2024 (8) TMI 185 - HC - Income Tax

Validity of income tax assessment/reassessment proceddings against company dissolved - NCLT has approved the resolution plan for insolvency - AO jurisdiction to issue notice post transfer of case - HELD THAT - As after the order of transfer of the case of the petitioner passed on 11.01.2023 under Section 127 (2) of the Act, the respondent No.1-Assessing Officer has no jurisdiction to issue the notice for re-opening for the Assessment Year 2019-20. Even otherwise, as held by this Court in case of Surya Exim Ltd. 2024 (4) TMI 937 - GUJARAT HIGH COURT when the NCLT has approved the application filed under Section 13 (6) of IBC, 2016 and resolution plan submitted by the applicant was approved, the respondent-Assessing Officer would not have any jurisdiction to re-open the assessment with regard to the Assessment Year 2019-20. The impugned notice u/s 148 as well as the order passed u/s 148A (d) of the Act are not tenable and are accordingly, quashed and set aside - Decided in favour of assessee.

Summary

Issues:
Jurisdiction of Assessing Officer to re-open assessment post transfer of case under Section 127(2) of the Income Tax Act, 1961; Impact of NCLT-approved resolution plan on extinguishing past dues and its effect on re-opening assessment.

Analysis:
The petitioner challenged an order under Section 148A(d) of the Income Tax Act, 1961, dated 20th March, 2023, for Assessment Year 2019-20. The petitioner, a steel cylinder manufacturer, underwent insolvency proceedings, resulting in the approval of a resolution plan by the NCLT. Despite a transfer order of the case to Ahmedabad, the Assessing Officer at Vadodara issued a notice under Section 148A(b) for re-opening assessment. The petitioner contended that the Assessing Officer lacked jurisdiction post-transfer. Citing the Ghanashyam Mishra & Sons case, the petitioner argued that NCLT-approved resolution plans extinguish past dues, precluding assessment re-opening. Referring to the Surya Exim Ltd. case, the petitioner emphasized the extinguishment of statutory dues post-resolution plan approval.

The respondent argued that the petitioner's failure to respond to the notice justified the assessment re-opening due to alleged income escapement. The Court held that post-transfer, the Assessing Officer lacked jurisdiction to re-open the assessment for 2019-20. Citing the Ghanashyam Mishra & Sons case, the Court noted that NCLT-approved resolution plans freeze claims and extinguish non-included claims, preventing assessment re-opening. Quoting the case, the Court emphasized the binding nature of resolution plans on debtors and stakeholders, extinguishing non-included claims. Consequently, the Court quashed the notice under Section 148 and the order under Section 148A(d) for lack of tenability, ruling in favor of the petitioner.