NFAC cannot Invoke Section 144B of Income Tax Act based on Failure to Lodge claim within Time Stipulated: Delhi HC [Read Order]

In a recent decision the Delhi High Court ruled that the National Faceless Assessment Centre ( NFAC ) cannot invoke Section 144B of the Income Tax Act, 1961 based on failure to lodge claim within time stipulated.

The challenge is essentially mounted on the basis of Section 31 of the Insolvency and Bankruptcy Code, 2016, with the petitioner contending that once the Resolution Plan came to be duly accepted, the bar created in terms of Section 31 of the IBC would apply, and bearing in mind the decision of the Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd vs. Edelweiss Asset Reconstruction Company Ltd, the respondents would stand deprived of the jurisdiction or authority to reopen or assess income for any period prior to the approval of the Resolution Plan.According to the writ petitioner, the Resolution Professional appointed pursuant to the commencement of CIRP, on 23 November 2020, informed the Income Tax authorities of the pendency of proceedings before the NCLT. This was followed by a communication dated 28 January 2021 in terms of which the RP is stated to have conveyed a request to the Income Tax authorities to lodge their claims in accordance with the provisions of the IBC.The CIRP proceedings in the meanwhile culminated in the approval of the Resolution Plan being approved by the NCLT on 15 March 2022 and accepting a plan submitted by M/s Sarthi Constructions which had been accepted by the Committee of Creditors. It is only thereafter that the respondents chose to commence proceedings referable to Section 144B of the Income Tax Act.Section 144B of the Income Tax Act entails proceedings for assessment, reassessment or re-computation being initiated in terms of the faceless procedure of assessment as prescribed therein. Any effort to assess, reassess or re-compute could tend to lean towards a re-computation of liabilities which otherwise stands freezed by virtue of the Resolution Plan having been approved.A Division Bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav observed that “In our considered opinion, the purport of Section 31 of the IBC stands conclusively settled by the Supreme Court in terms of the judgments rendered in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta11 14. We also bear in mind that upon commencement of CIRP, the petition is duly advertised in terms of the provisions made in Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and which would thus constitute due public announcement. The respondents, therefore, cannot sustain the invocation of Section 144B based on their own failure to lodge a claim within the time stipulated.”

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