Delhi High Court: In the present petition filed for quashing the Assessment Order dated 22-05-2024 by the Deputy Commissioner of Income Tax (respondent 1) under Section 143(3) of the Income Tax Act, 1961 (‘the Act’) for the Assessment Year (‘AY’) 2022-23 and Financial Year (‘FY’) 2021-22, the petitioner seek to assails the Demand Notice under Section 156 of the Act and Notices dated 23-05-2024 under Section 274 of the Act. The Division Bench of Mini Pushkarna* and Dharmesh Sharma, JJ., while setting aside the impugned order and notices stated that, upon approval of a Resolution Plan or sale as going concern by the adjudication authority, all the previous liabilities and claims of any person qua the corporate debtor, cease to exist and extinguish.
The petitioner submitted that, the aforesaid notice have been issued after the approval of the Resolution Plan for the revival and restructuring of the petitioner-company by the National Company Law Tribunal (‘NCLT’), Chennai, vide order dated 06-12-2021, which makes impugned order and notices legally untenable in teeth of the provisions of Insolvency and Bankruptcy Code, 2016 (‘IBC’), which envisages revival/resolution of the Company on a “Clean Slate Basis”.
The petitioner further submitted that by the way of the impugned notice, penalty was sought to be imposed upon the petitioner. He further submitted that the respondent had fixed the matter for 24-06-2024 for assessing the penalty to be imposed upon the petitioner.
None appears for the respondent despite advance notice, Attention of this Court had been drawn to the proof of service, wherein, service had been made on the respondents on their official emails.
The Court after perusal of facts and contentions noted that, NCLT, Chennai, vide order 29-08-2019 had allowed the application seeking initiation of the Corporate Insolvency Resolution Process (‘CIRP’) of the petitioner. Subsequently, the CIRP of the petitioner culminated in successful manner, wherein the resolution plan was approved by Committee of Creditors (‘COC’) with majority of votes on 13-09-2021. Eventually, on 06-12-2021, final approval to resolution plan was given to NCLT, Chennai.
The Court further noted that upon approval of the resolution plan, a new management took over the petitioner, in order to implement the resolution plan as per the scheme of IBC, on a “Clean Slate Basis”. Thus, upon approval of a resolution plan or sale as going concern by the adjudicating authority, all the previous liabilities and claims of any person qua the corporate debtor cease to exist and extinguish.
In the case of Ireo Fiveriver Pvt Ltd v. Income Tax Department, W.P.(C) 12461 of 2022, a Coordinate Bench of this Court, held, “the successful resolution applicant cannot be foisted with any liabilities other than those which are specified and factored in the Resolution Plan and which may pertain to a period prior to the resolution plan itself having been approved.”
The Court then stated that once the resolution plan was approved by the COC, it should be binding on all the stakeholders. Thus, the successful resolution applicant starts running the business of the corporate debtor on a fresh slate. Considering the aforesaid, the Court held that the impugned assessment order dated 22-05-2024 under Section 143(3) of the Act; Notice of Demand dated 22-5-2024 under Section 156 of the said Act, and Notice dated 23-5-2024 passed under Section 274 of the Act cannot stand in the eyes of the law and thus, were set aside.
[National Sewing Thread Co. Ltd. v. CIT, 2024 SCC OnLine Del 4426, decided on 24-06-2024]
*Judgement authored by: Justice Mini Pushkarna
Advocates who appeared in this case :
For Petitioner: Palash S. Singhai, Advocate.
