1. Petitioner challenges income tax assessment orders and demand notices issued for periods prior to the approval of a corporate insolvency resolution plan. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 )
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2026 Supreme(Online)(Gau) 26157
HIGH COURT OF GAUHATI
MR. JUSTICE DEVASHIS BARUAH
MEGHALAYA INFRATECH LIMITED – Appellant
Versus
DEPUTY COMMISSIONER OF INCOME TAX AND 2 ORS – Respondent
WP(C) / 3001 / 2023
Important Points
Under the 'clean slate' doctrine, once a resolution plan is approved under the Insolvency and Bankruptcy Code, all statutory dues for the period prior to approval not included in the plan are extinguished, rendering any subsequent tax assessment orders or demand notices invalid.
Subject
Taxation - Insolvency and Bankruptcy
Act Referred
Headnote
(A) Insolvency and Bankruptcy Code, 2016 - Section 31 - Income Tax Act, 1961 - Section 153C - Approval of Resolution Plan - Clean Slate Doctrine - Once a resolution plan is duly approved by the adjudicating authority, the claims provided in the plan stand frozen and are binding on the corporate debtor, its employees, members, creditors, and the Central Government or any State Government or local authority to whom statutory dues are owed - All claims, including statutory dues, which are not part of the approved resolution plan stand extinguished - No person is entitled to initiate or continue any proceedings in respect of a claim which is not part of the resolution plan for the period prior to the date of approval - The successful resolution applicant must be able to recommence business on a clean slate, and belated claims cannot be included as it would create uncertainty. (Paras 22, 23, 24)
(B) Writ Jurisdiction - Alternative Efficacious Remedy - Where pure questions of law are involved without any disputed questions of fact, the High Court should not relegate the petitioner to statutory authorities. (Paras 19, 20)
Facts of the case:
A company underwent the Corporate Insolvency Resolution Process, and a resolution plan was approved by the adjudicating authority. Subsequent to this approval and its confirmation by the apex court, the tax department initiated proceedings under the tax laws for assessment years prior to the approval of the plan. This resulted in the issuance of assessment orders and notices of demand for those assessment years after the resolution plan had already been accepted.
Findings of Court:
The proceedings initiated by the issuance of notices for assessment years prior to the approval of the resolution plan were without jurisdiction. The assessment orders and corresponding notices of demand are unsustainable as the approved resolution plan binds the central government regarding statutory dues.
Issues: Whether demand notices for assessment years prior to the approval of a resolution plan, raised subsequent to such approval, can be sustained in law in view of the clean slate doctrine under the insolvency laws.
Ratio Decidendi: Upon the adjudicating authority's approval of a resolution plan, all dues, including statutory dues owed to the government, if not part of the plan, stand extinguished. No proceedings in respect of such dues for the period prior to the date of approval could be continued or initiated, ensuring the resolution applicant starts on a clean slate.
Result: Assessment orders and corresponding notices of demand for the relevant assessment years set aside and quashed.
(B) Writ Jurisdiction - Alternative Efficacious Remedy - Where pure questions of law are involved without any disputed questions of fact, the High Court should not relegate the petitioner to statutory authorities. (Paras 19, 20)
Facts of the case:
A company underwent the Corporate Insolvency Resolution Process, and a resolution plan was approved by the adjudicating authority. Subsequent to this approval and its confirmation by the apex court, the tax department initiated proceedings under the tax laws for assessment years prior to the approval of the plan. This resulted in the issuance of assessment orders and notices of demand for those assessment years after the resolution plan had already been accepted.
Findings of Court:
The proceedings initiated by the issuance of notices for assessment years prior to the approval of the resolution plan were without jurisdiction. The assessment orders and corresponding notices of demand are unsustainable as the approved resolution plan binds the central government regarding statutory dues.
Issues: Whether demand notices for assessment years prior to the approval of a resolution plan, raised subsequent to such approval, can be sustained in law in view of the clean slate doctrine under the insolvency laws.
Ratio Decidendi: Upon the adjudicating authority's approval of a resolution plan, all dues, including statutory dues owed to the government, if not part of the plan, stand extinguished. No proceedings in respect of such dues for the period prior to the date of approval could be continued or initiated, ensuring the resolution applicant starts on a clean slate.
Result: Assessment orders and corresponding notices of demand for the relevant assessment years set aside and quashed.
Legal Category Hierarchy
Advocates:
For the Appellants/Petitioners: Kapil Goel, P Das
For the Respondents: S Chetia
For the Appellants/Petitioners: Kapil Goel, P Das
For the Respondents: S Chetia
Table of Contents
2. Petitioner claims immunity under the clean slate doctrine post-resolution plan; Revenue contends assessment orders are maintainable statutory appeals and pertain to information discovered post-approval. (Para 15 , 16 , 17 , 18 )
3. The court found that once a resolution plan is approved under the Insolvency and Bankruptcy Code, subsequent claims for dues prior to approval cannot be legally maintained. (Para 19 , 20 , 21 , 22 , 23 , 24 )
4. Approved resolution plans bind all stakeholders and government authorities, extinguishing all prior claims not included therein to facilitate the business's fresh start. (Para 23 , 24 )
5. The High Court quashed the assessment orders and demand notices, ruling them to be without jurisdiction. (Para 25 )
6. Can taxation authorities initiate or continue proceedings for statutory dues relating to a period prior to the approval of a resolution plan?
