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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether pre-acquisition tax dues of the Gram Panchayat, not lodged during the corporate insolvency resolution process or liquidation, could be recovered from the auction purchaser, and whether the demand notices issued for such prior-period dues were sustainable.
Analysis: The assets were sold in liquidation under the Insolvency and Bankruptcy Code, 2016, and the sale certificate recorded that the transfer was free from encumbrances and levies on the corporate debtor's assets. The respondent, though a local authority having a claim for tax dues, did not submit any claim during the corporate insolvency resolution process or in liquidation despite public announcements requiring creditors to do so. The scheme of the Insolvency and Bankruptcy Code, 2016, particularly the provisions governing invitation, collation and adjudication of claims, and the binding and extinguishing effect of the process, does not permit a creditor who remained outside the process to reopen pre-existing dues against the auction purchaser. The pre-sale dues not forming part of the insolvency process stood extinguished and could not be enforced against the petitioner.
Conclusion: The demand notices, to the extent they sought recovery of tax dues for the period prior to the petitioner's acquisition of the assets in liquidation, were unsustainable and liable to be quashed.
Ratio Decidendi: Under the Insolvency and Bankruptcy Code, 2016, claims of a local authority or other creditor that are not submitted and dealt with in the insolvency or liquidation process cannot survive against a purchaser of assets sold free from encumbrances, and such pre-acquisition dues stand extinguished.
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