V S Texmills Private Limited Vs ACIT (Gujarat High Court)
Gujarat High Court recently quashed recovery notices issued by the Assistant Commissioner of Income Tax (ACIT) against V.S. Texmills Private Limited for the Assessment Year 2017-18, citing the prior approval of the company’s resolution plan under the Insolvency and Bankruptcy Code (IBC). The ruling, delivered in response to a petition filed by V.S. Texmills, reinforces the principle that claims not included in an approved resolution plan stand extinguished.
V.S. Texmills Private Limited had faced Corporate Insolvency Resolution Process (CIRP) proceedings before the National Company Law Tribunal (NCLT), Ahmedabad. A resolution plan for the company was subsequently approved by the Committee of Creditors and, critically, sanctioned by the NCLT on January 1, 2020.
Despite this NCLT approval, the Income Tax Department initiated recovery proceedings against V.S. Texmills. On December 15, 2023, the petitioner received an email from the department regarding outstanding dues. V.S. Texmills promptly responded online the same day, asserting that the demand was invalid due to the NCLT’s order. This was followed by a formal request on February 29, 2024, to cancel the outstanding demand.
However, the respondent ACIT proceeded to issue recovery notices on March 4, 2024, and April 9, 2024. These notices sought to recover Rs. 1,26,02,075/- based on a penalty order dated November 24, 2021, under Section 270A of the Income Tax Act, and Rs. 2,02,200/- pursuant to a penalty order dated October 18, 2021, under Section 271AAC of the Income Tax Act. A significant contention raised by the petitioner was that neither of these penalty orders had been served upon them.
