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TMI Blog2024 (9) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, and that too of AY 2016-17. Evidently, such proceedings pertain to the period prior to the approval of the resolution plan. The outcome of such proceedings, particularly if adverse to the Petitioner-Assessee, would clearly be in relation to tax claims for the period prior to the approval of the resolution plan. The resolution plan came to be approved on May 6, 2020. Any attempt to re-agitate the assessment for AY 2016-17, evidently and squarely, constitutes pursuit of claims for the period prior to even the initiation of the CIRP. The conduct of such proceedings would be directly in conflict with the law declared in Ghanshyam Mishra, which makes it clear that continuation of existing proceedings and initiation of new proceedings that relate to operations prior to the CIRP are totally prohibited after the approval of the resolution plan. Consequently, nothing in the Impugned Proceedings can legitimately survive. Evidently and admittedly, the reassessment proceedings pre-date the CIRP. They would relate to the period prior to the approval of the resolution plan of the Petitioner-Assessee, and therefore stand extinguished. This is why the Supreme Court has clearly ruled that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication containing reasons for initiating the said reassessment. It was stated that the original assessment of the Petitioner-Assessee had been completed on December 28, 2018 in terms of the loss of Rs. 220.25 Crores as returned by the Petitioner-Assessee. Thereafter, the Revenue had conducted survey proceedings against some companies and had reason to believe that dealings by the Petitioner-Assessee with those companies could have led to income in the sum of Rs. 111.28 Crores escaping assessment. 6. On November 19, 2021, the Petitioner-Assessee submitted its objections, specifically asserting that after approval of a resolution plan under Section 31 of the IBC, the Petitioner-Assessee had begun on a new slate with all past claims and dues being extinguished in terms of the resolution plan. The Petitioner-Assessee made submissions on the import of Section 31 of the IBC and various case law interpreting the IBC. The Petitioner-Assessee also called upon the Revenue to share the documents and material relating to the sanction of reassessment proceedings, under Section 151 of the Act. 7. Thereafter, on February 15, 2022 the Petitioner-Assessee called for a speaking order on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Revenue also argued that there is nothing inconsistent between the IBC and the Act for the non-obstinate provisions in the IBC to have any relevance. 11. On March 28, 2022, a Division Bench of this Court, on a prima facie examination of the matter granted ad interim relief by restraining the Revenue from taking any further steps, whether coercive or otherwise, in relation to the Impugned Proceedings. Such interim relief has continued till date. Section 31 (1) of IBC and its import: 12. At the outset, it would be necessary to extract the provisions of Section 31 (1) of the IBC, since it makes the terms of resolution of corporate debtors binding on the world at large. They are extracted below: 31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a plan is aware of the assets and liabilities of the corporate debtor, including the details about the creditors and the amounts claimed by them. It is also required to contain the details of guarantees that have been given in relation to the debts of the corporate debtor by other persons. The details with regard to all material litigation and an ongoing investigation or proceeding initiated by the Government and statutory authorities are also required to be contained in the information memorandum. So also the details regarding the number of workers and employees and liabilities of the corporate debtor towards them are required to be contained in the information memorandum. 68. All these details are required to be contained in the information memorandum so that the resolution applicant is aware as to what are the liabilities that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the corporate debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the adjudicating authority upon its sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; (21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; 97. Creditor therefore has been defined to mean any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder . Operational creditor has been defined to mean a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. Operational debt has been defined to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. 98. It is a cardinal principle of law that a statute has to be read as a whole. Harmonious const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval under Section 31 could be continued. [Emphasis Supplied] 16. It is therefore crystal clear that once a resolution plan is duly approved under Section 31 (1) of the IBC, the debts as provided for in the resolution plan alone shall remain payable and such position shall be binding on, among others, the Central Government and various authorities, including tax authorities. All dues which are not part of the resolution plan would stand extinguished and no person would be entitled to initiate or continue any proceedings in respect of any claim for any such due. No proceedings in respect of any dues relating to the period prior to the approval of the resolution plan can be continued or initiated. 17. In this clear view of the matter, there can be no manner of doubt that the Impugned Proceedings and their continuation against the Petitioner-Assessee are wholly misconceived and untenable. The Impugned Proceedings are essentially reassessment proceedings, and that too of AY 2016-17. Evidently, such proceedings pertain to the period prior to the approval of the resolution plan. The outcome of such proceedings, particularly if adverse to the Petitioner-Assessee, would clearly be in rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nently, 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. 16. The impugned notice issued under Section 143 (2) of the Act by Respondent No. 1 and the consequential impugned notices issued under Section 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. [Emphasis Supplied] Conclusion: 19. The aforesaid position in law squarely applies to the facts of the instant case, and necessitates quashing the Impugned Proceedings. Evidently and admittedly, the reassessment proceedings pre-date the CIRP. They would relate to the period prior to the approval of the resolution plan of the Petitioner-Assessee, and therefore stand extinguished. This is why the Supreme Court has clearly ruled that initiation and continuation of proceedings relating to the period prior to the approval of the resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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