Income Tax Notice issued prior to date of approval of Resolution Plan was quashed

TUF Metallurgical Pvt. Ltd. Vs Union Of India & Anr. (Delhi High Court)

Conclusion: The impugned notices and orders were issued by the respondents/revenue admittedly subsequent to the public announcement under Section 15 of the Code regarding CIRP process pertaining to assessee and it was only subsequent to approval of the Resolution Plan of the Tribunal that Revenue issued the impugned Assessment Order and Demand Notice. Therefore, the income tax notice was quashed issued prior to date of approval of resolution plan.

Held: Revenue passed the assessment order under Section 143(3) in respect of income of assessee for the Assessment Year 2014-15. Finally, on 19.03.2022, Revenue issued Demand Notice, calling upon assessee to deposit Rs.33,08,070/- in respect of Assessment Year 2014-15 within thirty days failing which assessee would be liable to pay interest, penalty and recovery proceedings under the Income Tax Act. Simultaneously on 19.03.2022, Revenue also issued show cause notice under Section 274 for penalty under Section 271(1)(b). Assessee contended that Revenue arbitrarily issued the impugned orders and demand notices, ignoring the factual and legal ramifications which ensued upon conclusion of the insolvency proceedings of assessee, wherein a Resolution Plan qua assessee for its revival and resurrection was duly approved by the concerned authority vide order dated 05.11.2019. It was held that the admitted factual matrix was that the notices and orders impugned in these writ petitions pertained to the income tax claims of the revenue pertaining to the period much prior to the date of approval of the Resolution Plan. The impugned notices and orders were issued by the Revenue admittedly subsequent to the public announcement under Section 15 of the Code regarding CIRP process pertaining to assessee. As noted above, the public announcement under Section 15 of the Code called for submission of claims by 21.01.2019, but Revenue did not file any claim till that date or even thereafter; it was only subsequent to approval of the Resolution Plan vide order dated 05.11.2019 of the Tribunal, (which order was communicated to Revenue on 02.12.2019) that Revenue issued the impugned Assessment Order and Demand Notice. Similarly, in the other writ petition WP(C) 10628/2022, the impugned notices and orders were issued by Revenue much subsequent to the public announcement dated 30.09.2019 of commencement of CIRP under Section 13 of the Code; vide order dated 21.02.2022, the Tribunal approved the final Resolution Plan and that order was communicated by assessee to Revenue, calling upon the latter to withdraw the earlier notices, but to no avail. The Resolution Plans qua assessees having been approved by the National Company Law Tribunal on 05.11.2019 (in WP(C) 10528/2022) and on 02.2022 (in WP(C) 10628/2022), the tax claims pertaining to the Assessment Year 2017-18 (in WP(C) 10528/2022) and Assessment Year 2014-15 (in WP(C) 10628/2022) stood extinguished.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. These two writ petitions brought under Article 226/227 of the Constitution of India assail the tax claims of revenue in similar circumstances. The legal matrix being same, these petitions though filed by different parties are taken up together for disposal. We heard learned counsel for both sides.

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