Our company came out of the NCLT under an approved resolution plan. The department now says it will not recover anything but wants to complete the assessment for an earlier year to build a case against the old promoters. Can it?
No. Once the resolution plan is approved, claims that are not part of it stand extinguished and no proceedings in respect of them may be initiated or continued for any period before the effective date - and that covers the assessment itself, not merely recovery. The Bombay High Court quashed notices under s.143(2) and s.142(1) even though the Revenue had accepted on the record that it would not enforce any resulting demand.
Decided by the High Court (K.R. Shriram J and Dr. Neela Gokhale J) on 2024-04-23, reported as Writ Petition (L) No. 6313 of 2024; neutral citation 2024:BHC-OS:6965-DB (High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction). It bears on section 143(2), section 142(1), section 156A, section 148, section 133(6) of the Income Tax Act 1961, in Demand, Recovery & Stay and Assessment & Scrutiny matters.
The Revenue's standard position after a resolution plan is exactly the one taken here: we will not recover, we only want to complete the assessment. This decision closes that door, and it does so for the most valuable reason - the Court accepted the argument in the Alok Industries order that s.147 and s.148 exist to bring escaped income to tax and cannot be used to collect evidence about third parties or ex-promoters, for which s.133(6) exists; and it added that the present management is not in a position to participate properly in proceedings about a period it knows nothing of, so the exercise would be futile in any event. The second thing worth carrying away is that the department here had never filed a claim with the interim resolution professional despite the public announcement - the extinguishment operates against a creditor who could have lodged a claim and did not. Note also s.156A, inserted by the Finance Act 2022 with effect from 1 April 2022, which obliges the Assessing Officer to modify a demand in conformity with an order of the adjudicating authority under the Code.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner was formerly Uttam Galva Steels Limited. On 1 October 2020 the NCLT, Mumbai admitted a petition by the State Bank of India under s.7 of the Insolvency and Bankruptcy Code 2016 and declared a moratorium. The interim resolution professional made a public announcement on 8 October 2020 calling for proof of claims by 20 October 2020. Although the Income Tax Department was covered by the definition of operational creditors, neither the Assessing Officer nor the Jurisdictional Assessing Officer submitted any claim. The resolution applicant, AM Mining India Pvt. Ltd., submitted a plan on 9 May 2021 which the committee of creditors approved on 2 June 2021 and the NCLT approved by order dated 14 October 2022; the effective date was 10 November 2022. The company's name was then changed to AMNS Khopoli Limited. On 31 May 2023 the first respondent issued a notice under s.143(2) for AY 2022-23 (FY 2021-22), followed by notices under s.142(1) on 28 August 2023, 8 January 2024, 29 January 2024 and 26 February 2024. The petitioner asked the department to withdraw them. By letter of 5 January 2024 the department declined, reasoning that the Assessing Officer is not prohibited from initiating or continuing assessment proceedings, that notices under s.143(2) and s.142(1) are an essential part of them, and that 'on finalization of assessment proceedings, demand if any shall not be enforced'. In the affidavit in reply the Revenue took the same stand, adding that completing the assessment would help it take further steps against the ex-promoters.
The impugned notices under s.143(2) and s.142(1) and all subsequent actions taken pursuant to them are bad in law, because no proceedings can be initiated against the petitioner for a period prior to the effective date; the resolution plan bars new claims, disputes, litigations and other judicial or administrative proceedings including assessments in relation to any period prior to the effective date, and after approval a creditor including the Central Government is not entitled to initiate proceedings on the resolution applicant in relation to claims which are not part of the plan. The Revenue had also filed no claim with the IRP despite the public announcement. Rule was made absolute in terms of the prayer quashing the s.143(2) notice, the four s.142(1) notices and all consequential actions (paras 15 to 21).
