2026 (4) TMI 185 - AT - Income Tax

Insolvency resolution plan bars enforcement of unfiled tax demand against the corporate debtor after approval.

An outstanding income-tax demand could not be enforced against the corporate debtor after approval of the resolution plan under the Insolvency and ... Maintanability of outstanding income-tax demand against the assessee after approval of the resolution plan HELD THAT: - The Tribunal found from the material on record that insolvency proceedings had commenced, the Revenue had been informed of the same, and the resolution plan approved by the National Company Law Tribunal treated statutory dues at nil because no claim had been submitted by the statutory authorities in the manner prescribed. On that basis, the Tribunal held that the Revenue had missed the opportunity to place its claim before the insolvency forum and, once the resolution plan attained finality, the outstanding tax demand which had not been claimed or included therein could not be enforced against the assessee. Since no recoverable demand could survive on the strength of the assessment order, adjudication on the merits of the disallowances was rendered unnecessary. [Paras 9, 11] The appeal was treated as infructuous, as the tax demand arising from the assessment order was held to be unenforceable in view of the approved resolution plan. Final Conclusion: The Tribunal held that, after approval of the resolution plan under the Insolvency and Bankruptcy Code and in the absence of any claim lodged by the Revenue in that process, the impugned tax demand could not be enforced against the assessee. The appeal was therefore dismissed as infructuous. Issues: Whether the outstanding income-tax demand could be enforced against the assessee after approval of the resolution plan under the Insolvency and Bankruptcy Code, and whether the appeal had become infructuous.Analysis: The assessee was undergoing corporate insolvency resolution proceedings, a moratorium had been declared, and the resolution plan approved by the National Company Law Tribunal recorded nil payment towards statutory dues because no claim had been submitted by the revenue within the resolution process. The Tribunal noted that the revenue had knowledge of the insolvency proceedings but failed to establish that its demand had been included in, or preserved under, the approved plan. In these circumstances, the demand arising from the assessment order could not be enforced against the assessee.Conclusion: The outstanding demand was held unenforceable against the assessee, and the appeal was treated as infructuous.Final Conclusion: The assessment-related demand survived only on paper and could not be recovered in view of the approved resolution plan, leaving no effective relief to be granted in the appeal.Ratio Decidendi: Once a resolution plan is approved under the Insolvency and Bankruptcy Code and a statutory creditor fails to lodge or preserve its claim within the process, the creditor cannot later enforce the unprovided demand against the corporate debtor.