AO lacks jurisdiction to issue reassessment notice under Section 148 after case transfer order under Section 127(2)

Gujarat HC held that AO lacked jurisdiction to issue reassessment notice under Section 148 for AY 2019-20 after case transfer order dated 11.01.2023 under Section 127(2). Court ruled that once NCLT approved resolution plan under Section 13(6) of IBC 2016 for dissolved company, AO cannot reopen assessment proceedings. Following precedent in Surya Exim Ltd., HC quashed both the Section 148 notice and Section 148A(d) order, deciding in favor of assessee.

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Issues:
Jurisdiction of Assessing Officer to re-open assessment post transfer of case under Section 127(2) of the Income Tax Act, 1961; Impact of NCLT-approved resolution plan on extinguishing past dues and its effect on re-opening assessment.

Analysis:
The petitioner challenged an order under Section 148A(d) of the Income Tax Act, 1961, dated 20th March, 2023, for Assessment Year 2019-20. The petitioner, a steel cylinder manufacturer, underwent insolvency proceedings, resulting in the approval of a resolution plan by the NCLT. Despite a transfer order of the case to Ahmedabad, the Assessing Officer at Vadodara issued a notice under Section 148A(b) for re-opening assessment. The petitioner contended that the Assessing Officer lacked jurisdiction post-transfer. Citing the Ghanashyam Mishra & Sons case, the petitioner argued that NCLT-approved resolution plans extinguish past dues, precluding assessment re-opening. Referring to the Surya Exim Ltd. case, the petitioner emphasized the extinguishment of statutory dues post-resolution plan approval.

The respondent argued that the petitioner's failure to respond to the notice justified the assessment re-opening due to alleged income escapement. The Court held that post-transfer, the Assessing Officer lacked jurisdiction to re-open the assessment for 2019-20. Citing the Ghanashyam Mishra & Sons case, the Court noted that NCLT-approved resolution plans freeze claims and extinguish non-included claims, preventing assessment re-opening. Quoting the case, the Court emphasized the binding nature of resolution plans on debtors and stakeholders, extinguishing non-included claims. Consequently, the Court quashed the notice under Section 148 and the order under Section 148A(d) for lack of tenability, ruling in favor of the petitioner.

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