P DOT G Constructions Private Limited Vs ACIT (Madras High Court)
Summary: The Madras High Court, in P DOT G Constructions Private Limited Vs Assistant Commissioner of Income Tax, examined the validity of reassessment proceedings initiated for Assessment Year 2018–19 against a company that had undergone the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The petitioner challenged the order dated 31 March 2022 passed under Section 148A(d) of the Income-tax Act, 1961, and the consequential reassessment order dated 31 March 2023 under Sections 147 read with 144. The reassessment determined the company’s income at ₹9,00,85,178, together with interest, and proposed penalties under Sections 272A(1)(d), 271AAC(1), 270A and 271B. The central controversy concerned whether the Income Tax Department could initiate and continue proceedings relating to a period preceding approval of a resolution plan, notwithstanding the binding effect of that plan under Section 31 of the IBC.
The petitioner submitted that CIRP had commenced on 13 July 2018 and that the revised resolution plan submitted by RCC E-Construct Private Limited on 26 May 2019 was approved by the National Company Law Tribunal on 13 December 2019. It relied principally on Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, (2020) 8 SCC 531, and Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, (2021) 9 SCC 657. According to the petitioner, these judgments established that once a resolution plan is approved, claims relating to periods preceding its approval that are not incorporated into the plan stand extinguished. It argued that a successful resolution applicant must be permitted to operate the corporate debtor without exposure to undisclosed or subsequently asserted liabilities. On that basis, the petitioner maintained that the disputed reassessment proceedings were inconsistent with the clean-slate principle recognised by the Supreme Court.
The petitioner further contended that the legal position declared by the Supreme Court was applicable even though the resolution plan had been submitted before the decisions in Essar Steel and Ghanashyam Mishra. It submitted that judicial interpretation of a statutory provision ordinarily declares the law as it has stood from inception and should not be treated as creating a new legal obligation only from the date of judgment. The petitioner also referred to Vaibhav Goel v. Commissioner of Income Tax, Ruchi Soya Industries Ltd. v. Union of India, Alok Industries v. Commissioner of Income Tax and AMNS Khopoli Ltd. v. Assistant Commissioner of Income Tax in support of its position concerning statutory claims following resolution-plan approval. It sought relief against the impugned reassessment orders and requested that the tax demand not be enforced against the company. It additionally raised concerns that setting aside the orders should not merely facilitate recovery proceedings against former directors under Section 179 of the Income-tax Act.
The Revenue opposed the writ petition, submitting that the petitioner had admittedly failed to file its income-tax return for Assessment Year 2018–19. The Department argued that the statutory obligation to file returns continued notwithstanding commencement of CIRP and that the moratorium under Section 14 of the IBC did not dispense with tax-compliance requirements. It maintained that the Assessing Officer possessed information indicating possible escapement of income and had followed the procedure prescribed under Section 148A, including issuance of a show-cause notice and consideration of the petitioner’s reply. The Revenue also submitted that the NCLT had not granted an unconditional waiver of statutory tax liabilities when approving the resolution plan. According to the Department, the plan contemplated compliance with pending statutory requirements, preparation of audited financial statements and determination of outstanding tax liabilities through the competent authorities.
The Revenue additionally relied on the terms of the approved resolution plan and the disclosures contained in the information memorandum. It submitted that the successful resolution applicant was aware of the company’s pending tax-compliance obligations and could not selectively rely on the resolution plan to claim immunity from statutory liabilities while disregarding its corresponding commitments. The Department distinguished the determination of a tax liability from its enforcement, arguing that reassessment proceedings could lawfully quantify an existing statutory obligation even where questions concerning recovery remained subject to the insolvency framework. Reliance was placed on decisions including Adani Power Limited v. Shapoorji Pallonji and Co. Pvt. Ltd., Fourth Dimension Solutions Ltd. v. Ricoh India Ltd. and National Sewing Thread Co. Ltd. v. Superintending Engineer, TANGEDCO. The Revenue also referred to Section 140A of the Income-tax Act, the treatment of insolvency resolution process costs under the IBC and the possible application of Section 179 concerning recovery from directors.
The High Court examined the relevant chronology and observed that the disputed assessment concerned income earned during Financial Year 2017–18, corresponding to Assessment Year 2018–19. CIRP commenced on 13 July 2018, while the prescribed dates for filing the relevant return fell thereafter. The Court noted that returns had not been filed for Assessment Years 2016–17, 2017–18 and 2018–19. It also considered the appointment of the resolution professionals, constitution of the Committee of Creditors, submission and approval of the revised resolution plan, and the financial information made available during the insolvency proceedings. The revised plan disclosed outstanding statutory dues, including income-tax demands for earlier assessment years, and provided for treatment of certain liabilities following their determination by the relevant authorities. These circumstances were material to the Court’s examination of the petitioner’s claim that the disputed liability had automatically ceased to exist.
The Court analysed the Supreme Court decisions in Essar Steel, Ghanashyam Mishra, State Tax Officer v. Rainbow Papers Ltd. and Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat (P.) Ltd. It recognised the principle that an approved resolution plan binds the relevant stakeholders and that claims not forming part of the plan may stand extinguished. However, the Court emphasised that judicial precedents must be understood in the context of the issues actually decided. It distinguished the pre-CIRP liabilities considered in the clean-slate judgments from liabilities arising during the CIRP period. In the Court’s view, the principles laid down in Essar Steel and Ghanashyam Mishra could not automatically be extended to the disputed liability associated with the CIRP period. Accordingly, those judgments did not provide the petitioner with the protection claimed against the reassessment proceedings.
The High Court also examined the petitioner’s failure to regularise its income-tax returns and the specific terms of the NCLT-approved resolution plan. It noted that the resolution applicant had undertaken to file outstanding returns after approval of the plan and that the NCLT had directed it to approach the appropriate statutory authorities for reliefs and concessions permissible under law. The Court observed that the petitioner ought to have approached the competent income-tax authority, including the Central Board of Direct Taxes, for condonation of delay under Section 119(2)(b), particularly if it intended to claim losses or their set-off in subsequent assessment years. Without filing the necessary returns and obtaining appropriate relief, the petitioner could not assume entitlement to those tax benefits. The Court further considered that matters addressed in the approved resolution plan could not be reopened through collateral writ proceedings.
Consequently, the Madras High Court held that the petitioner could not rely on the clean-slate doctrine to invalidate the disputed reassessment for Assessment Year 2018–19 in the circumstances presented. It concluded that the Supreme Court decisions in Essar Steel and Ghanashyam Mishra were distinguishable because the liabilities under consideration in those cases related to the pre-CIRP period, whereas the present dispute concerned the tax liability addressed in the context of the CIRP and approved resolution plan. The Court declined to interfere with the reassessment orders and dismissed the writ petition, while granting the petitioner liberty to pursue remedies available under law. The connected miscellaneous petitions were closed, and no costs were awarded. The judgment highlights the distinction drawn by the Court between pre-CIRP claims and CIRP-period tax liabilities, together with the continuing importance of statutory tax compliance and the terms of an approved resolution plan.
Cases Discussed
- Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta — (2020) 8 SCC 531.
- Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. — (2021) 9 SCC 657.
- Vaibhav Goel v. CIT — (2025) 8 SCC 511.
- Ruchi Soya Industries Ltd. v. Union of India — (2022) 6 SCC 343 (related TaxGuru coverage).
- Alok Industries v. CIT — 2024 SCC OnLine Bom 3481.
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AMNS Khopoli Ltd. v. ACIT — 2024 SCC OnLine Bom 1213.
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Adani Power Ltd. v. Shapoorji Pallonji and Co. Pvt. Ltd. — [2025] 256 Comp Cas 346.
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Fourth Dimension Solutions Ltd. v. Ricoh India Ltd. — Civil Appeal No. 5908 of 2021.
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National Sewing Thread Co. Ltd. v. Superintending Engineer, TANGEDCO — (2024) 3 CTC 690.
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SBI v. V. Ramakrishnan — (2018) 17 SCC 394.
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STO v. Rainbow Papers Ltd. — (2023) 9 SCC 545.
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Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat (P.) Ltd. — (2023) 10 SCC 60.
