The Gujarat High Court nullified the demand notice and assessment order since they were based on claims not included in the resolution plan (RP).

Justices Bhargav D. Karia and Niral R. Mehta noted that, in accordance with the Insolvency and Bankruptcy Code (IBC), the demand notice issued on March 20, 2023, following the order dated March 13, 2023, cannot be considered as pertaining to a claim included in the resolution plan.

The bench affirmed that the proceedings under Section 147 of the Income Tax Act, 1961, initiated by the department, were also not related to a claim excluded from the resolution plan.

The petitioner company, as the assessee, underwent insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC), initiated by the Financial Creditor-State Bank of India through an application under Section 7 of the IBC filed on February 3, 2021.

The bank's petition was accepted, leading to the initiation of the Creditor Insolvency Resolution Process (CIRP) by the National Company Law Tribunal (NCLT). Sunilkumar Kabra was appointed as the Interim Resolution Professional (IRP) by the NCLT.

The IRP issued a public announcement regarding the initiation of the CIRP for the petitioner company, inviting creditors to submit their claims along with supporting evidence. Additionally, the IRP formed the Committee of Creditors (COC) on February 26, 2021.

The NCLT granted approval to the application filed by the IRP under Section 13(6) of the IBC. Subsequently, the resolution plan submitted by the resolution applicant received approval.

The petitioner argued that notices issued under Section 148, along with orders under Section 148A(d), and the subsequent proceedings following the notice, were invalidated following the NCLT's approval of the resolution plan.

The petitioner filed the petition contending that the resolution applicant is not accountable for any income tax proceedings before the effective date. Therefore, the petitioner has contested the notices issued by the Commissioner of Income Tax (Appeals) regarding the hearing of appeals filed by the petitioner against assessment orders for the assessment years 2013–14 to 2018–19.

During the pendency of this petition, the respondent passed the assessment order under Section 147, read with Section 144, and issued the demand notice under Section 156.

Hence, the petitioner asserts that no order would have been issued by the respondent on March 13, 2023, and consequently, the respondent could not have issued a notice of demand. This is because the entire reassessment proceedings are considered extinguished in light of the provisions of Section 31, read in conjunction with Section 238 of the IBC.

The court ruled that the notices issued by the CIT (A) and the references for the hearing of the appeals filed by the petitioner, challenging the assessment order, would be considered extinguished on July 1, 2022. This is because no demand would persist in the absence of any claim raised before the RP by the respondent authority.

Regarding the framing of the reassessment for the Assessment Year 2018-19, it was noted that no demand remained pending as of July 1, 2022. Therefore, any demand raised subsequently would not be considered part of the claim to be made before the RP.

Counsel For Petitioner: Dhinal A Shah

Counsel For Respondent: Karan G Sanghani

Case Title: Surya Exim Limited Thro Director Bhawani Singh Versus Union Of India & Ors.

Case No.: R/Special Civil Application No. 1195 Of 2023