The Gujarat High Court quashed demand notice and assessment order in the absence of claim not forming part of resolution plan.
It is the case the petitioner that as per clause 12.3 (viii) of the resolution plan as approved by the National Company Law Tribunal ( NCLT ), the resolution applicant will not be liable in respect of any reassessment, reopening, revision, review or other proceedings under the direct and indirect statutes.
The petitioner has therefore approached the Court by preferring the petition on the ground that the resolution applicant is not liable for any income tax proceedings prior to the effective date i.e. 01.07.2022. The petitioner has therefore challenged the notices issued by the Commissioner of Income Tax (Appeals) in respect of the assessment years 2013-14 to 2018-19 for fixing the hearing of appeals filed by the petitioner against the assessment orders for the respective assessment years.
Dhinal Shah, the counsel appearing for the petitioner therefore submitted that the CIT (A) could not have issued the notices for hearing as the pending proceeding before the CIT (Appeals) after 01.07.2022 would lapse and the respondent No.3 could not have passed an order and also could not have issued the notice under section 156 of the Income Tax Act pertaining to the assessment order 2018-19 as the re-assessment notices issued prior to 1st July,2022 would not survive and the entire re-assessment proceedings would lapse and would stand extinguished as per the provision of the IBC.
The counsel for the respondents, Karan Sanghani, submitted that submitted that the demand for the Assessment Year 2018-19 was not crystalized or made available to lodge a claim before the RP during the resolution process and as no demand was in existence with regard to Assessment Year 2018-19, the decisions relied upon by the petitioner would not be applicable to the facts of the case.
A Division Bench of Justices Bhargav D Karia and Niral R Mehta observed that “The demand which was raised pursuant to the order dated 13.03.2023 by issuing the demand notice dated 20.03.2023 cannot be said to be in respect to a claim which is part of the resolution plan. The proceedings which were continued under section 147 read with section 144 of the Income Tax Act by the respondent, was also not a proceeding in respect to a claim which is not part of the resolution plan.”
“As no demand to be claimed was in existence when the NLCT passed the order on 01.07.2022 and therefore, the demand which has arisen pursuant to the assessment order dated 13.03.2022 cannot be said to have been extinguished. Therefore, so far as notices issued by the CIT (Appeals) are accordingly quashed and set aside” the Court concluded.
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