassessment proceedings initiated against the assessee.
3. Per contra, Shri Manoj Kumar, representing the Department vehemently defending the impugned order prayed for dismissing appeal of the assessee. The ld. DR submits that the fact regarding any proceedings initiated against the assessee before the NCLT under IBC was never brought to the notice of either the AO or before the CIT(A). It is for the first time before the Tribunal, the fact of proceedings against the assessee under IBC are pending came to the light.
4. Both sides heard, orders of the authorities below examined. The present appeal has been filed on behalf of the assessee through Insolvency Professional. The NCLT in proceedings under the Insolvency and Bankruptcy Code, 2016 vide order dated 12.09.2022 has declared moratorium u/s 14 of the IBC. Consequent to the moratorium, proceedings against the assessee company could not have been initiated. It is also an undisputed fact that public notice dated 12.09.2022 was published in the newspaper. Once public notice had been given there was no requirement for any separate intimation to the AO regarding such proceedings.
5. The Hon’ble Bombay High Court in the case of Smaaash Entertainment Private Limited vs. ACIT (supra), after considering the decision of Hon’ble Supreme Court of India in the case of CIT vs. Monnet Ispat & Energy Ltd., 107 taxmann.com 481 and the decision of Hon’ble Delhi High Court in the case of Pr. CIT vs. Monnet Ispat & Energy Ltd., 304 CTR 234 held that assessment proceedings could not have been initiated or continued against the company during the operation of moratorium pursuant to the order of NCLT u/s 14 of the Insolvency and Bankruptcy Code, 2016.
6. In light of undisputed facts and the decisions discussed above, I find merit in the submissions of the assessee. Accordingly, the assessment order passed u/s.144 r.w.s. 147 of the Act is held to be invalid, hence, quashed. Appeal of the assessee is allowed.
Order pronounced in the open court on Monday the 18th day of May, 2026.
Author Bio
