AI OCR 
TaxTMI 
TaxTMI 
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2026 (4) TMI 126
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....st, and a proposal was made to impose penalties under Sections 272A(1)(d), 271AAC(1), 270A and 271B of the Income Tax Act, 1961. 5. The learned Counsel for the Petitioner places reliance of the judgment of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Sathish Kumar Gupta and others, (2020) 8 SCC 531,wherein it has been held that a successful resolution applicant cannot be confronted with undecided or belated claims after approval of the resolution plan, as the same would create uncertainty in respect of the liabilities to be borne by such applicant. This principle has been reiterated and affirmed in Ghanashyam Mishra and Sons Private Limited, Through the Authorised Signatory Vs. Edelweiss Asset Reconstruction Company Limited, Through the Director and others, (2021) 9 SCC 657. It is therefore submitted that the issue is no longer res integra. 6. It is submitted that any claim pertaining to a period prior to the approval of the resolution plan stands extinguished by operation of law and that this principle applies equally to tax demands and proceedings. 7. It is submitted that a consistent line of judicial precedents including those rel....
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.... 3481; (vi) AMNS Khopoli Ltd. Vs. Assistant Commissioner of Income Tax (International Taxation); 2024 SCC Online Bom 1213; 13. The learned Government Advocate for the Respondent contended that the Resolution Plan having been submitted prior to the judgments in Essar Steel (referred to supra) and Ghanashyam Mishra (referred to supra), the same must be interpreted independent of the said judgments. 14. It is submitted that the interpretation of the statutory provisions by the Hon'ble Supreme Court is deemed to be the law from the inception of the statute. Therefore, the applicability of the said judgments is not dependent on whether they were rendered prior to or subsequent to the approval of the Resolution Plan. 15. It is further submitted that, at the time when the issue arose as to the permissibility of raising demands for Assessment Year 2018-19, the law as settled by the Hon'ble Supreme Court was required to be applied, irrespective of the date of approval of the resolution plan. 16. The Respondent has further contended that since the Department has not acceded to the waiver of dues for Assessment Year 2018-19, the condition precedent contained in paragraph ....
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....x waivers by the NCLT. 24. It is further submitted that the Resolution Plan was submitted on 26.05.2019, prior to the judgments of the Hon'ble Supreme Court in Essar Steel (referred to supra) and Ghanashyam Mishra (referred to supra). 25. It is submitted that the commercial bargain entered into by the Resolution Applicant in the Revised Resolution Plan must be interpreted in light of the legal position prevailing at that time and specifically what was claimed and what was sanctioned and cannot be retrospectively expanded to extinguish statutory liabilities, particularly when specific relief in that regard was denied. 26. The learned Government Advocate further relied on Clause 7.13 of the approved Resolution Plan, which records an undertaking by the Resolution Applicant to file pending income tax returns and to seek statutory reliefs in accordance with law. 27. Similarly, it is submitted that Clause 5.7 records that the financial statements for relevant years would be audited and tax liabilities determined for the purpose of filing returns. These clauses clearly demonstrate that the Resolution Applicant was conscious of pending tax compliances and had undertaken to regu....
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.... time of CIRP which the Department is entitled to determine in accordance with law. 35. The learned Government Advocate further submitted that the Information Memorandum is a foundational disclosure document and must contain all known or reasonably ascertainable liabilities, including statutory dues. The "clean slate" doctrine can operate only when such liabilities are duly disclosed and addressed in the Resolution Plan. 36. In the present case, the liability to tax had already arisen by operation of law, and non-filing of return merely rendered it unquantified. The existence of such liability was neither unknown nor incapable of identification. Therefore, it cannot be contended that such liability stood extinguished. 37. It is submitted that failure to include such statutory dues in the Resolution Plan does not bind the Department nor extinguish the liability. The obligation to disclose such dues rested upon the Corporate Debtor and its management under Section 19 of the Insolvency and Bankruptcy Code, and any omission in this regard cannot operate to the prejudice of the Revenue. 38. The learned Government Advocate further submitted that the statutory liability under ....
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....07.2018. 46. In Committee of Creditors of Essar Steel India Limited Vs. Sathish Kumar Gupta and others, (2020) 8 SCC 531, the Hon'ble Supreme Court had earlier held as under:- 105. Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394 : (2019) 2 SCC (Civ) 458], this Court relying upon Section 31 of the Code has held: (SCC p. 411, para 25) "25. Section 31 of the Act was also strongly relied upon by the respondents. This section only states that once a resolution plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, under Section 133 of the Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. ....
