Revenue authorities cannot recover dues predating NCLT-approved resolution plans under IBC Section 31 and 238

Delhi HC ruled that revenue authorities cannot recover dues for periods preceding NCLT approval of resolution plan under IBC. Court held that Section 31 of IBC extinguishes all claims not provided for in approved resolution plan, including statutory dues owed to government authorities. Section 238 of IBC overrides inconsistent provisions in other statutes including Income Tax Act. Revenue's contention that Section 238 does not impede assessment proceedings was rejected. Successful resolution applicant gets clean slate and cannot be pursued for pre-approval dues not embedded in resolution plan. Impugned notices and orders held unsustainable and unenforceable.

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Issues Involved:
1. Jurisdiction to enforce tax and penalty demands.
2. Applicability of the "clean slate" principle post-Resolution Plan (RP) approval.
3. Claims lodged by the Revenue with the Resolution Professional (RP).
4. Overriding effect of the Insolvency and Bankruptcy Code (IBC) over the Income Tax Act, 1961.
5. Alternative remedies under the Income Tax Act, 1961.

Summary:

1. Jurisdiction to Enforce Tax and Penalty Demands:
The petitioner challenged the notice and order issued by the Revenue under Section 221(1) of the Income Tax Act, 1961, demanding tax and penalty for Assessment Years (AYs) 2001-02, 2009-10, 2010-11, and 2013-14. The petitioner argued that these demands pertain to periods preceding the approval of the Resolution Plan (RP) by the National Company Law Tribunal (NCLT) and thus fall within the ambit of the "clean slate" principle.

2. Applicability of the "Clean Slate" Principle Post-RP Approval:
The petitioner contended that once the RP is approved, all stakeholders, including the Revenue, are bound by its terms. The Revenue is not different from other creditors, and its claims not included in the approved RP stand extinguished. The Revenue, however, argued that it could continue with assessment or reassessment proceedings for the AYs in issue.

3. Claims Lodged by the Revenue with the Resolution Professional (RP):
The Revenue lodged claims for AYs 2009-10, 2010-11, and 2013-14 but did not include the penalty amount or the claim for AY 2001-02 within the prescribed timeframe. The penalty imposed via order dated 23.04.2018 did not form part of the claims lodged by the Revenue. The court noted that the Revenue had knowledge of the Corporate Insolvency and Resolution Process (CIRP) and lodged claims accordingly, but failed to include all relevant claims within the prescribed timeframe.

4. Overriding Effect of the IBC over the Income Tax Act, 1961:
The court emphasized that the IBC, being a special enactment, overrides the provisions of the Income Tax Act, 1961, where inconsistencies exist. Section 238 of the IBC makes this clear. The court referenced several judgments, including Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Construction Co. Ltd., to support this view.

5. Alternative Remedies under the Income Tax Act, 1961:
The Revenue argued that the petitioner should have taken recourse to remedies available under the Income Tax Act. The court, however, held that a successful resolution applicant should not be burdened with dues not embedded in the RP. The court cited the principle that a successful applicant is provided with a "clean slate," and dues for the period before the RP's approval cannot be recovered.

Conclusion:
The court concluded that the impugned notice and order dated 28.08.2018 and 17.10.2018, respectively, are unsustainable in law and cannot be enforced. However, the parties must abide by the final decision of the Supreme Court regarding AY 2001-02. The writ petition was disposed of accordingly, and the petitioner was directed to file an amended memo of parties.

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