Assessment proceedings under sections 147, 144, 144B, 148A quashed against insolvent company after resolution plan approval under section 30(6)

The Gujarat HC quashed assessment proceedings under sections 147, 144, 144B, and 148A against an insolvent company. The court held that following approval of a resolution plan under section 30(6) of the Insolvency and Bankruptcy Code by NCLT, no proceedings can be initiated or continued for claims relating to the pre-resolution period. The Deputy Commissioner's tax claim was already verified and admitted in NCLT proceedings. The court ruled in favor of the assessee, setting aside all assessment orders and notices.

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Issues Involved:

1. Jurisdiction and legality of the assessment and reassessment proceedings initiated under the Income Tax Act, 1961 for Assessment Year 2018-19.
2. Impact of the approved resolution plan under the Insolvency and Bankruptcy Code, 2016 on the tax claims for periods prior to the approval of the resolution plan.
3. Applicability of Supreme Court judgments regarding extinguishment of claims post-approval of a resolution plan.

Detailed Analysis:

1. Jurisdiction and Legality of Assessment Proceedings:

The petitioner challenged the assessment order dated 12.03.2023, issued under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961, and various notices issued under Sections 148A (b), 148, and 156 of the Act for the Assessment Year 2018-19. The petitioner argued that these proceedings were initiated without jurisdiction and were illegal. The petitioner contended that the initiation of reassessment proceedings was unwarranted as the resolution plan approved by the National Company Law Tribunal (NCLT) extinguished all past dues, including those of the Income Tax Department, thereby rendering the notices and the assessment order invalid.

2. Impact of Approved Resolution Plan:

The petitioner emphasized that the resolution plan, approved by the NCLT on 16.03.2021, was binding on all creditors, including the Income Tax Department, as per Section 31 of the Insolvency and Bankruptcy Code, 2016. The petitioner argued that the resolution plan provided for the settlement of all claims and disputes for periods prior to its approval. The petitioner further contended that the income tax authorities were informed about the resolution plan and their entitlement to a portion of the admitted claim, which was duly settled. Thus, any subsequent notices or proceedings for prior periods were in violation of the binding nature of the resolution plan.

3. Applicability of Supreme Court Judgments:

The petitioner relied on the Supreme Court judgment in Ghanashyam Mishra & Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited & Ors, which held that claims not lodged before the Interim Resolution Professional (IRP) are extinguished upon approval of the resolution plan. The petitioner argued that this judgment supported the contention that the tax claims for periods prior to the approval of the resolution plan were extinguished. The petitioner also cited the judgment in the case of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta, which reinforced the supremacy of the Insolvency and Bankruptcy Code over other laws, including the Income Tax Act.

Conclusion:

The court, after considering the submissions and the legal precedents, found that the approved resolution plan was binding and extinguished all claims for periods prior to its approval. The court noted that no proceedings could be initiated or continued for such claims. Consequently, the court quashed the assessment order dated 12.03.2023 and the related notices under the Income Tax Act for Assessment Year 2018-19, thereby allowing the petition. The court emphasized the overriding effect of the Insolvency and Bankruptcy Code, 2016, as per Section 238, over other laws, including the Income Tax Act, 1961. The rule was made absolute, and no costs were ordered.

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