Moratorium Protection Prevails: ITAT Delhi Dismisses Revenue Appeals Against IL&FS Energy Development Company Without Established Insolvency Claim

Case Background and Overview

The Income Tax Appellate Tribunal, Delhi Bench, pronounced its decision on 24th June 2026 in the matter of ACIT Vs IL & FS Energy Development Company Limited (ITA Nos. 2701 & 2768/Del/2024), addressing a significant jurisdictional question — whether Revenue appeals could be sustained against a company shielded by a moratorium-like protection granted by the National Company Law Appellate Tribunal (NCLAT). The appeals pertained to Assessment Years 2017-18 and 2018-19.

The core issue before the Tribunal was not merely procedural; it touched upon the interplay between income tax proceedings under the Income Tax Act, 1961 and insolvency protections extended under the framework governed by the Insolvency and Bankruptcy Code, 2016 (IBC). The ruling carries significant implications for how Revenue authorities must approach appellate proceedings when the assessee is a company under insolvency protection.

Genesis of the Appeals

The Revenue's appeals originated from the assessment order dated 27th April 2021 passed under Section 143(3) of the Income Tax Act, 1961 by the National e-Assessment Centre, Delhi. This order was subsequently challenged before the National Faceless Appeal Centre (NFAC), Delhi, which passed its appellate order dated 16th March 2024 bearing DIN & Order No: ITBA/NFAC/S/250/2023-24/1062751720(1). It was against this order of the learned First Appellate Authority (FAA) that the Revenue preferred the present appeals before ITAT Delhi.

The subject company, IL & FS Energy Development Company Limited, is a group entity under the IL&FS (Infrastructure Leasing & Financial Services) umbrella — a conglomerate that has been under significant regulatory and judicial scrutiny following its financial collapse in 2018.

The Protective Order

The assessee placed reliance on a critical order passed by the National Company Law Appellate Tribunal (NCLAT) — the order dated 15th October 2018 in Union of India v. Infrastructure Leasing & Financial Services Ltd. & Ors., Company Appeal (AT) Nos. 346 & 347 of 2018.

Through this order, the NCLAT extended a moratorium-like protection to the IL&FS group by staying the institution or continuation of suits or any proceedings by any party against:

  • The assessee company, and
  • Its group companies

in any court of law, including a Tribunal.

This protection was comprehensive in scope — it was not restricted to civil courts alone but explicitly encompassed Tribunals, thereby directly affecting the maintainability of income tax appellate proceedings before the ITAT.

Significance of the Moratorium

The moratorium-like protection granted by the NCLAT is analogous in character to the moratorium contemplated under Section 14 of the Insolvency and Bankruptcy Code, 2016, which prohibits the institution or continuation of suits and proceedings against a corporate debtor once the insolvency resolution process commences. The intent behind such protection is to: