THE NATIONAL SEWING THREAD COMPANY LIMITED vs DEPUTY COMMISSIONER OF INCOME TAX & ORS WP C 8679 of 2024
Facts:
1) Petition is filed seeking quashing of the Assessment Order dated 22nd May, 2024 issued by the respondent no. 1/Deputy Commissioner of Income Tax under Section 143(3) of Income Tax Act, 1961 for the Assessment Year 2022-23 and Financial Year 2021- 22. The present petition also assails the Demand Notice under Section 156 of the Income Tax Act, 1961 and Notices dated 23rd May, 2024 under Section 274 of the Income Tax Act, 1961 issued by the respondent no. 1.
Issue: Whether the petition can be allowed ?
Argument:
Petitioner:
1) Counsel submitted that Notices have been issued after the approval of the Resolution Plan for the revival and restructuring of the petitioner-company by learned National Company Law Tribunal (“NCLT”), Chennai, vide order dated 06th December, 2021. Learned counsel appearing for the petitioner submits that the impugned order and notice dated 23rd May, 2024 is legally untenable and in teeth of the provisions of Insolvency and Bankruptcy Code (“IBC”), 2016, which envisages revival/ resolution of the Company on a „Clean Slate Basis‟.
2) Counsel submitted that by way of the impugned notice, penalty is being sought to be imposed upon the petitioner. He further submits that the respondent has fixed the matter for today, i.e., 24th June, 2024 for assessing the penalty to be imposed upon the petitioner. Thus, it is submitted that there is urgency in the matter.
Decision: Hon’ble HC allowed the petition.
Rationale:
1) It is settled proposition of law that once a Resolution Plan is duly approved by the adjudicating authority under Section 31 (1) of IBC, 2016, the claims as provided in the Resolution Plan shall stand frozen and it will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stake holders. On the date of approval of Resolution Plan by the adjudicating authority, all such claims, which are not part of the Resolution Plan, shall stand extinguished, and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the Resolution Plan.
2) It held that upon approval of a Resolution Plan or sale as going concern, is duly approved by the adjudicating authority, all the previous liabilities and claims of any person qua the corporate debtor, cease to exist and extinguish. It held that the impugned Assessment Order dated 22nd May, 2024 as well as the Notice dated 23rd May, 2024, cannot stand in the eyes of the law.
Order:
