Facts of the Case

The appeal was filed by the Revenue against the order dated 12.10.2022 passed by the Income Tax Appellate Tribunal concerning Assessment Year 2011–12.

The Tribunal had closed the Revenue’s appeal on the ground that insolvency proceedings were pending against the assessee before the National Company Law Tribunal (NCLT).

It was admitted that proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 had been initiated in the matter titled Reliance Commercial Finance Ltd. vs Sunar Jewels Pvt. Ltd., and a moratorium under Section 14 had been imposed on 25.04.2019, which continued to remain in force 

Issues Involved

  1. Whether the Income Tax Appellate Tribunal was justified in closing the appeal due to the ongoing insolvency proceedings.
  2. Whether the moratorium under Section 14 of the IBC bars continuation of tax proceedings.
  3. Whether any substantial question of law arises for consideration before the High Court.

Petitioner’s (Revenue) Arguments

  • The Revenue challenged the Tribunal’s decision to close the appeal.
  • It sought adjudication on merits despite the pendency of insolvency proceedings.
  • Delay in filing and refiling the appeal (12 days and 43 days respectively) was explained and condoned by the Court.

Respondent’s (Assessee) Position

  • The assessee was undergoing insolvency proceedings before the NCLT.
  • A moratorium under Section 14 of the IBC was in operation.
  • The Tribunal had already granted liberty to revive the appeal after the moratorium is lifted.

Court Findings / Order

  • The Court acknowledged that insolvency proceedings under Section 7 IBC were admitted.
  • It noted that a moratorium under Section 14 was still in force.
  • The Court held that:
    • No interference with the Tribunal’s order was required.
    • The Tribunal had rightly granted liberty to revive the appeal post-moratorium.
    • No substantial question of law arose for consideration.

Final Order:
The appeal was closed, with liberty to revive after the moratorium is lifted in accordance with law 

Important Clarifications

  • Section 14 of the IBC creates a statutory bar on continuation of proceedings, including tax litigation.
  • Tax authorities cannot proceed with recovery or adjudication during the moratorium period.
  • Appeals can be revived post-moratorium, preserving the rights of the parties.

Sections Involved

  • Section 7 – Initiation of Corporate Insolvency Resolution Process
  • Section 14 – Moratorium under IBC

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS24082023ITA4832023_123046.pdf

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