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moreWe are pleased to share with you our recent publication on – ‘Gujarat HC: Absent claim in approved resolution plan, quashes assessment & demand of preceding period.’
Gujarat HC quashes the demand notice under Section 156 along with assessment order for the period preceding the resolution plan (RP) since the said demand remained extinguished in absence of any claim not forming part of the RP; Relies on SC judgment in Ghanshyam Mishra, wherein it was held that, ‘all the dues including the statutory dues owed to the Central Government, any State Government or any local authority and other stakeholders, if not part of the resolution plan duly approved by the NCLT, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31(1) could be continued’; Observes that demand raised pursuant to the assessment order for AY 2018-19 cannot be in respect to a claim which is part of the resolution plan and the proceedings which were continued under Section 147 (r.w. Section 144) was also not a proceedings in respect to a claim which is not part of resolution plan; Accordingly, holds that notices issued by CIT(A) giving reference to hearing of appeal wherein assessment order for AY 2018-19 was challenged would extinguish on the date of approval of resolution plan by NCLT since no demand would remain in existence in absence of any claim raised before the RP by the Revenue, accordingly, liable to be quashed; Observes that although reassessment proceedings for AY 2018-19 were initiated prior to approval of resolution plan by NCLT, however, no demand as on the date of approval was in existence; Accordingly, observes that demand under Section 156 arose out of assessment order under Section 147 read with Section 144 passed after the approval of resolution plan by NCLT is invalid and liable to be quashed:HC GUJ.
Decision Summary
The judgment was delivered by the Division Bench of Gujarat High Court comprising Justice Bhargav D. Karia and Justice Niral R. Mehta.
Advocate Dhinal A Shah along with Thakkar and Pahwa Advocates appeared for the Assessee while Revenue was represented by Advocate Karan G Sanghani.
Assessee was subjected to insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) wherein petition under Section 7 of the IBC was accepted by the NCLT on Feb 05, 2021 and consequently interim resolution professional (IRP) was appointed. Subsequently, the resolution plan was approved by NCLT on July 01, 2022. However, Revenue issued reassessment notice under Section 148 consequent to Section 148A(d) order on Mar 31, 2022 and consequently passed assessment order under Section 147 read with Section 144 for AY 2018-19 on Mar 13, 2023 confirming demand of Rs.28.98 Cr which was challenged before CIT(A) and pending adjudication.
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