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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Rishi Ganga Power Corporation Ltd. - Appellant
Versus
Assistant Commissioner of Income Tax - Respondent
W.P.(C) 3167 of 2020
Decided On : 31-10-2023
Income Tax - Assessment Orders and Notices - Income Tax Act, 1961, Section 142(1), Section 272A(1)(d), Section 143(3), Section 68, Section 271AAC, Section 156 - The court quashed the impugned notices and orders issued by the revenue, holding that the approved resolution plan under the Insolvency and Bankruptcy Code, 2016 binds all stakeholders, including statutory creditors, and the revenue's failure to lodge its claims resulted in the automatic extinguishment of the impugned demands.
Fact of the Case:
The petitioner, Rishi Ganga Power Corporation Ltd. (RGPCL), challenged assessment orders and notices issued by the revenue under the Income Tax Act, 1961. The orders and notices concerned penalties, tax demands, and additions to RGPCL's income for Assessment Year 2017-18.
Finding of the Court:
The court held that the impugned notices and orders were quashed, as the approved resolution plan under the Insolvency and Bankruptcy Code, 2016 binds all stakeholders, including statutory creditors, and the revenue's failure to lodge its claims resulted in the automatic extinguishment of the impugned demands.
Issues: The central issue was the legal tenability of the impugned notices and orders issued by the revenue, considering the approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016.
Ratio Decidendi: The approved resolution plan under the Insolvency and Bankruptcy Code, 2016 binds all stakeholders, including statutory creditors, and the failure to lodge claims resulted in the automatic extinguishment of the impugned demands.
Final Decision: The court quashed the impugned notices and orders, disposing of the writ petition in favor of the petitioner, RGPCL.
JUDGMENT
[Physical Court hearing/ Hybrid hearing (as per request)]
Rajiv Shakdher, J.
Prefatory facts:
1. The central issue for consideration in the instant writ action is whether the impugned assessment orders and notices issued by the respondents [hereafter collectively referred to as "revenue"] are sustainable in law.
1.1. The petitioner, i.e., Rishi Ganga Power Corporation Ltd. [hereafter referred to as "RGPCL"] has, via the instant writ petition, assailed two sets of orders and notices. The first set concerns the order dated 21.11.2019 and the demand notice dated 22.11.2019. The order dated 21.11.2019 was passed by the revenue for failure on the part of RGPCL to respond to the notices issued under Section 142(1) of the Income Tax Act, 1961 [in short, "1961 Act"]. This order was passed under Section 272A(1)(d) of the 1961 Act. Via the said order, RGPCL has been mulcted with a penalty of Rs.10,000/-. The demand notice dated 22.11.2019 seeks to recover the said amount.
1.2. The second set comprises the impugned order and demand notice bearing the same date, i.e., 06.12.2019. The assessment order dated 06.12.2019 has been framed under Section 143(3) of the 1961 Act and concerns Assessment Year (AY) 2017-18. Via the said assessment order, RGPCL's income was assessed at Rs.28,93,60,000/-against a loss declared by it amounting to Rs.3,13,43,192/. The aforesaid assessed income resulted from an addition of an equivalent amount under Section 68 of the 1961 Act vis-a-vis unexplained credits. The Assessing Officer (AO), via the same assessment order, also initiated penalty proceedings against RGPCL under Section 271AAC of the 1961 Act.
1.3. Accordingly, a demand amounting to Rs.12,05,47,497/- was raised via notice dated 06.12.2019. RGPCL was granted 30 days to defray the tax demand.
1.4. For convenience, the penalty order passed on 21.11.2019, the demand notice dated 22.11.2019, and the assessment order as also the consequent demand notice dated 06.12.2019, will be collectively referred to as "impugned orders and notices", unless the context requires otherwise.
Backdrop:
2. The issue culled out hereinabove as regards the legal tenability of the impugned notices and orders, would require us to set forth the backdrop in which the instant writ action came to be instituted in this court.
3. As mentioned above, on 11.12.2017, RGPCL filed its Return of Income (ROI) for AY 2017-18. Pursuant to assessment proceedings being carried out, an assessment order was passed on 06.12.2019. The result was that RGPCL's loss return morphed into a return, which required it to pay tax, as indicated in paragraph 1.3 above.
4. In the interregnum, a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 [hereafter referred to as "2016 Code"] was filed with the National Company Law Tribunal, Chandigarh Bench [NCLT] by Punjab National Bank; a financial creditor of RGPCL. This petition was admitted by the NCLT on 25.01.2018. While admitting the petition, NCLT, inter alia, issued directions for the appointment of an Interim Resolution Professional [IRP]. The said order also indicated that the moratorium had kicked in under Section 14 of the 2016 Code.
5. Consequently, as a next step envisaged under the 2016 Code read with the regulations framed thereunder, a public announcement dated 31.01.2018 was published in various newspapers on 02.02.2018 and 03.02.2018.
6. The record discloses that Resolutions Plans were filed by three entities, going by the name Kundan Care Products Ltd. [in short, "KCPL"]; Ajanta Energy Pvt. Ltd. [in short, "AEPL"] and Agam Pulp and Papers Pvt. Ltd. [in short, "APPL"].
6.1. The record also reveals that KCPL had submitted its Expression of Interest [EOI] to the Resolution Professional on 14.04.2018, which transformed into a Resolution Plan dated 27.04.2018 [hereafter referred to as "RP"]. Evidently, KCPL entered an [undated] amendment to its RP, which, inter alia, adverted to the following:
"All present and future, claims, dues, liabiliti
Once a resolution plan is approved under the Insolvency and Bankruptcy Code, no claims can be pursued for dues prior to that approval, rendering subsequent assessment orders and notices invalid.
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, where writ petition has been filed for en....
Approved resolution plan under IBC Section 31(1) extinguishes all pre-CIRP unsubmitted statutory dues; tax reassessment proceedings post-approval are barred by Section 238's overriding effect and cle....
Once a resolution plan is approved under the IBC, the claims provided in the plan are binding and any claims not included in the plan are extinguished.
The approval of a Resolution Plan under the Insolvency and Bankruptcy Code extinguishes all tax liabilities, preventing the issuance of notices under Section 263 of the Income Tax Act.
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