IBC Trumps Income Tax Law: Bombay HC Upholds Extinguishment of Pre-Resolution Claims [Read Order]
An approved resolution plan is binding on all stakeholders, including government authorities, and any claim not part of the plan stands extinguished.
The Bombay High Court has allowed challenging two notices issued by the National Faceless Assessment Centre under the Income Tax Act, 1961, for Assessment Year 2024-25 and upheld the extinguishment of Pre-Resolution Claims. It was observed that an approved resolution plan is binding on all stakeholders, including government authorities, and any claim not part of the plan stands extinguished.
V Hotels Limited filed a writ petition. The petitions concerned notices dated 24th June 2025 under Section 143(2) and 26th September 2025 under Section 142(1) ofthe Income Tax Act. V Hotels contended that these notices were untenable as the company had undergone a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). The company's primary argument was that a resolution plan was approved by the National Company Law Tribunal (NCLT) on 26th April 2024, which, under the IBC, extinguished all claims and liabilities pertaining to any period prior to that date.
A division bench comprising Justice B.P. Colabawalla and Justice Amit S. Jamsandekar observed that the Supreme Court, in Ghanshyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd., has categorically held that an approved resolution plan is binding on all stakeholders, including government authorities, and any claim not part of the plan stands extinguished.
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The court noted that the impugned notices sought to scrutinise the financial period for F.Y. 2023-24, which was largely prior to the approval of the resolution plan. Allowing such proceedings, the court held, would defeat the 'clean slate' principle under the IBC, which is intended to enable the successful resolution applicant to revive the corporate debtor without the burden of past liabilities.
The court further observed that the Revenue had not submitted any claim for the Assessment Year in question during the CIRP proceedings. It also relied on its own previous orders passed in the petitioner's case for earlier assessment years, where it had taken a similar view. Consequently, the court found the income tax notices to be unsustainable, without jurisdiction, and contrary to the law laid down by the Supreme Court. The writ petition was allowed, and the impugned notices were quashed and set aside.
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