Uttam Value Steels Ltd Vs ACIT (Bombay High Court)
Conclusion: Since upon the completion of Corporate Insolvency Resolution Process (CIRP), assessee had changed hands and commenced under a new ownership and management, the Bombay High Court held that tax proceedings pertain to period prior to the CIRP, and consequent to the approval of the resolution plan, the tax proceedings stood extinguished.
Held: Assessee-company was admitted into a CIRP by an order of NCLT, and eventually, the company came to be resolved pursuant to a resolution plan finalized by the Committee of Creditors (CoC) u/s 31 of the IBC. The resolution plan, as approved by the NCLT, entailed a full waiver of all tax and tax-related interest dues pertaining to the period prior to commencement of the CIRP. Evidently prior to the commencement of the CIRP, AO carried out search & seizure action against the Vinod Jatia group alleging that certain companies belonging to the Vinod Jatia group had engaged in bogus transactions and had made bogus entries in their books of accounts. Such companies were said to have entered into transactions with assessee. AO therefore intimated assessee about initiating proceedings u/s 153C along with multiple summons u/s 133(6). This was objected by assessee on the ground that resolution plan having already been approved, all past claims pertaining to assessee including claims raised by the Revenue, stood extinguished. Assessee’s submission was however rejected. After its failure to convince AO, assessee approached the High Court praying for quashing & setting aside of all the notices and communications received from the Revenue on the ground that Section 31 of the IBC explicitly made the resolution plan binding on the Revenue. It was held that all dues which were not part of the resolution plan would stand extinguished, and no individual/person would be entitled to initiate or continue proceedings in respect of any claim for dues related to prior of the approval of the resolution plan. Revenue’s contention that the impugned proceedings relate to liabilities that somehow emerge after the CIRP was wholly misconceived and untenable, as the resolution plan upon its approval brought quietus to all claims pursued by Revenue against assessee for any operation prior to the CIRP, added the Bench. The Bench also negated the Revenue’s stance that the as the tax amount had not yet crystallized, it would be future dues and not past dues. The Bench emphasized that the continuation of existing proceedings and the initiation of new proceedings, relating to operations prior to the approval of CIRP were totally prohibited after the approval of resolution plan. Hence, concluding that since tax proceedings against assessee predate the CIRP, it stood extinguished, and allowed assessee’s petition.
