2021 (7) TMI 1342 - HC - Income Tax

Validity of assessment/reassessment against company filled petition under Insolvency Bankruptcy Code, 2016 - refund processed by the respondents in favour of the petitioner shall be adjusted against the outstanding demand existed from Assessment Year 2007-2008 till 2015-2016 - whether respondent Income Tax Authorities were legally justified in raising the aforesaid demand and issuing notices and orders cum intimations and whether the respondent Income Tax Authorities were legally justified in initiating reassessment proceeding and continuing with the assessment proceeding for the Assessment Year 2012-13 and 2016-17 respectively and completing the assessments for the period prior to the transfer date and whether such an Act of the respondent is in breach of violation of the order passed by the National Company Appellate Tribunal approving the Resolution Plan - initiation of penalty proceedings under Section 271 (1) (C) for the periods prior to the Transfer Date - HELD THAT - As for proper adjudication of the issues involved in this Writ Petition, elaborate hearing upon affidavits is required. Petitioners have prima facie been able to make out a case for the interim order. Let there be an interim order restraining the respondent Income Tax Authorities from taking any step or further steps or acting in any manner contrary or inconsistent with the approved Resolution Plan dated 14th November, 2018 which was confirmed by the order passed by the Hon ble Supreme Court dated 26th July, 2019 and the respondents are also restrained from taking any further steps or to give further effect to the orders dated 24th December, 2019, 31st December, 2019 and the Notices dated 3rd January, 2020, 20th January, 2020 and 23rd January, 2020 till 30th September, 2021 or until further orders whichever is earlier.

Summary

Issues:
Challenged impugned orders by Income Tax authorities; Adjustment of refund against outstanding demand; Legality of demand raised by Income Tax Authorities; Initiation of reassessment and penalty proceedings; Compliance with approved Resolution Plan; Interpretation of relevant legal provisions; Application of Supreme Court judgment.

Analysis:
The petitioners challenged orders by Income Tax authorities, including those under Section 147/143 (3) of the Income Tax Act, 1961, and notices issued under Section 245 regarding settled matters pre-Transfer Date. They contested the adjustment of refunds against outstanding demands from previous assessment years. The main legal issue was whether the Income Tax Authorities were justified in raising demands, issuing notices, and continuing assessments for periods before the transfer date, despite the approved Resolution Plan stating no liability towards tax, fee, interest, or penalty for the Corporate Debtor.

The facts of the case involved the insolvency proceedings against Binani Cement Limited, culminating in the approval of a Resolution Plan by Ultra Tech Cement Limited. The management takeover and name change to Ultra Tech Nathdwara Cement Limited were highlighted. Various letters were issued for the extinguishment of tax demands, with the Resolution Plan confirmed by the Supreme Court. The key question raised was the legality of the Income Tax Authorities' actions in light of the approved Resolution Plan and the provisions of the Insolvency and Bankruptcy Code.

The petitioners also challenged the initiation of penalty proceedings under Section 271 (1) (C) of the Income Tax Act for the relevant assessment years. They cited a Supreme Court judgment and provisions of law to support their contentions. The court noted that the respondents failed to justify their actions or distinguish the relevant Supreme Court judgment relied upon by the petitioners. Consequently, an interim order was issued restraining the Income Tax Authorities from acting contrary to the approved Resolution Plan until further orders or September 30, 2021.

The court emphasized the need for detailed hearings based on affidavits to adjudicate the issues effectively. It directed the exchange of affidavits between the parties within specified timelines and scheduled the matter for final hearing after eight weeks. The court clarified that any findings or observations made in the interim order would not impact the final hearing on the merits of the writ petition. Additionally, an application for an interim order was disposed of as part of the judgment.