2024 (10) TMI 1156 - HC - Income Tax

Revision u/s 263 against company insolvent - HELD THAT - Considering the submissions made on behalf of both the sides and upon perusal of the record, it is noticed that pursuant to insolvency proceedings initiated under the Code, a resolution plan was approved by the Tribunal under Section 30 (6) of the Code. It is also on record that the claim which was lodged by the Deputy Commissioner of Income Tax, Rajkot was verified and admitted in the proceedings before NCLT after consideration of the claim filed by the Additional Commissioner of Income Tax, Rajkot. As relying on case of Ghanashyam Mishra 2021 (4) TMI 613 - SUPREME COURT no person would be entitled to initiate or continue any proceedings in respect of any claim for any dues relating to the period prior to approval of resolution plan. In view of approval of resolution plan, all liabilities of all stakeholders including that of Government/ Statutory Authority shall stand extinguished after approval of the resolution plan. We therefore, deem it appropriate to quash and set aside the notice u/s 263 of the Act. WP allowed.

Summary

Issues:
Challenge to notice initiating revision proceedings under Section 263 of the Income Tax Act, 1961 for Assessment Year 2017-18.

Analysis:
The petitioner, engaged in the business of electrical transmission line, filed its return of income for Assessment Year 2017-18, declaring a total loss. The case was selected for scrutiny assessment, and an order was passed determining the total loss after various additions and disallowances. Subsequently, insolvency proceedings were initiated under the Insolvency and Bankruptcy Code, resulting in the approval of a resolution plan for the company's revival. The Deputy Commissioner of Income Tax filed a claim, which was verified and admitted, making them an Operational Creditor. The petitioner argued that all admitted claims got extinguished upon the approval of the resolution plan, rendering the notice under Section 263 of the Act unjust and illegal.

The petitioner contended that all past dues of the Income Tax Department were extinguished upon the approval of the resolution plan, citing a Supreme Court decision in support of their argument. The respondent, on the other hand, argued that the powers of the respondent cannot be curtailed when the legal procedure has been followed, and the decision relied upon by the petitioner was not applicable to the present case as it pertained to recovery proceedings, not the initiation of Section 263 proceedings.

Upon considering the submissions, the court noted that the resolution plan was approved, and the claim by the Deputy Commissioner of Income Tax was verified and admitted. Referring to a Supreme Court decision, the court emphasized that all liabilities, including those of Government/Statutory Authorities, stand extinguished after the approval of the resolution plan. Consequently, the court quashed and set aside the notice issued under Section 263 of the Act, ruling in favor of the petitioner.