Facts of the Case

  • The petitioner, Rishi Ganga Power Corporation Ltd. (RGPCL), filed its return for AY 2017–18 declaring losses.
  • During assessment, the Income Tax Department:
    • Passed an order under Section 143(3) adding ₹28.93 crore under Section 68 (unexplained credits).
    • Raised a demand of ₹12.05 crore.
    • Imposed penalty under Section 272A(1)(d) for non-compliance.
  • Meanwhile:
    • Insolvency proceedings were initiated under Section 7 of IBC by Punjab National Bank.
    • NCLT admitted the petition and imposed moratorium under Section 14 IBC.
    • A Resolution Plan (RP) submitted by Kundan Care Products Ltd. was approved on 13.11.2018.
  • The Resolution Plan provided for extinguishment of all past liabilities, including statutory dues.
  • The Income Tax Department did not file any claim before the Resolution Professional.
  • Despite this, assessment orders and penalty demands were passed post approval of the Resolution Plan.

Issues Involved

  1. Whether income tax demands raised after approval of a Resolution Plan are legally enforceable?
  2. Whether failure of the Revenue to file claims before the Resolution Professional extinguishes its right to recover tax dues?
  3. Whether tax liabilities qualify as “claims” under the IBC even if not crystallized?

Petitioner’s Arguments

  • Tax demands relate to a period prior to approval of the Resolution Plan.
  • Revenue, being an operational creditor, failed to submit claims despite public notice.
  • Under Section 31 IBC, the approved Resolution Plan is binding on all stakeholders, including statutory authorities.
  • All pre-resolution claims stand extinguished automatically.

Respondent’s Arguments

  • Tax demand crystallized after approval of Resolution Plan, hence not required to be filed earlier.
  • Since no demand existed at the time of CIRP, the Revenue was not obligated to submit a claim.
  • Non-compliance by the petitioner justified assessment and penalty orders.

Court’s Findings / Analysis

  • The Court held that:
    • Under IBC, “claim” includes even disputed or unadjudicated claims (Section 3(6)).
    • Operational creditors must file claims even if liability is not finalized or crystallized.
    • Revenue had sufficient notice through public announcement but failed to act.
  • The Court clarified:
    • Resolution Plan approved under Section 31 IBC is binding on all stakeholders, including government authorities.
    • Any claim not submitted during CIRP stands extinguished permanently.
  • Tax authorities cannot:
    • Circumvent IBC framework
    • Enforce demands arising from pre-resolution period

Court Order / Final Decision

    • Quashed all impugned assessment orders and demand notices
    • Held that tax demands stood extinguished due to approved Resolution Plan
    • Declared Revenue’s action unsustainable in law

Important Clarifications

  • Tax authorities are treated as operational creditors under IBC.
  • Claims need not be adjudicated or finalized to be submitted in CIRP.
  • Failure to file claims results in:
    • Complete extinguishment of liability
    • No future recovery rights
  • Even penalty proceedings linked to such claims are invalid once principal demand fails.

Link to download the order -

https://delhihighcourt.nic.in/app/showFileJudgment/RAS31102023CW31672020_162616.pdf

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