No. Once a resolution plan is approved under Section 31 of the Insolvency and Bankruptcy Code, all claims for the period prior to such approval stand extinguished if not part of the plan, binding all creditors including government authorities. (Para 22 , 23 , 24 )
7. Does a High Court generally prefer statutory appeals over writ jurisdiction in tax matters?
Yes, but it should exercise its writ jurisdiction when the issue involves a pure question of law without disputed questions of fact, especially regarding the interpretation of the Insolvency and Bankruptcy Code. (Para 19 , 20 )
8. What is the legal effect of the clean slate doctrine on a corporate debtor after a resolution plan is approved?
It ensures the successful resolution applicant takes over the business unencumbered by past claims that were not part of the plan, preventing uncertainty and allowing the business to recommence on a fresh slate. (Para 24 )
JUDGMENT AND ORDER (ORAL)
1. Heard Mr. K. Goel, the learned counsel appearing on behalf of the Petitioner in both the writ petitions and Mr. S. Chetia, the learned Standing counsel appearing on behalf of the Income Tax Department.
2. On account of the commonality of facts and the similarity of the issue involved, both the writ petitions are taken up for disposal by this common judgment and order.
3. WP(C) No. No.3001/2023 is for the Assessment Year 2011–12 and WP(C) No. 3007/2023 is for the Assessment Year 2016–17.
4. The issue which arises for consideration in both the writ petitions is as to whether the Demand Notices for the two Assessment Years i.e. 2011-12 and 2016-17 though raised subsequent to the Resolution Plan having been accepted by the learned National Company Law Tribunal, Guwahati (for short, ‘NCLT’) on 18.05.2020 can be sustained in law in view of Section 31 of the Insolvency and Bankruptcy Code, 2016 (for short ‘the Code»)?
BRIEF FACTS OF THE CASES:
5. The Petitioner company is an assessee under Section 2(7) of the Income Tax Act, 1961, (for short ‘the Act of 1961’).
6. The materials on record show that an application being CP(IB) No. 13/GB/2019 was filed under Section 7 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP) in respect to the Petitioner Company by the Allahabad Bank. The learned NCLT vide an order dated 28.08.2019 admitted the application and the CIRP came to be initiated in respect to the Petitioner Company. One Mr. Amit Pareek was appointed as the Interim Resolution Professional who was subsequently confirmed as the Resolution Professional in the 1st Committee of Creditors. There were four Resolution Applicants who submitted their respective Resolution Plans. In the Committee of Creditors meeting held on 11–12 of February, 2020, the Resolution Applicant, namely Mr. Ngaitlang Dhar emerged as the H-1 bidder, whereas one Mr. Abhishek Agarwal emerged as the H-2 bidder.
7. In the 7th Committee of Creditors meeting held on 6th of March, 2020, with a 100% voting share, approved the Resolution Plan of Mr. Ngaitlang Dhar. Subsequent thereto, on an application filed before the learned NCLT, the Resolution Plan submitted by Mr. Ngaitlang Dhar was approved on 18.05.2020.
8. It is relevant to take note of that against the said approval granted by the learned NCLT, an Appeal thereagainst was filed before the National Company Law Appellate Tribunal, New Delhi challenging the order dated 18.05.2020 passed by the learned NCLT. The said Appeal was allowed by the learned National Company Law Appellate Tribunal, New Delhi, vide an order dated 19.10.2020. Being aggrieved, the Mr. Ngaitlang Dhar filed an Appeal before the Supreme Court which was registered and numbered as Civil Appeal No. 3665–3666 of 2020. Along with that, the Resolution Professional also filed Civil Appeal No. 3742–3743 of 2020. The Supreme Court, vide a detailed judgment and order dated 17.12.2021 interfered with the judgment and order passed by the National Company Law Appellate Tribunal dated 19.10.2020 and upheld the order dated 18.05.2020 passed by the learned NCLT.
9. Subsequent thereto, notices were issued to the Petitioner under Section 153C of the Act of 1961 for the Assessment Years 2011–12 and 2016–17. The records further reveal that assessment orders were passed for the Assessment Years 2011-12 and 2016- 17 on 29.03.2023 and Notices of Demand both dated 29.03.2023 were issued.
10. For the Assessment Year 2011–12, the assessment order was passed on 29.03.2023, whereby an amount of Rs.83,00,000/- was added to the total income of the assessee. Accordingly, upon adding the said income, an amount of Rs.1,01,56,212/- was determined to be payable by the Petitioner.
11. Insofar as the Assessment Year 2016–17, assessment order was passed on 29.03.2023 whereby Rs.10,55,00,000/- was added to the total income of the assessee. Accordingly, an amount of Rs.6,71,81,020/- was determined as payable by the Petitioner.
12. Being aggrieved, the
