2024 (10) TMI 1205 - HC - Income Tax

Resolution plan approval extinguishes all pre-approval liabilities including tax reassessment proceedings under Section 147

GSL Nova Petrochemicals Limited Versus National Faceless Assessment Centre

Gujarat HC quashed reassessment proceedings under Section 147 r.w.s. 144B for Assessment Year 2013-14, ruling that post-NCLT approval of resolution plan, ... Validity of reassessment proceedings post approval of resolution plan by NCLT - HELD THAT:- As pursuant to insolvency proceedings initiated under the Code, a resolution plan was approved by the Tribunal. It is also on record that the claims lodged by various parties were verified and admitted in the proceedings before NCLT. After consideration of the claims by all concerns the plan was approved. As relying on Ghanashyam Mishra [2021 (4) TMI 613 - SUPREME COURT] in view of above clear provisions of law no person would be entitle to initiate or continue any proceedings in respect of any claim for any dues relating to the period prior to approval of resolution plan. In view of approval of resolution plan, all liabilities of all stakeholders including that of Government/ Statutory Authority shall stand extinguished after approval of the resolution plan. We therefore, deem it appropriate to quash and set aside the Assessment Order passed u/s 147 r.w.s. 144B of the Act as well as the demand notice issued for the Assessment Year 2013-14. The petition is accordingly allowed. Issues:Challenge to Assessment Order under Section 147 of Income Tax Act, 1961 for Assessment Year 2013-14 based on approval of resolution plan by NCLT.Analysis:The petition filed under Article 226 of the Constitution challenged the Assessment Order under Section 147 read with Section 144B of the Income Tax Act, 1961, for the Assessment Year 2013-14. The petitioner, a company under the Companies Act, 1956, had its Corporate Insolvency Resolution Process (CIRP) initiated before the National Company Law Tribunal (NCLT), resulting in the approval of a Resolution Plan by the Committee of Creditors. The petitioner contended that all claims not dealt with during the CIRP period or filed within the statutory period were extinguished by the NCLT's order. Despite objections raised against reopening, the respondent proceeded with the assessment, leading to the determination of the petitioner's total income and the subsequent demand raised. The petitioner challenged the Assessment Order and demand notice, arguing that the past dues of the Income Tax Department were extinguished upon the approval of the resolution plan by the NCLT.In support of the petitioner's submissions, reliance was placed on the decision of the Supreme Court in a specific case. The respondent, on the other hand, justified the reassessment notice based on information indicating non-disclosure of income chargeable to tax by the assessee. It was argued that the statutory powers of the respondent could not be curtailed when the procedure in accordance with the law had been followed. The respondent distinguished the petitioner's reliance on the Supreme Court decision, stating that it pertained to claims extinguishment post-resolution plan approval and did not apply to the present case of reassessment proceedings.Upon considering the arguments and the record, the Court noted the approval of a resolution plan by the Tribunal following insolvency proceedings. Referring to the Supreme Court's decision, the Court emphasized that all liabilities, including those of Government/Statutory Authorities, stood extinguished after the approval of the resolution plan. Consequently, the Court quashed the Assessment Order under Section 147 read with Section 144B of the Act and the demand notice for the Assessment Year 2013-14, allowing the petition and making the rule absolute, with no order as to costs.