ITAT rules tax authorities can assess dues during insolvency moratorium but cannot recover them

The ITAT Mumbai dismissed the assessee's appeal as not maintainable due to pending liquidation proceedings. The tribunal held that IBC 2016 provisions prevail over the Income Tax Act 1961, but tax authorities retain limited jurisdiction to assess and determine tax dues during moratorium, though cannot initiate recovery. The CIT(A) erred by not adjudicating the penalty matter under section 271 for failure to audit accounts under section 44AB merely due to liquidation proceedings. Since the liquidator was pursuing the matter and no legal impediments existed for determining tax dues, the case was restored to CIT(A) for adjudication on merits.

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Issues Involved:
The judgment involves issues related to the imposition of penalty under section 271B of the Income Tax Act 1961 for failure to get accounts audited u/s. 44AB, the impact of the Insolvency and Bankruptcy Code 2016 on income tax proceedings, and the failure of the CIT(A) to adjudicate the matter on merit despite the pendency of liquidation process.

Imposition of Penalty u/s. 271B:
The appeal was filed against the penalty order imposed under section 271B of the Act due to the assessee's failure to get its accounts audited u/s. 44AB. The CIT(A) dismissed the appeal as not maintainable and infructuous due to the ongoing liquidation process, leading the assessee to approach the Tribunal for relief.

Impact of Insolvency and Bankruptcy Code 2016:
The Tribunal deliberated on whether the IBC 2016 would prevail over the Income Tax Act 1961 and to what extent. It was noted that the Income Tax Authorities were aware of the corporate debtor's liquidation status and that the IBC Code would override the provisions of the Income Tax Act, limiting the authority of the Income Tax Authorities during the moratorium period.

Failure to Adjudicate on Merit:
The CIT(A) was found to have erred in not adjudicating the tax dues issue on merit, especially when the liquidator was actively involved in the matter. Despite the lack of legal impediments, the CIT(A) did not address the issues involved, leading to the Tribunal's decision to partially allow the appeal and remand the case back to the CIT(A) for a fresh order on merit.

The Tribunal held that the IBC 2016 prevails over the Income Tax Act, limiting the Income Tax Authorities' jurisdiction to assess tax dues but not initiate recovery during the moratorium period. The CIT(A) was found to have erred in not adjudicating the matter on merit, leading to the appeal being partially allowed and the case remanded back for a fresh order.

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