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2024 (6) TMI 1148 - HC - Income TaxValidity of assessment against company dissolved - demand /penalty Notices have been issued after the approval of the Resolution Plan for the revival and restructuring of the petitioner-company by NCLT - HELD THAT - It is settled proposition of law that once a Resolution Plan is duly approved by the adjudicating authority under Section 31 (1) of IBC, 2016, the claims as provided in the Resolution Plan shall stand frozen and it 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 stake holders. On the date of approval of Resolution Plan by the adjudicating authority, all such claims, which are not part of the 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. As to be noted that the principle of clean slate has been time and again reiterated and reaffirmed by the Supreme Court as well as by this Court. Thus, upon approval of a Resolution Plan or sale as going concern, is duly approved by the adjudicating authority, all the previous liabilities and claims of any person qua the corporate debtor, cease to exist and extinguish. The law is well settled that once a Resolution Plan is approved by the COC, it shall be binding on all the stakeholders. Thus, the successful Resolution Applicant starts running the business of the Corporate Debtor on a fresh slate. Considering the aforesaid, the impugned Assessment Order as well as the Notice cannot stand in the eyes of the law.
Issues:
Quashing of Assessment Order and Demand Notice under Income Tax Act, 1961 post approval of Resolution Plan by NCLT. Analysis: The petitioner sought the quashing of an Assessment Order and Demand Notice issued by the Deputy Commissioner of Income Tax post-approval of a Resolution Plan by NCLT. The petitioner argued that the impugned order and notice were legally untenable and contrary to the provisions of the Insolvency and Bankruptcy Code (IBC), 2016, which aims at the revival of the company on a 'Clean Slate Basis'. The petitioner highlighted that the impugned penalty notice was being imposed, indicating urgency in the matter. Despite advance notice, no appearance was made on behalf of the respondents. The Court noted the approval of the Resolution Plan by NCLT, Chennai, and the subsequent takeover of the petitioner-company by new management to implement the Resolution Plan on a 'Clean Slate Basis'. The Court emphasized that once a Resolution Plan is approved by the adjudicating authority under the IBC, 2016, the claims provided in the Plan become binding on all stakeholders, extinguishing any claims not part of the Plan. The principle of a 'Clean Slate' post-approval of Resolution Plan was reiterated, stating that all previous liabilities and claims against the corporate debtor cease to exist. Referring to a previous judgment, the Court held that the Resolution Plan's approval binds all stakeholders, ensuring the successful resolution applicant operates the business on a fresh slate. Therefore, the Assessment Order, Demand Notice, and Penalty Notice were set aside as they contradicted the binding nature of the approved Resolution Plan. The Court's decision was based on the settled law that once a Resolution Plan is approved, it binds all stakeholders, allowing the successful Resolution Applicant to run the business on a fresh slate. The impugned Assessment Order and Notices were deemed invalid post-approval of the Resolution Plan by NCLT, emphasizing the binding nature of the Plan on all stakeholders. Consequently, the Court allowed the petition, setting aside the Assessment Order and Notices issued under the Income Tax Act, 1961, post-approval of the Resolution Plan.
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