The Court reproduced the extinguishment clauses of the approved plan, under which all liabilities, obligations and claims arising until the effective date stand waived, extinguished, abated and discharged in perpetuity; all claims of governmental authorities in relation to taxes pertaining to the period until the effective date stand extinguished; the resolution applicant and the corporate debtor are not liable under any tax proceedings by way of assessment, reassessment, rectification, revision or appeal for any period up to the effective date; and upon approval, 'all new inquiries, assessments, reassessments, rectifications, revisions, surveys, summons, investigations, notices, suits, claims, disputes, litigations, arbitrations or other judicial, regulatory (including any Tax Proceedings) or administrative proceedings will be deemed to be barred and will not be initiated or admitted against the Corporate Debtor in relation to any period until the Effective Date' (paras 8 and 9). It followed its own earlier order in Alok Industries Limited v. ACIT, which it set out in full: there the Court had held that s.148 read with s.147 deals only with income escaping assessment and could not be used to collect evidence about third parties or ex-promoters, for which s.133(6) exists; that s.31 of the Code makes an approved plan binding on the Central Government and s.238 gives the Code overriding effect, so the plan applies even if inconsistent with the Income-tax Act; that s.156A, inserted by the Finance Act 2022 with effect from 1 April 2022, requires the Assessing Officer to modify a demand in conformity with an order of the adjudicating authority; and that the present management, not being aware of the relevant facts, might well be incapable of properly participating, making the exercise futile. The Court held it made no difference that Alok Industries concerned notices under s.148A and s.148 rather than s.143(2) and s.142(1), and noted that in Alok Industries too the Revenue had said it did not wish to recover any money (para 11). It also relied on Patanjali Foods (Bombay), on Sirpur Paper Mills (Telangana), where the Revenue was likewise seeking to pass an order under s.143(3), and on Rishi Ganga Power Corporation (Delhi), where the Revenue had failed to lodge its claim and the demands were held automatically extinguished (paras 12 and 13). On the Revenue's submission that it only wanted to complete the assessment so as to act against the ex-promoters, the Court held that even that would not be appropriate, because the plan waives all non-compliances of the corporate debtor for the period until the effective date and bars any governmental authority from issuing orders in contravention of the plan (para 14).
The impugned notice issued under Section 143(2) of the Act and the impugned notices issued under Section 142(1) of the Act and all subsequent actions undertaken pursuant to the impugned notices issued under Section 142(1) of the Act are bad in law as no proceedings can be initiated against petitioner for a period prior to the Effective Date.
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Handle my notice → Ask a CA on WhatsAppNo. Once the resolution plan is approved, claims that are not part of it stand extinguished and no proceedings in respect of them may be initiated or continued for any period before the effective date - and that covers the assessment itself, not merely recovery. The Bombay High Court quashed notices under s.143(2) and s.142(1) even though the Revenue had accepted on the record that it would not enforce any resulting demand. This was decided by the High Court (K.R. Shriram J and Dr. Neela Gokhale J) and bears on section 143(2), section 142(1), section 156A, section 148, section 133(6) of the Income Tax Act 1961. It is reported as Writ Petition (L) No. 6313 of 2024; neutral citation 2024:BHC-OS:6965-DB (High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction). The Revenue's standard position after a resolution plan is exactly the one taken here: we will not recover, we only want to complete the assessment. This decision closes that door, and it does so for the most valuable reason - the Court accepted the argument in the Alok Industries order that s.147 and s.148 exist to bring escaped income to tax and cannot be used to collect evidence about third parties or ex-promoters, for which s.133(6) exists; and it added that the present management is not in a position to participate properly in proceedings about a period it knows nothing of, so the exercise would be futile in any event. The second thing worth carrying away is that the department here had never filed a claim with the interim resolution professional despite the public announcement - the extinguishment operates against a creditor who could have lodged a claim and did not. Note also s.156A, inserted by the Finance Act 2022 with effect from 1 April 2022, which obliges the Assessing Officer to modify a demand in conformity with an order of the adjudicating authority under the Code. If it applies to you, the first step is this: Fix the effective date of the resolution plan precisely - the bar runs to that date, not to the date of the NCLT order (here 14 October 2022 and 10 November 2022 respectively).
