Facts of the Case

The present writ petition was filed challenging the notice dated 31st March 2021 issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2014–15.

The petitioner, being a corporate debtor, had already undergone the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC), which culminated in approval of the resolution plan by the NCLT on 26th October 2020.

It was contended that the impugned reassessment notice pertained to a period prior to the approval of the resolution plan and hence, such liabilities stood extinguished.

Issues Involved

  1. Whether reassessment proceedings under Section 148 of the Income Tax Act, 1961 can be initiated for a period prior to approval of a resolution plan under the IBC.
  2. Whether such proceedings survive after extinguishment of past liabilities under an approved resolution plan.
  3. Whether the failure of the Assessing Officer to decide preliminary objections vitiates reassessment proceedings.

Petitioner’s Arguments

  • The impugned notice pertains to AY 2014–15, which is prior to the approval of the resolution plan, hence all liabilities stood extinguished.
  • Reliance was placed on the Supreme Court judgment in Ghanashyam Mishra & Sons Pvt. Ltd. vs Edelweiss Asset Reconstruction Company Limited (2021) 9 SCC 657, which held that all claims prior to approval of the resolution plan stand extinguished.
  • The petitioner had filed detailed objections to jurisdiction (dated 26 May 2021, 13 October 2021, and 20 December 2021), but the same were not adjudicated by the respondent.

Respondent’s Arguments

  • The respondent sought disposal of the writ petition with a direction to consider and decide the objections raised by the petitioner.

Court’s Findings / Order

  • The Delhi High Court disposed of the writ petition with a direction to the Assessing Officer to decide the petitioner’s objections in accordance with law within four weeks.
  • The Court did not adjudicate the merits of the case but ensured compliance with procedural fairness.
  • It was further directed that no coercive steps shall be taken pursuant to the impugned notice until the objections are decided.

Important Clarification

  • The Court emphasized the necessity for the Assessing Officer to first adjudicate jurisdictional objections before proceeding further.
  • It indirectly reinforced the principle that IBC resolution plans have overriding effect, though final determination on that issue was left open.

Sections Involved

  • Section 148, Income Tax Act, 1961
  • Section 142(1), Income Tax Act, 1961
  • Provisions of Insolvency and Bankruptcy Code, 2016 (CIRP & Resolution Plan)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:443-DB/MMH03022022CW20532022_225204.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.