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.... in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count. 47. In Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657, the Hon'ble Supreme Court merely held as under:- 93. As discussed hereinabove, one of the principal objects of the I&B Code is providing for revival of the corporate debtor and to make it a going concern. The I&B Code is a complete Code in itself. Upon admission of petition under Section 7 there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum. The resolution applicants submit their plans on the basis of the details provided in the information memorandum. The resolution plans undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the resolution applicant, various modif....
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.... 103. In the light of what has been held by us hereinabove, we now proceed to decide individual matters. 48. The Supreme Court in STO Vs. Rainbow Papers Ltd., (2023) 9 SCC 545, while dealing with recovery of taxes not provided in Resolution Plan in respect of VAT dues arising under Gujarat Value Added Tax Act, more particularly under Section 48 of the GVAT Actheld as under: a. State is a "secured creditor" with the meaning of Section 3(30) of the Code. b. Resolution Plan should provide for payment of such statutory dues, failure to provide may fall foul of sub-section (2) to Section 30 of the Code. c. A Resolution Plan not in compliance with Section 30 would not be binding on the Government. d. CoC which might include financial creditors cannot secure there dues against Statutory dues. e. Statutory First Charge under GVAT Act is not in conflict with the provisions of IBC. 49. The following portions of the said judgment makes it clear: "45. As rightly argued by the learned Solicitor General, there can be no question of acceptance of a resolution plan that is not in conformity with the statutory provisions of Section 31(2)....
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.... in sub-section (1) of Section 31, uses the expression "may". 52. If the resolution plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the adjudicating authority is bound to reject the resolution plan. 53. In other words, if a company is unable to pay its debts, which should include its statutory dues to the Government and/or other authorities and there is no plan which contemplates dissipation of those debts in a phased manner, uniform proportional reduction, the company would necessarily have to be liquidated and its assets sold and distributed in the manner stipulated in Section 53 IBC. 54. In our considered view, the Committee of Creditors, which might include financial institutions and other financial creditors, cannot secure their own dues at the cost of statutory dues owed to any Government or Governmental Authority or for that matter, any other dues. 56. Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions of IBC. Under Section 53(1)(b)(ii), the debts owed to a secured creditor, which would include the State under the GVAT Act, are to rank e....
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.... Insolvency Resolution Proceedings (CIRP) was earlier initiated against the petitioner company before the NCLT on 13.07.2018 by an Operating Creditors wherein Mr. T. V. Subramanian was initially appointed as an Interim Resolution Professional (IRP). Mr. T. V. Subramanian was subsequently replaced on 19.07.2018 with one Mr. Premachandran under the provisions of IBC 2016. 55. During the interregnum, as mentioned above, the last date for filing of the Return of Income for the Assessment Year 2018-2019 (Previous Year 2017-2018 i.e. for the income earned during Year ended on 31.03.2018) expired on 31.10.2018 and on 31.12.2018 respectively under Section 139(1) as well as 139(4) of the Income Tax Act, 1961. 56. The said Interim Resolution Professional merely invited claims between 24.07.2018 and 02.08.2018 from the Creditors of the petitioner. 57. On 18.08.2018, the Committee of Creditors was constituted pursuant to which the first meeting of the Committee of Creditors was held on 23.08.2018.On 20.09.2018, Mr. Sundaresan Nagarajan was appointed as a Resolution Professional (RP). 58. On 17.04.2019, the said Resolution Professional invited Expressions of Interest (EOI). On 28.04....
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.... Sr.no. Particulars Period Amount (INR in Lakh) Present Status 1 PF FY 2015-16 8.36 Under Discussion 2 ESI FY 2015-16 6.17 Under Discussion 3 Sales Tax 89.05 Obtained stay order from Chennai High Court 4 Sales Tax 9.06 Appeal over set aside and remanded by the Court 5 VAT FY 2007-08 to 2015-16 Inspection made by the Enforcement Department and Notice has been issued. 6 TDS & TCS Various years 13.43 Orders Received 7 Service Tax FY 2013-14 to 2015-16 2062.50 Notice issued by the Dept Total 2,188.57 66. In Clause 3 to Para 4.6 of the aforesaid Revised Resolution Plan, it was stated as under: "(iii) Most of the abovementioned statutory dues are under assessment or at various stages of litigation. Therefore, the final amount payable in respect thereof is to be ascertained by respective authorities/statutory bodies." 67. In respect of the payment of the aforesaid amount, it was quantified in the above Revised Resolution Plan as under: "(iv) Even though no claims have been filed by the statuto....
