Delhi HC quashes Income Tax Notice issued Prior to Date of Approval of Resolution Plan [Read Order]

The Delhi High Court quashed an income tax notice issued prior to date of approval of resolution plan.

The income tax notices and orders impugned in these writ petitions pertain to the income tax claims of the respondents/revenue pertaining to the period much prior to the date of approval of the Resolution Plan.

The respondent/revenue passed the assessment order under Section 143(3) of the Income Tax Act in respect of income of the petitioner/assessee for the Assessment Year 2014-15. Finally, on 19.03.2022, the respondent/revenue issued Demand Notice, calling upon the petitioner/assessee to deposit Rs.33,08,070/- in respect of Assessment Year 2014-15 within thirty days failing which the petitioner would be liable to pay interest, penalty and recovery proceedings under the Income Tax Act.

Simultaneously on 19.03.2022, the respondent/revenue also issued show cause notice under Section 274 of the Income Tax Act for penalty under Section 271(1)(b) of the Income Tax Act.

The counsel for petitioner/assessee contended that the respondent/revenue arbitrarily issued the impugned orders and demand notices, ignoring the factual and legal ramifications which ensued upon conclusion of the insolvency proceedings of the petitioner/assessee, wherein a Resolution Plan qua the petitioner/assessee for its revival and resurrection was duly approved by the concerned authority vide order dated 05.11.2019.

A Division Bench comprising Justices Girish Kathpalia and Rajiv Shakdher observed that “The impugned notices and orders were issued by the respondents/revenue admittedly subsequent to the public announcement under Section 15 of the Code regarding CIRP process pertaining to the petitioner/assessee. The public announcement under Section 15 of the Code called for submission of claims by 21.01.2019, but the respondents/revenue did not file any claim till that date or even thereafter; it is only subsequent to approval of the Resolution Plan vide order dated 05.11.2019 of the Tribunal.”

“The argument on behalf of respondents/revenue that being the State exchequer, it cannot be bound by the Resolution Process provisions of the Code has been recorded only to be rejected in view of the above quoted extract from the judgment in the case of Ghanshyam Mishra” the Court concluded.

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