Murli Industries Limited. Vs ACIT (Bombay High Court)
IT Department cannot raise claims against the Corporate Debtor once the resolution plan is approved
The Hon’ble Bombay High Court in Murli Industries Limited vs. Assistant Commissioner of Income Tax & ors. [W.P. No. 2948 of 2021 and W.P. No. 2965 of 2021 dated December 23, 2021] held that the IT Department is not entitled to issue notice against the Corporate Debtor for unpaid tax claims after the approval of the resolution plan by the adjudicating authority.
Facts:
Murli Industries Limited (“the Petitioner” or “Corporate Debtor”) is engaged in the business of manufacture and sale of cement.
The M/s. Edelweiss Asset Reconstruction Company Limited had filed application under the Insolvency Bankruptcy Code, 2016 (“the IBC”) to initiate Corporate Insolvency Resolution Process (“CIRP Proceedings”) against the Petitioner.
Accordingly, Resolution Professional (“RP”) was appointed and he made a public announcement calling upon the creditors to submit a proof of their claim.
Subsequently, the resolution plan was approved subject to certain modifications by the National Company Law Tribunal (“NCLT”) vide order dated March 03, 2019 and July 22, 2019 and further upheld by National Company Law Appellate Tribunal (“NCALT”) vide order dated January 24, 2020 and the same was made effective from August 25, 2020.
Thereafter, the Assessing Officer (“the Respondent”) issued the Notice dated March 25, 2021 (“the Notice”) under Section 148 of the Income Tax Act, 1961 (“Income Tax Act”), seeking to reopen the concluded assessment of the Petitioner for the assessment year 2014 – 15 i.e., the assessment year falling prior to the date of approval of Resolution Plan under IBC.
Being aggrieved by the Notice, the Petitioner challenged the legality of the Notice and contended that the Resolution Plan was approved prior to the issuance of the Notice.
The Respondent argued that the claim cannot be a part of the Resolution Plan since the claim was not finalised and has been purely charged based on the fact that the tax in the assessment year of 2014-15 has been escaped.
Issue:
Whether the Notice under Section 148 of the Income Tax Act can be issued to a Corporate Debtor after approval of resolution plan?
Held:
The Hon’ble Bombay High Court in W.P. No. 2948 of 2021 and W.P. No. 2965 of 2021 dated December 23, 2021 held as under:
