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TMI Blog2024 (5) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings on the Resolution Applicant, in relation to claims which are not part of the Resolution Plan approved by the NCLT. Pertinently, respondents had not submitted any claims to the IRP, as required under the Code, despite the public announcement being issued by the IRP, as prescribed under the Code. The impugned notice issued u/s 143(2) of the Act by Respondent No. 1 and the consequential impugned notices issued u/s 142(1) of the Act by Respondent No. 2 and all subsequent communications issued by Respondent No. 2 pursuant to the aforementioned impugned notices are bad in law since assessment and inquiry under the Act is sought to be initiated in gross violation of provisions of the Code in as much as it relates to a period prior to the Effective Date. The impugned notice issued under Section 143(2) of the Act and the impugned notices issued under Section 142(1) of the Act and all subsequent actions undertaken pursuant to the impugned notices issued under Section 142(1) of the Act are bad in law as no proceedings can be initiated against petitioner for a period prior to the Effective Date. Pertinently, the Resolution Plan provides that new claims, disputes, litigations or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal (NCLT), Mumbai admitted a petition filed by the State Bank of India under Section 7 of the Code against UGSL and appointed an Interim Resolution Professional (IRP). The NCLT also declared a moratorium under Section 14 of the Code. A public announcement was made on 8th October 2020 by the IRP in accordance with Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and calling upon the creditors of UGSL to submit on or before 20th October 2020 proof of their claims. Though respondent being Central Government Department was covered under the definition of operational creditors under the Code, no claims or proof of claims were submitted by Respondent No. 1 or Respondent No. 2. On 4th November 2020, the first meeting of the Committee of Creditors (CoC) was held and the IRP was appointed as the Resolution Professional (RP). On 9th May 2021 the Resolution Applicant submitted a Resolution Plan before the CoC which was approved by the CoC on 2nd June 2021 and submitted to NCLT for approval. By an order dated 14th October 2022 NCLT approved the Resolution Plan. The operative part of the NCLT s order dated 14th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th November 2022 (Effective Date) stood extinguished and/or settled in terms of the Resolution Plan and all proceedings, suits, claims, etc. in connection with the corporate debtor, i.e., UGSL or its affairs, in relation to any period prior to the Effective Date, shall stand withdrawn and dismissed. Mr. Dhond submitted that approved Resolution Plan also provides that all new claims, disputes, litigations or other judicial orders, administrative proceedings including recovery of demands etc., shall be deemed to be barred and shall not be initiated or admitted against the corporate debtor, i.e., petitioner in relation to period prior to the Effective Date which is 10th November 2022. 9. It will be useful to reproduce the relevant paragraphs of Resolution Plan which read as under : Extinguishment of Claims: 2 Notwithstanding anything contained under applicable Law or otherwise, all liabilities, obligations and/or Claims that arise until the Effective Date shall stand waived, extinguished, abated, discharged in perpetuity and no party /Stakeholder shall have any claim against the Corporate Debtor and/or the Resolution Applicant for Claims, whether claimed or unclaimed, contingent or cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time be, directly or indirectly, held responsible or liable in relation thereto. k. The Resolution Applicant and/or the Corporate Debtor (including: (i) any director or officer of the Corporate Debtor who was associated with the Corporate Debtor prior to the Effective Date and continues to be a director or officer of the Corporate Debtor following the Effective Date; and (ii) any individual who becomes a director or officer of the Corporate Debtor following the Effective Date) shall not be liable under any Proceedings (including any Tax Proceedings) in relation to any Claims in so far as the Claims relate to the period until the Effective Date, including in connection with any prior transfer of assets, contracts or business by the Corporate Debtor or any of its Subsidiaries or Affiliates (whether current or previously existing). No Person shall claim the lack of knowledge or actual notice of this Resolution Plan Process as a reason for continuation of any Proceedings against the Corporate Debtor and/or the Resolution Applicant. Such extinguishment of liability shall not affect the claims of the Corporate Debtor in relation to the amounts owed to it. Further, the Resolution Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Plan Approval Order, shall be binding on the Governmental Authorities or any local authority whose Claim, debt, liability including contingent liabilities as on the Effective Date, in each case, whether or not such Claim, debt, liabilities including contingent liabilities is reduced to judgment, fixed, equitable, matured, unmatured, disputed, undisputed, secured, unsecured, contingent, crystallised, admitted, rejected, under verification, assessed or unassessed, recognized in the financial statements or not, and whether or not such Claim, debt, liability is in relation to or on account of notice, proceedings, compounding, Non-Compliance, non-filling, non-preparation of documents, reports, or pursuant to any surveys or summons, under any applicable Law for the time being in force. Any such Claim, debt, liability including contingent liabilities shall be deemed to be dealt with in the Resolution Plan. (Emphasis supplied) 10. Petitioner replied to the notices received calling upon respondent to withdraw the notices, since the Resolution Plan as approved by NCLT stipulates that no person shall be entitled to initiate any proceedings or inquiry, assessment, regulatory including a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Government, State Government or any local authority, if not part of the Resolution Plan, shall stand extinguished and no proceedings in respect of such dues for a period prior to the date on which the Adjudicating Authority grants its approval under Section 31 of the Act could be continued. Even though in the case of Alok Industries Limited (supra) notices had been issued under Section 148A of the Act and Section 148 of the Act, in our view that would not make any difference. We should also note that even in Alok Industries Limited (supra) the Revenue had made it clear that they do not wish to recover any money from assessee. It will be useful to reproduce the order passed in Alok Industries Limited (supra) which reads as under : 1 Petitioner is challenging the notice dated 27th February 2021 issued by respondent No. 1 under section 148 of the Income-tax Act, 1961 ( the Act ) for the assessment year 2013-14, the order dated 6th December 2021 passed by respondent No. 1 rejecting the objections of petitioner for assessment year 2013-2014, the assessment order dated 18th February 2022 passed under section 144 r.w.s. 147 of the Act for assessment year 2013-2014 and the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that although at paragraph 9.5 of the assessment order, respondent No. 1 notes that the assessment order is passed on a protective basis, respondent No. 1 has also proceeded to issue a notice of demand raising a demand of Rs. 305.70 crores. Further, respondent No. 1 has initiated penalty u/s 271(1)(c) of the Act. 6. Respondent No. 1, in the Affidavit in reply filed through one Saurabh Yadav, Deputy Commissioner of Income Tax, Central Circle 6(2), Mumbai, affirmed on 20th August 2022, has stated that ...... Respondent No. 1 is aware of the resolution plan (as submitted by petitioner) and because of that has not initiated any coercive action to recover the demand in petitioner s case.... . 7. In paragraph 4Q(v) respondent No. 1 further stated in the affidavit that respondent No. 1 has further stated that the section is for purpose of assessment/reassessment of escaped income. However before making assessment/reassessment of the escape income, the assessing officer causes necessary enquiries, if the Assessing officer finds/gathers evidence with respect to any other person or with regard to ex-promoters, ex-employees of petitioner, then, the same shall be used, for the purpose of any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority to whom a debt or a statutory due is owned. Further, section 238 of the Code provides that the Code shall have effect notwithstanding anything inconsistent therein contain in any other law for the time being in force. Therefore, the resolution plan approved under section 31 of the Code will be applicable even if the department contends that the same is inconsistent with the provisions of the Act. Hence, proceedings cannot be initiated contrary to the resolution plan. It is to be noted that as per paragraph 3.3.5 of the resolution plan, the value of all dues including income tax dues is treated as nil and is deemed to have been fully discharged and settled for any period prior to the closing date irrespective of whether final or contingent, whether disputed or undisputed, whether or not the Government authority was aware of such claim. Further para 3.3.3 of the Resolution Plan also provides that all proceedings initiated before any forum by the operational creditors (including the central government) shall stand withdrawn and abated. It is also noted that the Income-tax Department had challenged the order of the NCLT approving the resolution plan before the NCLAT, which appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 6th December 2021, rejecting the objections of petitioner, the assessment order dated 18th February 2022 passed under section 144 r.w.s. 147 of the Act and the penalty notice dated 23rd March, 2022 issued under section 274 r.w.s. 271(1)(c) of the Act for the assessment year 2013-14 are quashed and set aside. (g) Petitioner undertakes to withdraw/apply to withdraw within two weeks the appeal against the order of assessment dated 18th February 2022 filed before the Commissioner of Income Tax (Appeal). Undertaking accepted. 12. Petition disposed. 