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.... Professional had stated, as follows insofar as Income Tax pending dues:- "13. INCOME TAX All matters with regard to the Income tax is handled by Mr. Madhu, Chartered Accountant, the auditor of the company. The Income Tax department has recently issued a demand notice for the pending dues, which is reproduced below: Sl. No Assessment Year Raised u/s Tax Status 1 2008-09 220(2) Rs.73/- Not Paid 2 2009-10 143(1) Rs.1,88,887/- Not Paid 3 2013-14 143(3) Rs.11,16,620/- Not Paid 4 2014-15 154 Rs.1,37,04,250/- Appeal Preferred 5 2015-16 143(3) Rs.13,42,250/- Not Paid However, the IRP/RP has not received any claims from the Income tax department. As the accounts of the company has not been finalised for the FY 2016-17 and FY 2017-18, the company has not filed its Income tax returns for the Assessment year 2017-18 and 2018-19. The Income Tax Department has issued notice dated 7th Feb 2019 to the company under section 142(1) of the Income tax Act, 1961 for the assessment year 2017-18. Copy of the demand notice dated 7th February 2019 received from the Income ....
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....-16. Thereafter, the Corporate Debtor has not filed its ITRs for FY 2016-17 and FY 2017-18. The erstwhile management of the Corporate Debtor missed the due date within which the tax returns for these years could be filed under the IT Act. As per the provisions of section 139(3) of the IT Act, read with section 80 of the IT Act, in case a taxpayer incurs a loss in any year, inter-alia under the head "Profits and gains of business or profession", which can be carried forward for set-off in future years, the taxpayer ought to furnish the ITR for that year within the due date prescribed under the IT Act. To simplify, as per the provisions of the IT Act, tax losses cannot be carried forward for set-off in future years if no ITR/ belated ITR is filed by a taxpayer. As per the above provisions, due to non-filing of tax returns by erstwhile management of the Corporate Debtor for FYs 2016-17 and 2017-18, the tax losses incurred by Corporate Debtor in those years have lapsed and are not available for set-off in future years. Given the current financial position of the Corporate Debtor, wherein the secured financial creditors and Home Buyers are bearing heavy financial hairc....
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....the Resolution Applicant shall have no obligations whatsoever under this Plan or otherwise to any Person, including having no obligation with respect to any performance security/corporate guarantee/demand draft or any other obligation and each such performance security/corporate guarantee/demand draft shall be promptly returned to the Resolution Applicant. a. All the claims/demands/dues of income tax department pertaining to Financial Year 16-17, Financial Year 17- 18 (which is prior to Insolvency Commencement Date) and Financial Year 18-19 shall stand extinguished or the Adjudicating Authority shall have waived all claims/ of income tax department including the Income Tax liabilities pertaining to Financial Year 16-17 Financial Year 17-18 (which is prior to Insolvency Commencement Date) and Financial Year 18-19 in light of the following reasons: (i) Since, the Liquidation Value owed to the Operational Creditors is expected to be nil owing to very limited funds/assets being available for undertaking the construction and completion of projects and for payment of secured financial creditors and Home Buyers, who are bearing heavy financial haircuts and burden for com....
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....genuine hardship to the Corporate Debtor and will also further reduce the monies available for paying the creditors including the Home Buyers. Accordingly, we request you to direct the Income Tax Authorities to forego any tax liability that may arise under the Income Tax Act, 1961 ("IT Act") on account of assignment of liabilities to the Resolution Applicant or upon entering into joint development agreement and/or collaboration agreement and/or JV agreement with the Resolution Applicant." The conditions stated hereinabove shall be referred to as the "Condition Precedent". 73. As far as the relief sought for in the Revised Resolution Plain is concerned, while sanctioning the same, the NCLT in its Order dated 13.12.2019 observed as under: "13. Since this Adjudicating Authority is required to approve the Resolution Plan in terms of Section 30(6) of I&B Code, 2016, upon the focus in relation to the invitation for "EoI" and filing of the Resolution Plan by the Resolution Applicant, the following facts emerge:- (i) In the Information Memorandum as circulated, it is evident that the Corporate Debtor viz., P Dot G Constructions Private Limited was Incorporated....
