Supreme Court Upholds Moratorium on Tax Appeals during CIRP under IBC 2016

The appeal of the revenue against the order of Ld. CIT(A) for AY 2006-07, regarding additions on parts and accessories of Air Pollution Control Machineries, was dismissed by the Supreme Court. The NCLT's declaration of a moratorium under IBC 2016, leading to the liquidation of the assessee company, prevented the continuation of legal proceedings. The Court upheld that the moratorium applies to appeals by the Income Tax Department related to tax liabilities of companies under CIRP. The revenue's appeal was dismissed, allowing for remedial measures in accordance with the law if necessary.

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Issues involved: Appeal against the order of Ld. CIT(A)-IX, New Delhi dated 28.03.2012 for AY 2006-07 regarding additions of Rs. 5,51,11,277 claimed by the assessee on parts and accessories of Air Pollution Control Machineries.

Summary:

Issue 1: Erroneous order of Ld. CIT(A)
The appeal was filed against the order of Ld. CIT(A) for AY 2006-07, where the Assessing Officer assessed taxable income at Rs. 10,51,11,543 by making additions and disallowances. The Ld. CIT(A) granted part relief to the assessee, leading to the revenue's appeal against the deletion of the addition made on parts and accessories of air pollution control machineries.

Issue 2: Moratorium under IBC 2016
The NCLT declared a moratorium under the Insolvency and Bankruptcy Code 2016, prohibiting various actions including institution or continuation of suits, transferring assets, enforcing security interests, and property recovery. The NCLT ordered liquidation of the assessee company under IBC 2016, emphasizing that the moratorium prevents the continuation of legal proceedings. The Supreme Court upheld that the moratorium under IBC 2016 applies to appeals by the Income Tax Department, including those against CIT(A) and ITAT orders, concerning tax liabilities of a company under Corporate Insolvency Resolution Process (CIRP).

Judgment:
The appeal of the revenue was dismissed due to the NCLT's order of liquidation and the moratorium under IBC 2016. The Tribunal highlighted that the revenue could seek remedial measures in accordance with the law when justifiable or necessary in the interest of the parties. Consequently, the appeal of the revenue was dismissed in limine for statistical purposes.

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