2026 (3) TMI 1578 - HC - Income Tax

Pre-CIRP tax and TDS demands are extinguished after Resolution Plan approval if not included in the plan.

Pre-CIRP income tax and TDS demands do not survive once a Resolution Plan is approved under the Insolvency and Bankruptcy Code if those claims are not ... Extinguishment of pre-CIRP tax demands - Binding effect of approved resolution plan - seeking extinguishment of demands against the Petitioner pertaining to the period prior to the initiation of the Corporate Insolvency Resolution Process ( ‘CIRP’) and deletion of such demand from the Income Tax and TDS Portals as appearing against the name of the Petitioner Whether the Income Tax Department could have proceeded against the Petitioner after approval of Resolution Plan by the NCLT for enforcement of a demand pertaining to a period prior to approval of such Plan? - HELD THAT: - The law in this regard is settled by several judgements of the Hon’ble Supreme Court as well as this Court. A similar issue came up for consideration before this Court in Swan Defence and Heavy Industries Ltd [2025 (8) TMI 770 - BOMBAY HIGH COURT] following the ratio laid down in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. & Ors. [2021 (4) TMI 613 - SUPREME COURT] and Vaibhav Goel & Another [2025 (3) TMI 1052 - SUPREME COURT] this Court held that once the Resolution Plan is approved by the Adjudicating Authority (under the IBC), no belated claim can be included therein. If one were to allow this, the Resolution Applicants would not be in a position to recommence the business of the Corporate Debtor with a clean slate. Respondent No. 1 is directed to give effect to the NCLT’s Order and extinguish all the demands relating to the period prior to the Resolution Plan on the Income Tax Portal and re-compute the Petitioner’s liability and / or refund, if any within a period of four weeks from the date of uploading this order. Respondents are also directed to issue refunds due to the Petitioner, which may arise upon extinguishment of demands relating to the period prior to the Resolution Plan and adjustment of refunds, if any, as expeditiously as possible and in any event within eight weeks from the date of uploading this order. [Paras 13, 14] Final Conclusion: The writ petition was allowed by directing the Revenue to delete all pre-resolution-plan demands surviving on the Income Tax Portal, recompute the petitioner's liability or refund accordingly, and issue any consequential refund within the time stipulated by the Court. Issues: Whether pre-CIRP income tax and TDS demands could survive and be enforced after approval of the Resolution Plan under the insolvency process.Analysis: The Resolution Plan had been approved by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, and the Court treated the legal position as settled that claims not forming part of the approved plan stand extinguished. On that basis, the Revenue could not continue to enforce demands relating to the period prior to approval of the Resolution Plan, whether appearing on the Income Tax Portal or the TDS portal. The Court also directed consequential recomputation of liability and refund after giving effect to the NCLT orders.Conclusion: The issue was answered in favour of the assessee. The pre-Resolution Plan demands were held not to survive and the Revenue was directed to extinguish them and grant consequential relief.