Appeals Dismissed as Infructuous Due to Ongoing IBC Proceedings and Moratorium: ITAT

Since insolvency proceedings with moratorium under the IBC were in force, the Tribunal held that both the assessee’s and Revenue’s appeals had become infructuous and dismissed them with liberty to revive after completion of insolvency proceedings.

The present matter relates to a cross-appeal that has been filed by Raman Gupta (Assessee) as well as the DCIT (Respondent) in ITAT Delhi against the order of the first Appellate Authority dated October 13, 2013, for AY 2017-18.

On the date of hearing, i.e., January 1, 2026, no one appeared on behalf of the assessee despite service of notice. However, an email dated January 28, 2026, was received from the assessee’s AR. In the email, it was stated that because the assessee was not cooperating, they wanted to stop representing the assessee and asked for permission to cancel the Power of Attorney that had been submitted earlier.

The Tribunal noticed that insolvency proceedings had already started against the assessee under the Insolvency and Bankruptcy Code, 2016 (IBC). The Hon’ble National Company Law Tribunal (NCLT), Principal Bench, New Delhi, by an order dated May 13, 2025, in the case of National Asset Reconstruction Company Ltd. vs. Raman Gupta (CP(IB)-337(PB)2021 & IA 890/2025), had admitted the insolvency petition and imposed a moratorium under the provisions of the IBC.

Ld. DR did not dispute this factual position regarding the initiation of insolvency proceedings and imposition of a moratorium.

The Tribunal considered the effect of Section 238 of the Insolvency and Bankruptcy Code, 2016. Section 238 provides that the provisions of the IBC will have an overriding effect over any other law for the time being in force, including the Income Tax Act, 1961. The Tribunal relied upon the judgement of the Hon’ble Supreme Court in the case of PCIT vs. Monnet Ispat and Energy Ltd. (SLP (C) No. 6483 of 2018, order dated 10.08.2018), wherein it was held that by virtue of Section 238, the IBC overrides any inconsistent provisions contained in other enactments, including the Income Tax Act.

In view of Section 238, the Tribunal said that all claims, including tax dues claimed by the Income Tax Department under the Income Tax Act, 196,1 must be handled according to the rules of the Insolvency and Bankruptcy Code (IBC). Such claims must be handled under the IBC process and should be made according to Section 53(1) of the IBC, which sets the order of priority for distributing money during insolvency.

Accordingly, since insolvency proceedings were pending and a moratorium was in force, the Tribunal held that both the appeals filed by the assessee and the Revenue had become infructuous. Therefore, both appeals were dismissed for statistical purposes.

However, as a result, the Tribunal granted liberty to both the assessee and the Revenue to approach the Tribunal again for the reinstitution of their respective appeals, if permissible under law, after the conclusion or appropriate stage of the insolvency proceedings.