Reassessment Proceedings Quashed: Revenue Cannot Revive Extinguished Claims Post-CIRP

Case Analysis

Based on the facts provided, the case establishes that the Income Tax Department cannot initiate or continue reassessment proceedings (under Section 148A/148 of the Income Tax Act) against a corporate debtor for a period prior to the approval of a Resolution Plan, if the Department failed to submit its claim during the Corporate Insolvency Resolution Process (CIRP).

Key Legal Issue

Whether the Revenue Department can initiate reassessment proceedings against a company for a period preceding the approval of a Resolution Plan by the NCLT, specifically when the Department failed to file a claim before the Resolution Professional (RP) during the insolvency process.

Decision

Held: Yes, the reassessment proceedings are to be quashed.

The tribunal/court held that permitting the Income Tax Department to continue with proceedings for past dues would derail the Resolution Plan and violate the “Clean Slate” doctrine enshrined in the Insolvency and Bankruptcy Code (IBC).

Legal Reasoning

1. The “Clean Slate” Doctrine

The core of this judgment rests on the “Clean Slate” theory, which was conclusively settled by the Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (2021).

Principle: Once a Resolution Plan is approved by the Adjudicating Authority (NCLT) under Section 31(1) of the IBC, the successful Resolution Applicant (the new management) takes over the corporate debtor on a “clean slate.”
Effect: The new management cannot be burdened with “hydra-headed” monsters of past liabilities that were not part of the approved plan.

2. Section 31 of the IBC vs. Income Tax Act

Binding Nature: Section 31(1) of the IBC states that an approved Resolution Plan is binding on the corporate debtor and its employees, members, creditors, including the Central Government, State Governments, or any local authority to whom a debt is owed.
Extinguishment of Claims: Since the Income Tax Department is considered an “Operational Creditor” (for statutory dues), it is mandatory for them to file their claims with the Resolution Professional within the prescribed timeline during the CIRP.
Consequence of Non-Filing: If the Revenue fails to file a claim, or if the claim is not included in the approved Resolution Plan, that debt is legally extinguished. The Department cannot later invoke the Income Tax Act to recover dues that effectively no longer exist in the eyes of the law.

3. Reviving the Assessee

The objective of the IBC is to revive the corporate debtor. If statutory authorities were allowed to initiate reassessment for past years after the plan is approved, it would create unforeseen liabilities for the new management, making the revival of the company impossible and defeating the purpose of the Code.

Conclusion

Since the Revenue Department failed to file a claim during the CIRP for the relevant assessment year, the claim stood extinguished upon the NCLT’s approval of the plan. Consequently, the notice under Section 148A and the subsequent reassessment proceedings were without jurisdiction and were quashed.

Relevant Precedents:

Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (Supreme Court)
Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (Supreme Court)

HIGH COURT OF BOMBAY

Anuradha Real Estate Developers Pvt Ltd

Office of the Income-tax Officer

B. P. COLABAWALLA and AMIT S. JAMSANDEKAR, JJ.

WRIT PETITION (L) NO. 29539 OF 2025

NOVEMBER 4, 2025

Tirth Nayak, Aayush Modi, Aayu Saxena and Akshay Dave, Advs. for the Petitioner. Subir Kumar and Niyanta Trivedi, Advs. for the Respondent.

ORDER

1. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally.

2. By this writ petition under Article 226 of the Constitution of India, the Petitioner is challenging the re-assessment proceedings initiated by Respondent No.1 vide Notice dated 26.06.2025 [“Impugned Notice”] under the provision of Section 148A(1) of the Income Tax Act, 1961 [“IT Act”] and Order dated 26.06.2025 [“Impugned Order”] under the provision of Section 148A(3) of the IT Act [collectively “Impugned Proceedings”] for the Assessment Year 2019-20 [“relevant A.Y.”].

3. It is contended by the Petitioner that the re-assessment proceedings for the relevant A.Y., initiated against the Petitioner is liable to be quashed and set aside, in view of the Resolution Plan approved by the Ld. National Company Law Tribunal, Mumbai Bench [“Ld. Adjudicating Authority”] vide Order dated 02.09.2024 [“Plan Approval Order”].

