Income tax demands and penalties against company extinguished after successful resolution under Section 31 IBC

Delhi HC held that income tax demands and penalties against a company that underwent successful CIRP under IBC were extinguished. The revenue department failed to lodge claims during the resolution process despite public announcements inviting creditor claims. The court ruled that the approved resolution plan binds all stakeholders including government authorities under Section 31 of IBC, and demands not claimed during CIRP proceedings stand automatically extinguished, making subsequent enforcement attempts legally untenable.

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Issues Involved:
1. Legal tenability of impugned assessment orders and notices.
2. Impact of the moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) on the impugned orders and notices.
3. Binding nature of the Resolution Plan (RP) approved by the National Company Law Tribunal (NCLT) on statutory creditors.

Summary:

1. Legal Tenability of Impugned Assessment Orders and Notices:
The petitioner, Rishi Ganga Power Corporation Ltd. (RGPCL), challenged two sets of orders and notices. The first set includes an order dated 21.11.2019 and a demand notice dated 22.11.2019, imposing a penalty of Rs. 10,000/- under Section 272A(1)(d) of the Income Tax Act, 1961 (1961 Act) for non-compliance with notices issued under Section 142(1). The second set comprises an assessment order dated 06.12.2019 under Section 143(3) of the 1961 Act, assessing RGPCL's income at Rs. 28,93,60,000/- and initiating penalty proceedings under Section 271AAC, resulting in a demand of Rs. 12,05,47,497/-.

2. Impact of Moratorium under IBC:
RGPCL filed its Return of Income for AY 2017-18 on 11.12.2017. Meanwhile, a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) was admitted by the NCLT on 25.01.2018, initiating a moratorium under Section 14 of the IBC. Despite this, the revenue issued several notices under Sections 143(2) and 142(1) of the 1961 Act, culminating in the impugned orders and notices. The new management of RGPCL, post-approval of the RP, requested the deletion of the additions made in the assessment order, citing the moratorium.

3. Binding Nature of Approved RP on Statutory Creditors:
The RP submitted by Kundan Care Products Ltd. (KCPL) was approved by the NCLT on 13.11.2018. The revenue did not lodge its claim with the Resolution Professional despite the public announcement. The court held that the approved RP binds all stakeholders, including statutory creditors like the revenue. The revenue's failure to lodge its claim meant it could not enforce the impugned orders and notices. The court cited several precedents, including Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited and others, to support this conclusion.

Conclusion:
The court quashed the impugned notices and orders, stating that the revenue's failure to lodge its claim resulted in the automatic extinguishment of the impugned demands. The writ petition was disposed of accordingly, with parties bearing their respective costs.

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