2025 (1) TMI 705 - HC - Income Tax

Reassessment proceedings against company insolvent - Affect of approved Resolution Plan by the NCLT - HELD THAT - NCLT has approved the Resolution Plan vide order dated 20th June, 2022 which has now been upheld and confirmed by dismissal of the Appeal filed by the respondent-Authority by the NCLAT vide order dated 21.05.2024. As the decision of Ghanashyam Mishra 2021 (4) TMI 613 - SUPREME COURT would be applicable wherein, it is held that once the NCLT has approved the Resolution Plan, all the past dues shall stand extinguished and respondent-Authority could not have assumed the jurisdiction to re-open the assessment as the same would have achieved the finality. In the facts of the present case, the petitioner stands even on better footing as the order passed by the NCLT approving the Resolution Plan already has merged into the order passed by the NCLAT while dismissing the Appeal preferred by the respondent-Authority which has achieved finality in view of the provisions of Section 62 of the IBC The impugned notice issued u/s 148 of the Act is not tenable in the eyes of law and is accordingly, quashed and set aside.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the issuance of the notice under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the Assessment Year 2016-17, is valid in light of the approved Resolution Plan by the NCLT.
Whether the claims of the Income Tax Department, which were not part of the approved Resolution Plan, stand extinguished.
Whether the decision of the Hon'ble Supreme Court in Ghanashyam Mishra and Sons Private Limited versus Edelweiss Asset Reconstruction Company Limited is applicable to the case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Notice under Section 148

Relevant legal framework and precedents: The petitioner challenged the notice under Section 148 based on the decision in Ghanashyam Mishra, which states that once a Resolution Plan is approved by the NCLT, all past dues are extinguished.
Court's interpretation and reasoning: The court agreed with the petitioner, noting that the NCLT's approval of the Resolution Plan extinguished the claims not included in the plan.
Key evidence and findings: The NCLT approved the Resolution Plan on June 20, 2022, and the NCLAT upheld this decision, dismissing the Income Tax Department's appeal.
Application of law to facts: The court applied the principles from Ghanashyam Mishra, concluding that the notice under Section 148 was without jurisdiction.
Treatment of competing arguments: The respondent argued that they intended to challenge the NCLAT's decision in the Supreme Court. However, the court noted that the period for such an appeal had expired.
Conclusions: The notice under Section 148 was quashed as it was issued without jurisdiction.

Issue 2: Extinguishment of Claims

Relevant legal framework and precedents: Section 31 of the IBC, as interpreted in Ghanashyam Mishra, provides that claims not part of the approved Resolution Plan are extinguished.
Court's interpretation and reasoning: The court reiterated that the Resolution Plan binds all stakeholders, including tax authorities, and extinguishes claims not included.
Key evidence and findings: The approved Resolution Plan included a provision that no reassessment or proceedings could be initiated for claims not part of the plan.
Application of law to facts: The court found that the Income Tax Department's claims were not part of the approved plan and thus stood extinguished.
Treatment of competing arguments: The respondent's argument of potential Supreme Court appeal was dismissed due to the expiry of the appeal period.
Conclusions: The claims of the Income Tax Department not included in the Resolution Plan were extinguished.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Once the NCLT has approved the Resolution Plan, all the past dues shall stand extinguished and respondent-Authority could not have assumed the jurisdiction to re-open the assessment as the same would have achieved the finality."
Core principles established: The approval of a Resolution Plan by the NCLT under the IBC extinguishes all claims not included in the plan, and no reassessment or proceedings can be initiated for such claims.
Final determinations on each issue: The court quashed the notice under Section 148 as it was issued without jurisdiction, and the claims of the Income Tax Department not part of the Resolution Plan were extinguished.

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