4. It is further contended by the Petitioner that, prior to initiation of the Impugned Proceedings, the Ld. Adjudicating Authority vide Order dated 11.08.2021 [“Admission Order”] admitted Company Petition No. 481/(IB)-MB-V/2021 filed under the provision(s) of Section 7 of the Insolvency and Bankruptcy Code, 2016 [“the Code”] by certain homebuyers in a residential building project being ‘Royal Accord’, proposed to be developed on Survey No. 429, Hissa No. 1/3, C.T.S No. 1069 inter alia initiating the Corporate Insolvency Resolution Process [“CIRP”] and declaring a moratorium under Section 14 of the Code. Further, no appeal against the Admission Order was preferred and the CIRP viz-a-viz the Petitioner was concluded upon passing of the Plan Approval Order by the Ld. Adjudicating Authority approving the resolution plan of Zaveri and Company Private Limited (the Resolution Applicant) in accordance with the provisions of Section 31 of the Code. Accordingly, from the passing of the Admission Order till passing of the Plan Approval Order by the Ld. Adjudicating Authority, i.e. from 11.08.2021 till 02.09.2024, a moratorium in terms of Section 14 of the Code was in force.

5. Accordingly, it is contended by the Petitioner that the Impugned Proceedings are without jurisdiction and contrary to law as declared by the Hon’ble Apex Court in Ghanshyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (SC)/(2021) 9 SCC 657 and Vaibhav Goel v. Dy. CIT Company Cases 266 (SC).

6. Further, reliance is placed by the Petitioner on various Judgment(s) and Order(s) of this Court in the matter(s) of Murli Industries Ltd. v. Asstt. CIT [2022] 441 ITR 8 (Bombay)/2021 SCC Online Bom 6187; Alok Industries Ltd. v. CIT (Bombay)/ 2024 SCC Online Bom 3481; Pr. CIT v. Patanjali Foods Ltd. (Bombay)/2024 SCC Online Bom 3997; Uttam Value Steels Ltd. v. Asstt. CIT /Writ Petition (L) No. 9420 of 2022; Ornate Spaces (P.) Ltd. v. Dy. CIT [Writ Petition No. 2698 of 2025, dates 21-7-2025]/Writ Petition No.2698 of 2025.

7. We have heard the learned counsel of the respective parties.

8. The short issue to the decided in whether the Income Tax Authorities, the Respondent to this petition, could proceed against the Petitioner for alleged escapement of tax for the period prior to the approval of the Resolution Plan by the Ld. Adjudicating Authority and which does not form part of the resolution plan approved by the Ld. Adjudicating Authority.

9. We find that tax allegedly escaping the assessment for the relevant A.Y., is prior to the passing of the Plan Approval Order and does not form part of the resolution plan approved by the Ld. Adjudicating Authority vide the aforesaid order. The Impugned Notice, as well as the Impugned Order pertaining to the relevant A.Y. admittedly have been issued after the passing of the Plan Approval Order. Further, a combined reading of paragraphs 26 and 27 of the Plan Approval Order, make it abundantly clear that all past claims stand extinguished. The Ld. Adjudicating Authority, whilst passing the Plan Approval Order, has also referred to the judgment of the Hon’ble Apex Court in the context of statutory dues.

10. This Court in the matters of Alok Industries (supra); Patanjali Foods Ltd. (supra); Uttam Value Steels (supra), and Ornate Spaces (P.) Ltd. (supra) has quashed re-assessment proceedings for period(s) prior to approval of resolution plan by an adjudicating authority in light of the ratio of the judgement of the Hon’ble Apex Court in the matter of Ghanshyam Mishra (supra).

11. Further, in a recent decision in the matter of Vaibhav Goel (supra), the Hon’ble Supreme Court has reiterated that any demand made subsequent to approval of a Resolution Plan by an Adjudicating Authority, is invalid and once a Resolution Plan is approved by the NCLT, no belated claim can be included therein that was not made earlier.

12. In the facts of the present case, we find that during the subsistence of the CIRP viz-a-viz the Petitioner, the Respondent(s) did not file any claim in relation to escapement of income for the relevant A.Y. or any other assessment year. Therefore, permitting the Respondents to continue with the reassessment proceedings will result in derailing the Resolution Plan and the Resolution Applicant will not be in a position to revive the Petitioner with a clean slate as held by the Hon’ble Supreme Court in the case of Ghanshyam Mishra (supra).

13. In view of the foregoing discussion, we hold, that the Respondents cannot be permitted to proceed with the reassessment proceedings for A.Y.2019-20. Accordingly, the Impugned Notice dated 26.06.2025 and Impugned Order 26.06.2025 passed by the Respondent No. 1 are hereby quashed and set aside.

14. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.

15. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.