The petitioner was formerly Uttam Galva Steels Limited. On 1 October 2020 the NCLT, Mumbai admitted a petition by the State Bank of India under s.7 of the Insolvency and Bankruptcy Code 2016 and declared a moratorium. The interim resolution professional made a public announcement on 8 October 2020 calling for proof of claims by 20 October 2020. Although the Income Tax Department was covered by the definition of operational creditors, neither the Assessing Officer nor the Jurisdictional Assessing Officer submitted any claim. The resolution applicant, AM Mining India Pvt. Ltd., submitted a plan on 9 May 2021 which the committee of creditors approved on 2 June 2021 and the NCLT approved by order dated 14 October 2022; the effective date was 10 November 2022. The company's name was then changed to AMNS Khopoli Limited. On 31 May 2023 the first respondent issued a notice under s.143(2) for AY 2022-23 (FY 2021-22), followed by notices under s.142(1) on 28 August 2023, 8 January 2024, 29 January 2024 and 26 February 2024. The petitioner asked the department to withdraw them. By letter of 5 January 2024 the department declined, reasoning that the Assessing Officer is not prohibited from initiating or continuing assessment proceedings, that notices under s.143(2) and s.142(1) are an essential part of them, and that 'on finalization of assessment proceedings, demand if any shall not be enforced'. In the affidavit in reply the Revenue took the same stand, adding that completing the assessment would help it take further steps against the ex-promoters. The matter was decided on 2024-04-23 by the High Court (K.R. Shriram J and Dr. Neela Gokhale J). On those facts the High Court held as follows. The impugned notices under s.143(2) and s.142(1) and all subsequent actions taken pursuant to them are bad in law, because no proceedings can be initiated against the petitioner for a period prior to the effective date; the resolution plan bars new claims, disputes, litigations and other judicial or administrative proceedings including assessments in relation to any period prior to the effective date, and after approval a creditor including the Central Government is not entitled to initiate proceedings on the resolution applicant in relation to claims which are not part of the plan. The Revenue had also filed no claim with the IRP despite the public announcement. Rule was made absolute in terms of the prayer quashing the s.143(2) notice, the four s.142(1) notices and all consequential actions (paras 15 to 21).
The Court reproduced the extinguishment clauses of the approved plan, under which all liabilities, obligations and claims arising until the effective date stand waived, extinguished, abated and discharged in perpetuity; all claims of governmental authorities in relation to taxes pertaining to the period until the effective date stand extinguished; the resolution applicant and the corporate debtor are not liable under any tax proceedings by way of assessment, reassessment, rectification, revision or appeal for any period up to the effective date; and upon approval, 'all new inquiries, assessments, reassessments, rectifications, revisions, surveys, summons, investigations, notices, suits, claims, disputes, litigations, arbitrations or other judicial, regulatory (including any Tax Proceedings) or administrative proceedings will be deemed to be barred and will not be initiated or admitted against the Corporate Debtor in relation to any period until the Effective Date' (paras 8 and 9). It followed its own earlier order in Alok Industries Limited v. ACIT, which it set out in full: there the Court had held that s.148 read with s.147 deals only with income escaping assessment and could not be used to collect evidence about third parties or ex-promoters, for which s.133(6) exists; that s.31 of the Code makes an approved plan binding on the Central Government and s.238 gives the Code overriding effect, so the plan applies even if inconsistent with the Income-tax Act; that s.156A, inserted by the Finance Act 2022 with effect from 1 April 2022, requires the Assessing Officer to modify a demand in conformity with an order of the adjudicating authority; and that the present management, not being aware of the relevant facts, might well be incapable of properly participating, making the exercise futile. The Court held it made no difference that Alok Industries concerned notices under s.148A and s.148 rather than s.143(2) and s.142(1), and noted that in Alok Industries too the Revenue had said it did not wish to recover any money (para 11). It also relied on Patanjali Foods (Bombay), on Sirpur Paper Mills (Telangana), where the Revenue was likewise seeking to pass an order under s.143(3), and on Rishi Ganga Power Corporation (Delhi), where the Revenue had failed to lodge its claim and the demands were held automatically extinguished (paras 12 and 13). On the Revenue's submission that it only wanted to complete the assessment so as to act against the ex-promoters, the Court held that even that would not be appropriate, because the plan waives all non-compliances of the corporate debtor for the period until the effective date and bars any governmental authority from issuing orders in contravention of the plan (para 14). In the words reproduced by the source cited on this page: "The impugned notice issued under Section 143(2) of the Act and the impugned notices issued under Section 142(1) of the Act and all subsequent actions undertaken pursuant to the impugned notices issued under Section 142(1) of the Act are bad in law as no proceedings can be initiated against petitioner for a period prior to the Effective Date." The decision followed or applied Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., (2021) 9 SCC 657 - followed and quoted (see editor_note on the paragraph number); Alok Industries Limited v. Assistant Commissioner of Income Tax (Bom.) - followed and reproduced in full; Principal Commissioner of Income Tax, Central-4 v. Patanjali Foods Ltd. (formerly Ruchi Soya Industries Ltd.) (Bom.) - followed; Sirpur Paper Mills Limited v. Union of India (Telangana) - followed and quoted at paras 70 to 72; Rishi Ganga Power Corporation Ltd. v. Assistant Commissioner of Income Tax (Del.) - followed and quoted at paras 28 to 38.
