Alok Industries Ltd. Vs ACIT (Bombay High Court)
Bombay High Court has ruled in favor of Alok Industries Ltd., quashing reassessment proceedings initiated by the Income Tax Department for the assessment year 2013-14. The court held that the reassessment notice issued under Section 148 of the Income-tax Act, 1961, after the approval of the company’s resolution plan under the Insolvency and Bankruptcy Code (IBC), was legally untenable. The judgment follows the precedent set by the Supreme Court in Ghanshyam Mishra & Sons Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657, which held that all claims against a corporate debtor prior to the approval of a resolution plan stand extinguished.
The case arose when the State Bank of India initiated insolvency proceedings against Alok Industries before the National Company Law Tribunal (NCLT) in 2017. The resolution plan was approved in 2019, stipulating that all pre-closing date claims, including tax liabilities, would be deemed settled. Despite this, the Income Tax Department issued a reassessment notice in February 2021, arguing that the proceedings were necessary for gathering evidence related to third parties, ex-promoters, and employees. The department later issued a reassessment order, adding ₹109.70 crore to Alok Industries’ income and raising a tax demand of ₹305.70 crore, along with a penalty notice under Section 271(1)(c) of the Act.
