Resolution plan extinguishes prior tax liabilities, so reassessment proceedings for those claims cannot continue.

Approved resolution plans under the Insolvency and Bankruptcy Code extinguish pre-existing tax liabilities not preserved in the plan, and no reassessment can continue in respect of those wiped-out claims. Applying this binding effect, the Gujarat High Court held that once the corporate debtor was given a fresh slate under the approved plan, the income-tax reassessment notice under Section 148 and the order under Section 148A(d) could not survive for prior tax dues that stood waived and extinguished. The reassessment challenge was therefore academic, and the impugned proceedings were quashed in favour of the assessee.

---

---

Issues: Whether the impugned notice under Section 148 of the Income-tax Act, 1961 and the order under Section 148A(d) could survive after approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016, when the plan provided for waiver and extinguishment of prior tax liabilities.

Analysis: The approved resolution plan expressly contemplated waiver and extinguishment of all pre-approval tax liabilities, assessed and unassessed. The binding effect of an approved resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, as explained by the Supreme Court, is that claims not forming part of the plan stand extinguished and no proceedings in respect of such claims can continue. Once the corporate debtor was placed on a fresh slate through the approved plan, the respondents could not initiate or continue reassessment proceedings for liabilities that stood wiped out by the plan. The challenge to the reassessment action therefore became academic.

Conclusion: The reassessment notice and the order under Section 148A(d) were not sustainable and were quashed, in favour of the assessee.

Ratio Decidendi: Once a resolution plan is approved under Section 31 of the Insolvency and Bankruptcy Code, 2016 and the pre-existing tax liabilities are not preserved in the plan, those liabilities stand extinguished and reassessment proceedings concerning them cannot be continued.

---