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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Maruti Koatsu Cylinders Ltd. – Appellant
Versus
Dy Commissioner Of Income Tax, Circle 2(1)(1) Or His Successor & Anr.
R/Special Civil Application No. 7470 of 2023
Decided on : 16-07-2024
Income Tax - Assessment Re-opening - Income Tax Act, 1961 Sections 148A(d), 148, 127(2) - The court held that the Assessing Officer lacked jurisdiction to re-open the assessment post-transfer of the case, emphasizing the finality of the NCLT's resolution plan approval which extinguished past dues.
Fact of the Case:
The petitioner challenged an order under Section 148A(d) of the Income Tax Act regarding the re-opening of assessment for the Assessment Year 2019-20, asserting that jurisdiction was lost after the case was transferred to another authority following a corporate insolvency resolution.
Finding of the Court:
The court found that the Assessing Officer had no jurisdiction to issue the notice for re-opening the assessment after the transfer order, and that the NCLT's approval of the resolution plan extinguished all past dues.
Issues: Whether the Assessing Officer had jurisdiction to re-open the assessment after the transfer of the case and the approval of the resolution plan by the NCLT.
Ratio Decidendi: The court concluded that once a resolution plan is approved by the NCLT, all claims not included in the plan are extinguished, and the Assessing Officer cannot re-open assessments related to those claims.
Result: The impugned notice and order were quashed and set aside.
JUDGMENT :
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
Heard learned advocate Mr.S.N.Divatia for the petitioner and learned advocate Mr.Rudram Trivedi for learned advocate Mr.Nikunt K. Raval for the respondents.
1. Rule, returnable forthwith. Learned advocate Mr.Rudram Trivedi waives service of notice of rule for and on behalf of the respondents.
2. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the order under Section 148A(d) of the Income Tax Act, 1961 (for short ‘the Act’) dated 20th March, 2023 for Assessment Year 2019-20.
3. The brief facts of the case are as under :
3.1. It is the case of the petitioner that the petitioner was carrying on business of manufacturing seamless steel cylinder and a Corporate Insolvency proceeding was initiated before the National Company Law Tribunal (for short ‘the NCLT’) who by order dated 25th May, 2018 under the provisions of Insolvency and Bankruptcy Code, 2016 appointed an Interim Resolution Professional (IRP) who was subsequently confirmed as Resolution Professional (RP) by Committee of creditors and had taken control and custody of the management and operations of the petitioner- Company.
3.2. The NCLT by order dated 16.08.2019 approved the Resolution Plan. The National Company Law Appellate Tribunal by order dated 03.05.2019 instructed the Resolution Professional to ensure the company remains a going concern. The NCLT passed the final order on 22.10.2019, by virtue of which the petitioner-Company written off bank loans, statutory dues waived off by the NCLT.
3.3. It also appears from the record that an order under Section 127(2) of the Act dated 11.01.2023 was passed by the Principal Commissioner of Income Tax, Vadodara-I transferring the case of the petitioner from Vadodara to Central Circle-1(1) Ahmedabad i.e. before the respondent No.2 with immediate effect. However, in spite of the above facts, the respondent No.1-Assessing Officer at Vadodara issued the notice under Section 148A(b) of the Act on 14.02.2023 calling upon the petitioner to show cause as to why the notice under Section 148 of the Act should not be issued for re-opening of the assessment for Assessment Year 2019-20.
3.4. As per the notice under Section 148A(b) of the Act, there was information that petitioner-Company had not filed return of income for Assessment Year 2019-20 though there were transactions by way of time deposits of Rs.1,00,31,962/- and interest income of Rs.93,440/-.
3.5. The petitioner however could not file the response due to the change in place of Office and mail ID etc. and therefore, the respondent No.1 passed the impugned order under Section 148A(d) of the Act on 20th March, 2023 holding that income to the tune of Rs.1,01,25,402/- had escaped assessment for the year under consideration.
3.6. The notice under Section 148 was issued as a consequence of the aforesaid order.
4.1. Learned advocate Mr.S.N.Divatia for the petitioner has submitted that the impugned order passed under Section 148A(d) of the Act as well as the notice under Section 148 of the Act are without jurisdiction as the respondent No.1 situated at Vadodra could not have assumed the jurisdiction to re-open the assessment for Assessment Year 2019-20 after the order of transfer of the case from Vadodara to Ahmedabad was passed on 11.01.2023 under Section 127(2) of the Act.
4.2. It was further submitted that in view of the decision of the Hon’ble Supreme Court of India in case of Ghanashyam Mishra & Sons (P.) Ltd. Versus Edelweiss Asset Reconstruction Co. Ltd. reported in (2021) 126 taxmann.com 132/166 SCL 237 (SC), once the NCLT has approved the resolution plan, all the past dues shall stand extinguished and the respondent-authority could not have assumed the jurisdiction to re-open the assessment as the same would have achieved the finality.
4.3. Learned advocate Mr.S.N.Divatia invited the attention of the Court to the following observations made by the Company Law in the final order dated 22.1
The approval of a resolution plan by the NCLT extinguishes all claims not included in the plan, preventing re-opening of assessments by tax authorities.
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.
All claims of the Income Tax Department are extinguished upon approval of a resolution plan under the Insolvency and Bankruptcy Code, preventing reassessment notices for periods prior to insolvency.
Approval of a resolution plan under the Insolvency and Bankruptcy Code extinguishes all past dues, including those owed to statutory authorities, preventing further claims.
Approval of a resolution plan under the IBC extinguishes all past dues, preventing any assessment or demand for liabilities incurred prior to that approval.
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....
Upon approval of a resolution plan under IBC, all claims not expressly included therein, including tax liabilities, are extinguished and cannot be pursued.
The extinguishment of liabilities under the IBC 2016 post-resolution plan approval necessitates a review of any notices issued for prior assessment years, emphasizing procedural fairness.
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