It was decided by the High Court on 2024-04-23 and is reported as Writ Petition (L) No. 6313 of 2024; neutral citation 2024:BHC-OS:6965-DB (High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 143(2), section 142(1), section 156A, section 148, section 133(6), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The impugned notices under s.143(2) and s.142(1) and all subsequent actions taken pursuant to them are bad in law, because no proceedings can be initiated against the petitioner for a period prior to the effective date; the resolution plan bars new claims, disputes, litigations and other judicial or administrative proceedings including assessments in relation to any period prior to the effective date, and after approval a creditor including the Central Government is not entitled to initiate proceedings on the resolution applicant in relation to claims which are not part of the plan. The Revenue had also filed no claim with the IRP despite the public announcement. Rule was made absolute in terms of the prayer quashing the s.143(2) notice, the four s.142(1) notices and all consequential actions (paras 15 to 21). It arises in Demand, Recovery & Stay and Assessment & Scrutiny matters, on section 143(2), section 142(1), section 156A, section 148, section 133(6) of the Income Tax Act 1961, and was decided by K.R. Shriram J and Dr. Neela Gokhale J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Extract and quote the extinguishment clauses of your own plan; the Court reproduced them at length and decided on their terms as much as on the Code. Establish that the department filed no claim with the IRP despite the public announcement, and put the dates of the announcement and the claim deadline on affidavit. Answer the 'we only want to assess, not recover' line with this decision and with the Alok Industries order quoted in it, and point to s.133(6) as the department's proper route for evidence about ex-promoters. Where a demand already stands, invoke s.156A to require the Assessing Officer to modify it in conformity with the adjudicating authority's order. Challenge every notice in the chain - here the s.143(2) notice, the four s.142(1) notices and all consequential communications were quashed together.
Validity check could not be completed. Validity check could not be completed. No search for later treatment of this decision, and no check for an appeal, was run. It rests on Ghanashyam Mishra & Sons v. Edelweiss ARC, a three-Judge Supreme Court decision of 13 April 2021, which could not itself be read for this batch (the indiankanoon print view of that judgment is truncated - see NOTES-B24), and on a line of consistent High Court decisions from Bombay, Telangana and Delhi that it reproduces. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The paragraph numbering in the retrieved text is irregular in one place: the block quotation from the resolution plan inside paragraph 9 itself contains clauses numbered 9 and 12, so those numbers appear twice. The numbers cited here are the Court's own. Paragraph 18 of this judgment reproduces what it describes as paragraph 95 of the Supreme Court's decision in Ghanashyam Mishra & Sons. That quotation is NOT reproduced anywhere in this entry, and nothing in this entry quotes or paraphrases Ghanashyam Mishra. The Supreme Court judgment itself could not be read (see NOTES-B24) and the paragraph number 95 has not been verified against the Supreme Court's own text - the Alok Industries order quoted at paragraph 11 of this judgment attributes the same conclusion to paragraph 102 of Ghanashyam Mishra. Do not cite a paragraph number of Ghanashyam Mishra on the strength of this entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The impugned notices under s.143(2) and s.142(1) and all subsequent actions taken pursuant to them are bad in law, because no proceedings can be initiated against the petitioner for a period prior to the effective date; the resolution plan bars new claims, disputes, litigations and other judicial or administrative proceedings including assessments in relation to any period prior to the effective date, and after approval a creditor including the Central Government is not entitled to initiate proceedings on the resolution applicant in relation to claims which are not part of the plan. The Revenue had also filed no claim with the IRP despite the public announcement. Rule was made absolute in terms of the prayer quashing the s.143(2) notice, the four s.142(1) notices and all consequential actions (paras 15 to 21).
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Is a notice under s.143(2) a jurisdictional precondition, or merely a procedural step the Assessing Officer can skip?
My return was only processed under 143(1). Does that stop the department reopening it later?
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The sanctioning authority just wrote 'yes' and signed. Is that a sanction?