TaxTMI 
TaxTMI 
2024 (9) TMI 371
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....and Bankruptcy Code, 2016 ("IBC"). 3. Essentially, the Impugned Proceedings entailed issuance of notices in relation to Assessment Year 2016-17 ("AY 2016-17") as under: i) Section 148 (Issue of notice where income has escaped assessment) and; ii) Section 142(1) (Inquiry before assessment); Resolution of the Petitioner-Assessee: 4. The Petitioner-Assessee was admitted into a CIRP by an order dated July 11, 2018 passed by the National Company Law Tribunal, New Delhi ("NCLT"). Various processes under the IBC were undertaken. Eventually, the company came to be resolved pursuant to a resolution plan finalized by the Committee of Creditors, and approved by the NCLT under Section 31 of the IBC by an order dated May 6, 2020 [The record shows that this order was pronounced on April 30, 2020, but delivered on May 6, 2020.]. The resolution plan, as approved by the NCLT, entails a full waiver of all tax and tax-related interest dues pertaining to the period prior to commencement of the CIRP. 5. On March 27, 2021 i.e., well after the resolution plan was approved, the Revenue issued a notice under Section 148 of the Act seeking to initiate reassessment of the Petiti....
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....been filed are essentially that Section 31 of the IBC explicitly makes the resolution plan binding on the Revenue. The Petitioner-Assessee has also submitted that the law declared by the Supreme Court, interpreting Section 31 of the IBC fully covers the position that the Petitioner-Assessee is in, namely, that a corporate debtor after being resolved, starts with a clean slate and cannot be pursued for past tax claims. Revenue's Defence of Impugned Proceedings: 10. The Revenue has filed an affidavit in reply dated May 18, 2022 ("Reply Affidavit") opposing the Petition. The Reply Affidavit essentially sets out the Revenue's interpretation of the import of the IBC. Effectively, the argument of the Revenue is that once the CIRP came to an end (with the approval of the resolution plan), the moratorium on initiating and continuing proceedings against the Petitioner-Assessee too came to an end. Therefore, according to the Revenue, the power of the Revenue to continue proceedings against the Petitioner-Assessee would revive. The Revenue quoted from orders of the Supreme Court passed during the course pending CIRP proceedings, when dealing with the import of the moratorium under Secti....
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....iss Asset Reconstruction Company Limited (2021) 9 SCC 657 (Ghanshyam Mishra) comprehensively summaries the import of various judgments on the point. The following extracts from Ghanshyam Mishra are noteworthy: 64. It could thus be seen, that the legislature has given paramount importance to the commercial wisdom of CoC and the scope of judicial review by adjudicating authority is limited to the extent provided under Section 31 of the I&B Code and of the appellate authority is limited to the extent provided under sub-section (3) of Section 61 of the I&B Code, is no more res integra. 65. Bare reading of Section 31 of the I&B Code would also make it abundantly clear that once the resolution plan is approved by the adjudicating authority, after it is satisfied, that the resolution plan as approved by CoC meets the requirements as referred to in sub-section (2) of Section 30, it shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is revival of the corporate debtor and to make it a running concern. 67. Perusal of Sec....
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....ity, the State/Central Government authorities continued with the proceedings in respect of the debts owed to them. In order to remedy the said mischief, the legislature thought it appropriate to clarify the position that once such a resolution plan was approved by the adjudicating authority, all such claims/dues owed to the State/Central Government or any local authority including tax authorities, which were not part of the resolution plan shall stand extinguished. 94. We have no hesitation to say that the words "other stakeholders" would squarely cover the Central Government, any State Government or any local authorities. The legislature noticing that on account of obvious omission certain tax authorities were not abiding by the mandate of the I&B Code and continuing with the proceedings, has brought out the 2019 Amendment so as to cure the said mischief. We therefore hold that the 2019 Amendment is declaratory and clarificatory in nature and therefore retrospective in operation. 95. There is another reason which persuades us to take the said view. Clause (10) of Section 3 of the I&B Code defines "creditor" thus: "3. (10) "creditor" means any person to w....
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....luding the statutory dues, would be covered by the term "creditor" and in any case, by the term "other stakeholders" as provided in sub-section (1) of Section 31 of the I&B Code. [Emphasis Supplied] 15. In conclusion, to put matters beyond a pale of doubt, the Supreme Court declared as follows: Conclusion 102. In the result, we answer the questions framed by us as under: 102.1. That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. 102.2. The 2019 Amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and t....
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.... and applied Ghanashyam Mishra in at least two judgments and that too, in the context of reassessment proceedings, to rule that proceedings initiated by the Revenue in respect of tax for a period prior to the CIRP, cannot be continued. In Alok Industries Ltd. v. Assistant Commissioner of Income-tax [2024] 161 taxmann.com 285(Bombay), a Division Bench of this Court held in favour of the Assessee quashing various proceedings for reassessment initiated against a corporate debtor that had undergone a resolution under the IBC. So also, in AMNS Khopoli Limited v. Assistant Commissioner of Income Tax and Others 2024 SCC OnLine Bom 1213 (AMNS Khopoli) the reassessment proceedings initiated in the facts of that case were quashed and set aside by a Division Bench of this Court. In particular, Paragraphs 15 and 16 of AMNS Khopoli are noteworthy and are extracted below:- 15. In the circumstances, since the Resolution Plan expressively provides that no person shall be entitled to initiate any proceedings or inquiry, assessment, enforce any claim or continue any proceedings in relation to claims so long such result to a period prior to the Effective Date of the Resolution Plan, i.e., 10....