Resolution plan extinguishes pre-resolution tax claims; post-approval assessment and recovery cannot continue against the corporate debtor.

Income-tax claims relating to a period before approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 cannot be revived if they are not provided for in the plan. The approved plan in this matter expressly extinguished all pre-effective-date income-tax liabilities, including assessed or unassessed dues and pending assessment or appellate proceedings. Applying Section 31 of the IBC, the Court noted that pre-resolution claims outside the plan stand frozen and extinguished, and no further assessment or recovery action can continue against the corporate debtor or the resolution applicant. The assessment order and demand notice for the earlier assessment year were therefore liable to be quashed.

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Issues: Whether income-tax dues relating to a period prior to approval of the resolution plan could be revived and recovered by passing an assessment order and demand notice after approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016.

Analysis: The approved resolution plan expressly provided that all income-tax liabilities, whether assessed or unassessed, and all pending assessment or appellate proceedings relating to the period prior to the effective date would stand extinguished and terminated. The Court applied the settled principle that once a resolution plan is approved under Section 31 of the Insolvency and Bankruptcy Code, 2016, all claims not forming part of the plan stand frozen and extinguished, and no proceedings in respect of such pre-resolution claims can continue against the corporate debtor or the resolution applicant. The impugned assessment and demand related to Assessment Year 2011-12, which was long prior to approval of the resolution plan, and therefore the respondents had no authority to proceed further.

Conclusion: The pre-resolution income-tax dues stood extinguished, and the impugned assessment order and demand notice were liable to be quashed.

Ratio Decidendi: Upon approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, all claims and proceedings relating to pre-resolution liabilities that are not provided for in the plan stand extinguished and cannot be revived or enforced against the corporate debtor or resolution applicant.

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