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....Tax and other statutory dues details of which have also been given in the Information Memorandum in relation to which dues, proceedings seem to be pending by way of an Appeal before Hon'ble High Court of Madras. The composition of CoC as on 07.04.2019 has also been disclosed at page 68 of the Resolution Plan from which it is seen that the CoC had from time to time, by virtue of orders of this Tribunal undergone a change as compared to the one which was first constituted. 74. Since the application for Corporate Insolvency Resolution Process (CIRP) was filed by an Operating Creditor before the National Company Law Tribunal (NCLT) on 13.07.2018 and in the course of the aforesaid proceeding a Resolution Plan was submitted by RCC E-Construct Private Limited on 26.05.2019, it cannot be said that the income tax liability during the Corporate Insolvency Resolution Process, will be covered by the Order of the NCLT. 75. While filing the Revised Resolution Plan filed for taking over the management of the Petitioner Company, the Resolution Applicant, namely M/s. RCC E-Construct Private Limited was aware of the intimations under Section 143(1) of the Income Tax Act, 1961 and the Asses....
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....Resolution Plan of the Committee of Creditors. 84. In Paragraph 26 of the Order dated 13.12.2019, NCLT, stated as under: 26. OBJECTIONS FILED BY THE INCOME TAX - SR No. 4825 Dated 09.10.2019 in MA/554/2019 26.1 The Deputy Commissioner of Income Tax, Corporate Ward - 5(2), Chennai, upon notice being issued, has filed its memo of objections to the Resolution Plan, wherein, it has been stated that the Corporate Debtor has outstanding demands for 5 years amounting to nearly 2 Crores as provided below: Sl. No Assessment Year Demand in Rs. 1 2009 - 10 Rs.2,83,290/- 2 2013 - 14 Rs.11,16,620/- 3 2014 - 15 Rs.1,37,04,250/- 4 2015 - 16 Rs.13,12,217/- 5 2017 - 18 Rs.30,56,181/- 26.2. It was further submitted by the Ld. Counsel for the Income Tax that the Resolution Applicant has sought for waiver of tax or interest dues in para 6.1, 6.5, 7.4 and 7.6 of the Resolution Plan, and as there are tax arrears that have been unpaid over several years, such violation cannot be overlooked by this Authority and hence prayed for not to grant any relief with respect to the same. 26.3. The Ld. Counsel for the Income....
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....ons framed thereunder. 85. In Paragraph 27.6, NCLT, stated as under: "27.6. As to the Relief and Concessions sought for in the Resolution Plan, taking into consideration the Judgments of the Hon'ble Supreme Court and Hon'ble NCLAT, we direct the Resolution Applicant to file necessary application before the necessary forum / authority in order to avail the necessary Relief and Concessions, if it is accordance with law." 86. The above observation of the NCLT was after considering the submissions of the Resolution Applicant and the Resolution Professional based on the available decisions of the Courts. 87. In view of the above, it is seen that paragraph 6.1 to Chapter 6 of the Revised Resolution Plan dealing with limitation of liabilities, has not been approved by the NCLT in its Order dated 13.12.2019. 88. That apart, as per clause 1.1 to Chapter-1 of Revised Resolution Plan dated 26.05.2019, the effective date is 27.01.2020, being the date after 45 days from the date of approval Revised Resolution Plan i.e., 13.12.2019. Thus, it was the intention of the Resolution Applicant that all the unsettled and unassessed statutory dues including direct and indirect taxes ....
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....1.03.2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the impugned Assessment Order dated 31.03.2023 passed under Section 147 read with Section 144 of the Income Tax Act, 1961. 98. In Paragraph No.7.13 of the Revised Resolution Plan, the Resolution Applicant to carry forward the loss to set off the Tax Liability for the subsequent Assessment years. The Resolution Applicant was required to file applications under Section 119(2)(b) of the Income Tax Act, 1961 for waiver, relief of condonation of delay in filing of Returns of Income before the concerned Income Tax Authority stating reasons for seeking such waiver. 99. To claim such waiver, the Petitioner was required to file Return of Income for the Assessment Years in question together with such application under Section 119(2)(b) of the Income Tax Act, 1961without filing such application and determination of the Income, such loss or such claims for setoff of Tax cannot be made for the subsequent Assessment Year. 100. The NCLT has also observed the submission in the Resolution Applicant in Paragraph No.26.4 of the Revised Resolution Plan wherein it has been stated that insofar as the failure to file Income T....