13. At the same time, we make it clear that if, the revenue wants to take any steps as they proposed to, it may do so in accordance with law. 14. All rights and contentions of the parties are kept open. 12. This was followed by this court in The Principal Commissioner of Income Tax, Central 4 vs. Patanjali Foods Ltd. (Formerly known as Ruchi Soya Industries Ltd. Writ Petition No. 1971 of 2023 Dated 17th April 2024 (Unreported) . The Telangana High Court in Sirpur Paper Mills Limited and Another vs. Union of India and Others 2022 SCC OnLine TS 130 , where also the Revenue was seeking to pass the Assessment Order under Section 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent which is outside the resolution plan would stand extinguished. 72 Insofar carry forward of losses and adjustments against future profits are concerned, the same is provided by Clause 17.7 (c) of the resolution plan. However, as and when such carry forward and set off is claimed by the petitioner in future, i.e. beyond the period covered by the resolution plan, the Income Tax Department would be entitled to verify such claim and pass appropriate order. But for the period covered by the resolution plan, it cannot carry out any scrutiny or carry out assessment in respect of the corporate debtor. To that extent, the impugned notices cannot be justified. 13. The Delhi High Court in Rishi Ganga Power Corporation Ltd. vs. Assistant Commissioner of Income Tax 2023 SCC OnLine Del 6994 also took similar view. Paragraph Nos. 28 to 38 read as under : 28. Having heard learned counsel for the parties, what is not in dispute insofar as the instant case is concerned is that some of the notices issued under Section 143(2) of the 1961 Act predated the order dated 13.11.2018 passed by the NCLT, whereby KCPL s RP was approved. These notices are dated 09.08.2018, 28.09.2018 and 30.09.2018. These no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(2) of the 1961 Act. 33. The aforementioned impugned order and notice, dated 21.11.2019, cannot have a life on its own and are inextricably linked to the fate of the impugned assessment order and notice dated 06.12.2019. 34. Thus, having regard to the fact that the revenue had not lodged its claim, despite the publication of the public announcement by the Resolution Professional inviting claims from creditors, including statutory/operational creditors such as the revenue, no provision could be made [even if it may otherwise have been possible] in the approved RP. The terms contained in the approved RP are binding on all stakeholders, including those who could have filed claims but chose not to lodge them. The revenue, having failed to lodge its claim, cannot enforce the impugned orders and notices, given the binding nature of the approved RP. 35. Section 31 of the 2016 Code, among other things, stipulates that once the RP is approved, it shall be binding on the corporate debtor and its employees, members, and creditors, which includes the Central Government, State Government, Local Authority to whom a debt in respect of payment of dues arising under any law for the time being in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor or the Resolution Applicant. Upon approval of this Resolution Plan, all new inquiries, assessments, reassessments, rectifications, revisions, surveys, summons, investigations, notices, suits, claims, disputes, litigations, arbitrations or other judicial, regulatory (including any Tax Proceedings) or administrative proceedings will be deemed to be barred and will not be initiated or admitted against the Corporate Debtor in relation to any period until the Effective Date and the Corporate Debtor and/or the Resolution Applicant shall at no point of time be, directly or indirectly, held responsible or liable in relation thereto. 12. No Governmental Authority (including regulatory, judicial and quasi-judicial authority) shall issue any orders, directions, decrees, Judgments etc. that will be in contravention of the provisions of the Resolution Plan (including the financial plan). 15. In the circumstances, since the Resolution Plan expressively provides that no person shall be entitled to initiate any proceedings or inquiry, assessment, enforce any claim or continue any proceedings in relation to claims so long such result to a period prior to the Effective Date of the Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of 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. Consequently, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. (Emphasis supplied) 19. The approved Resolution Plan clearly provides that any claim and/or liability pertaining to the period prior to the Effective Date (i.e., 10th November 2022) stood extinguished and/or settled in terms of the Resolution Plan. The NCLT approved the Resolution Plan on 14th October 2022, which is binding on all stakeholders of petitioner including respondents. 20. In the circumstances, Rule made absolute in terms of prayer clause (b) which reads as under : (b) To issue a writ of Certiorari or writ in the nature of Certiorari or any other writ, order or direction under Article 226 read with Article 227 of the Constitution of In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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