Tax reassessment proceedings quashed after insolvency resolution plan approval under Ghanshyam Mishra precedent

The Gujarat HC ruled on reassessment proceedings against a company post-insolvency resolution. Following Supreme Court precedent in Ghanshyam Mishra Sons, the court held that once NCLT approves a resolution plan, all claims not included in the plan are extinguished. The demand raised after the resolution plan's approval on 1st July 2022 was not part of the resolution plan, and no claim was made before the Resolution Professional. Since no demand existed when NCLT passed its order, the subsequent demand arising from the assessment order could not be considered extinguished. The court quashed notices issued by CIT (Appeals) regarding the reassessment proceedings.

---

---

Issues Involved:
1. Legal prohibition against coercive actions by respondents.
2. Quashing of impugned notices and proceedings under the Income Tax Act.
3. Stay on implementation, operation, and execution of impugned notices.

Summary:

Issue 1: Legal Prohibition Against Coercive Actions by Respondents
The petitioner sought a declaration that the respondents are legally prohibited from taking any coercive action against the petitioner Corporate Debtor in respect of any claims/offences that occurred prior to the Effective Date and are prohibited from continuing proceedings under the Income Tax Act. The court noted that the National Company Law Tribunal (NCLT) had approved a resolution plan on 01.07.2022, which extinguished all liabilities of the Corporate Debtor prior to the Corporate Insolvency Resolution Process (CIRP) approval date.

Issue 2: Quashing of Impugned Notices and Proceedings Under the Income Tax Act
The petitioner challenged the assessment order passed on 13.03.2023 under sections 147 and 144 of the Income Tax Act, 1961, for the Assessment Year 2018-19, as well as the demand notice issued under section 156 of the Act. The court referenced the Supreme Court's decision in Ghanshyam Mishra & Sons (P) Ltd vs. Edelweiss Asset Reconstruction Co. Ltd, which held that once a resolution plan is approved by the adjudicating authority, all claims not part of the resolution plan stand extinguished. Consequently, the court quashed the notices issued by the CIT (A) and set aside the assessment order and demand notice as they were not part of the resolution plan approved by the NCLT.

Issue 3: Stay on Implementation, Operation, and Execution of Impugned Notices
The petitioner requested a stay on the implementation, operation, and execution of the impugned notices issued by the respondent. The court found that the reassessment proceedings initiated prior to the NCLT's approval of the resolution plan would not survive, and therefore, the demand raised pursuant to the assessment order dated 13.03.2023 could not be enforced. The court granted the stay on the implementation and operation of the impugned notices.

Conclusion:
The court quashed the impugned notices and set aside the assessment order and demand notice issued by the respondents, holding that the reassessment proceedings initiated prior to the NCLT's approval of the resolution plan would not survive. The court granted a stay on the implementation and operation of the impugned notices, making the rule absolute to the extent of quashing the notices and setting aside the assessment order and demand notice. The petition was dismissed concerning the prayer for staying the reassessment order dated 13.03.2023. No order as to costs.

---