Tax liabilities arising during corporate insolvency resolution cannot be extinguished by a resolution plan unless explicitly provided, as affirmed by recent Supreme Court rulings.

ORDER :

C. Saravanan, J.

An important question of law has come up for consideration in this writ petition.

2. In this writ petition, the petitioner has challenged the impugned Order dated 31.03.2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the impugned Assessment Order dated 31.03.2023 passed under Section 147 read with Section 144 of the Income Tax Act, 1961.

3. By the impugned Order dated 31.03.2022, the respondent had justified the issuance of the Section 148 Notice dated 31.03.2022 for the Assessment Year 2018-2019.

4. By the second mentioned Assessment Order dated 31.03.2023, the petitioner’s income was determined at Rs.9,00,85,178/- along with interest, and a proposal was made to impose penalties under Sections 272A(1)(d), 271AAC(1), 270A and 271B of the Income Tax Act, 1961.

5. The learned Counsel for the Petitioner places reliance of the judgment of the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Sathish Kumar Gupta and others, (2020) 8 SCC 531,wherein it has been held that a successful resolution applicant cannot be confronted with undecided or belated claims after approval of the resolution plan, as the same would create uncertainty in respect of the liabilities to be borne by such applicant. This principle has been reiterated and affirmed in Ghanashyam Mishra and Sons Private Limited, Through the Authorised Signatory Vs. Edelweiss Asset Reconstruction Company Limited, Through the Director and others, (2021) 9 SCC 657. It is therefore submitted that the issue is no longer res integra.

6. It is submitted that any claim pertaining to a period prior to the approval of the resolution plan stands extinguished by operation of law and that this principle applies equally to tax demands and proceedings.

7. It is submitted that a consistent line of judicial precedents including those relating to income tax demands, have upheld this position, holding that a successful resolution applicant cannot be settled with tax liability.

8. It is submitted that the challenges to such decisions have also been dismissed by the Hon’ble Supreme Court.

9. The learned Counsel further submitted that the resolution plan in the present case was submitted on 26.05.2019 and subsequently approved by the National Company Law Tribunal (NCLT) on 13.12.2019. While approving the Resolution Plan, the NCLT, in paragraph 27.6, observed that the Resolution Applicant may approach the appropriate forum or authority for seeking reliefs and concessions in accordance with law.

10. It is submitted that the aforesaid observation must be construed in the context of the legal position prevailing as on the date of approval. Subsequently, the Hon’ble Supreme Court, in Essar Steel (referred to supra and Ghanashyam Mishra (referred to supra), has conclusively held that no proceedings can be initiated or continued in respect of claims pertaining to a period prior to the approval of the Resolution Plan. In view of the said authoritative pronouncements, the requirement of approaching any authority for such reliefs no longer survives and must be read accordingly.

11. In response to the query of this Hon’ble Court as to whether the Respondent would refrain from enforcing the demand against the Petitioner and instead proceed against the erstwhile promoters, it is submitted that the order of this Hon’ble Court may specifically record that such demands arising out of the impugned orders not be enforced against the Petitioner. It is further prayed that it be clarified that the impugned orders are not being set aside merely to enable the Department to ini