2021 (12) TMI 1182 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - income chargeable to tax of the Corporate Debtor has escaped assessment - notice under Section 148 to a Corporate Debtor, calling upon it to submit a return in the prescribed form for the assessment year falling prior to the date of approval of Resolution Plan under Insolvency and Bankruptcy Code, 2016 - HELD THAT - Once the public announcement is made under the IBC by the Resolution Professional calling upon all concerned, including the statutory bodies, to raise claim, it would be expected from all the stakeholders to diligently raise their claim. The Income Tax authorities in that sense, ought to have been diligent to verify the previous years assessment of the Corporate Debtor as permissible under the law and to raise the claim in the prescribed form within time before the Resolution Professional. In the present case, the Income Tax Authorities failed to do so and therefore, the claim stood extinguished. As stated earlier, there could be a contingency where statuary claim is raised after the approval of the Resolution Plan, owing to receipt of information of the Corporate Debtor having suppressed certain facts while filing returns of the previous years, which then could not be a part of the Resolution Plan. To counter such a situation, the statutory authorities will have to explore the possibility of raising such claims before the Resolution Professional or Adjudicating Authority, as the case may be, by requesting to make certain provisions for payment of statutory claims in the Resolution Plan. Whether to accept such claim is a matter that should be left to the COC, the Resolution Professional or the Adjudicating Authority. However, in absence of any such claim having been made and dealt with by the Resolution Professional and in absence of any provision to settle such claim in the Resolution Plan, such claim could not be raised subsequently. In that sense, the Petitioner is correct in contending that the impugned notice could not have been issued by the Assessing Officer. We did not come across any such provision under the Income Tax Act, 1961 nor did the parties before us informed of its existence. We, accordingly, record our answer in the negative to the question framed. Objection of maintainability of the petition - As decided in Ghanashyam Mishra s case 2021 (4) TMI 613 - SUPREME COURT the alternate remedy would not operate as a bar for invoking jurisdiction under Article 226 of the Constitution of India in at least three contingencies, namely, (1) where the writ petition has been filed for the enforcement of any of the Fundamental Rights; (2) where there has been a violation of the principle of natural justice; and (3) where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. We find that the impugned notice falls under category 3 above. Accordingly, the preliminary objection is rejected.Both the Petitions are allowed. The impugned notices dated 25.03.2021 and 24.03.2021 are hereby quashed and set aside. - Decided in favour of assessee.

Issues Involved:
1. Legality of issuing notice under Section 148 of the Income Tax Act, 1961 to a Corporate Debtor after the approval of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016.
2. Maintainability of the writ petitions challenging the notice under Section 148.

Detailed Analysis:

1. Legality of Issuing Notice under Section 148:

Background and Facts:
The petitioner, a corporate debtor, was issued notices under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2014-15. This occurred after the approval of the Resolution Plan by the National Company Law Tribunal (NCLT). The petitioner argued that such notices are invalid post-approval of the Resolution Plan, citing the Supreme Court's decision in Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited.

Resolution Plan and Approval:
The Resolution Plan submitted by Dalmiya Cement (Bharat) Limited was approved by the NCLT and upheld by the National Company Law Appellate Tribunal (NCLAT). The effective date for the Resolution Plan was 25.08.2020.

Contentions:
The petitioner contended that post-approval of the Resolution Plan, no new claims could be initiated against the corporate debtor. The respondents argued that the claim was not crystallized at the time of the Resolution Plan approval and thus could be raised subsequently.

Supreme Court Precedent:
The Supreme Court in Ghanashyam Mishra’s case clarified that once a Resolution Plan is approved, all claims not part of the plan are extinguished. This includes claims by statutory authorities like the Income Tax Department. The Court emphasized that the Resolution Plan aims to provide certainty to the Resolution Applicant, ensuring no surprise claims post-approval.

Binding Nature of the Resolution Plan:
The Supreme Court held that the Resolution Plan, once approved, binds all stakeholders, including statutory bodies. This ensures the Corporate Debtor starts on a clean slate. The legislative intent is to freeze all claims to prevent uncertainty for the Resolution Applicant.

Statutory Claims Post-Approval:
The Court noted that statutory claims not part of the Resolution Plan are extinguished upon its approval. This includes claims under the Income Tax Act, 1961. The overriding effect of the IBC (Section 238) ensures no inconsistency with other laws, including the Income Tax Act.

Conclusion on Legality:
The High Court concluded that the impugned notices under Section 148 could not be issued post-approval of the Resolution Plan. The claims should have been raised during the CIRP proceedings. The failure of the Income Tax Department to do so resulted in the extinguishment of their claims.

2. Maintainability of the Writ Petitions:

Preliminary Objection:
The respondents argued that the proper course of action for the petitioner was to file returns and seek reasons for the notice, as per the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. Income-Tax Officer.

High Court’s Rejection of Preliminary Objection:
The High Court rejected this preliminary objection, citing the Supreme Court’s judgment in Ghanashyam Mishra’s case. It was held that the writ petition is maintainable when the proceedings are wholly without jurisdiction.

Contingencies for Invoking Article 226:
The Court referred to the Supreme Court's ruling that alternate remedies do not bar invoking Article 226 in cases where:
1. Fundamental Rights are enforced.
2. There is a violation of natural justice principles.
3. The proceedings are without jurisdiction or challenge the vires of an Act.

Conclusion on Maintainability:
The High Court found the impugned notices to be without jurisdiction, falling under the third contingency. Hence, the writ petitions were deemed maintainable.

Final Judgment:
The High Court allowed both writ petitions, quashing the impugned notices dated 25.03.2021 and 24.03.2021. The rule was made absolute, and no costs were awarded.

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