Resolution plan approval extinguishes pre-resolution tax claims and bars later assessment, reassessment, and penalty proceedings.

Approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 binds all stakeholders, including tax authorities, and extinguishes claims not forming part of the approved plan. Pre-resolution tax liabilities cannot be pursued after approval, and the relevant factor is the period to which the liability relates, not the date of the assessment or reassessment order. Penalty proceedings, being consequential to the underlying tax liability, also cannot continue once the principal claim stands extinguished. Proceedings relating to assessment years before plan approval were therefore without jurisdiction and unsustainable.

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Issues: Whether, after approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016, the tax authorities can continue or initiate assessment, reassessment and penalty proceedings in respect of liabilities relating to the period prior to such approval.

Analysis: Upon approval of a resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, the plan becomes binding on all stakeholders, including statutory authorities. Claims not forming part of the approved plan stand extinguished, and pre-resolution liabilities cannot be pursued thereafter. The determinative factor is the period to which the liability relates, not the date on which the assessment or reassessment order is passed. Penalty proceedings, being consequential to the underlying assessment liability, cannot survive once the principal claim itself stands extinguished. The continuation of proceedings for assessment years relating to the pre-approval period was therefore without jurisdiction.

Conclusion: The tax proceedings for periods prior to approval of the resolution plan were held unsustainable and were quashed, with the pre-resolution tax claims declared extinguished.

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