Gujarat High Court
Perfect Boring Private Limited vs Assessment Unit, Income Tax Department on 1 October, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 7222 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MRS. JUSTICE MAUNA M. BHATT
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of No
the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution of
India or any order made thereunder ?
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PERFECT BORING PRIVATE LIMITED
Versus
ASSESSMENT UNIT, INCOME TAX DEPARTMENT & ANR.
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Appearance:
MS SHRUNJAL T SHAH(10617) for the Petitioner(s) No. 1
MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 2
SERVED BY RPAD (N) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MRS. JUSTICE MAUNA M. BHATT
Date : 01/10/2024
ORAL JUDGMENT
(PER : HONOURABLE MRS. JUSTICE MAUNA M. BHATT)
1. Heard learned advocate Ms.Shrunjal T. Shah Page 1 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined for the petitioner and learned Senior Standing Counsel Mr.Karan G. Sanghani for learned advocate Mrs.Kalpana K. Raval for the respondents.
2. Rule, returnable forthwith. Learned Senior Standing Counsel Mr.Karan Sanghani waives service of notice of rule for and on behalf of the respondents.
3. This petition under Article 226 of the Constitution of India is filed challenging the Assessment Order dated 12.03.2023 passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961 (for short 'the Act') and order passed under Section 148A(d) of the Act dated 23.03.2022 as well as the impugned notices dated 13.03.2022 passed under Section 148A(b) of the Act, notice dated 31.03.2022 issued under Section 148 of the Act and notice dated 12.03.2023 issued under Section 156 of Page 2 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined the Act for Assessment Year 2018-19.
4. The brief facts are as under :
4.1. The petitioner is a company incorporated in India and are entitled to the fundamental rights guaranteed under Articdes 14 and 19(1)(g) of the Constitution of India and the respondent is a State within the meaning of Article 12 of the Constitution of India and therefore, it is amenable to the writ jurisdiction of this Court. 4.2. It is the case of the petitioner that a Company Petition (I.B.) No: 148 of 2019 was fled by Operational Creditor namely, Devsaria Iron & Steel Co. Pvt. Ltd., under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for short 'the Code') for initiation of the Corporate Insolvency Resolution Process (for Page 3 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined short 'the CIRP') before the National Company Law Tribunal, Ahmedabad Bench (for short 'the NCLT').
4.3. Vide order dated 30.09.2019, the NCLT admitted the Company Petition (I.B.) No 148 of 2019. Accordingly, the Interim Resolution Professional (for short 'the IRP') Mr.Manish Kumar Bhagat invited claims against the petitioner through a pubic advertisement in Form A dated 07.10.2019. It is the case of the petitioner that subsequent to such public announcement, all the persons/departments/ companies/corporations/statutory bodies who had an outstanding amount of claim against the petitioner are under a legal obligation to lodge their claim before the IP in the prescribed form. The Income-tax Authorities lodged a claim of Rs.2,04,17,900/- pursuant to Page 4 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined such advertisement which was admitted.
4.4. In other words, according to the
provisions of the Code, every
creditor/claimant of the Corporate Debtor i.e. the petitioner is under a legal obligation to lodge a claim before the IRP. It is the case of the petitioner that as per the law laid down by the Hon'ble Supreme Court in the case of Ghanashyam Mishra & Sons Private Limited versus Edelweiss Asset Reconstruction Company Limited & Ors reported in (2021) 9 SCC 657., claims of all the persons/departments/ companies/corporations who fail to lodge their claim before the IRP gets extinguished upon approval of the resolution plan as per Section 31 of the Code.
4.5. It is the case of the petitioner that Page 5 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined after the public announcement and receipt of claims in the prescribed form, the IRP is required to form a Committee of Creditors (for short 'the CoC').
4.6. In accordance with the provisions of the Code, the IRP constituted a CoC. The first CoC meeting was held on 02.11.2019 wherein, the CoC decided for constitution of IRP as Resolution Professional.
4.7. In the Third CoC meeting held on 28.01.2020, the Resolution Professional presented the list of Expression of Interest (for short 'the EoI') received from the prospective Resolution Applicants and four resolution plans were submitted in pursuance to such EoI. A Resolution Plan essentially contains a scheme for revival of the Page 6 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined Corporate Debtor i.e, the petitioner by paying of all dues of the creditors who have lodged their claims before Resolution Professional.
It also contains relevant details such as infusion of funds by Resolution Applicant for revival of the petitioner etc. 4.8. After detailed discussions on the received plans, in the fifth CoC, the CoC asked RP to inform all the resolution applicants to revise their Resolution Plans. In the Eighth CoC, the Resolution Professional informed that two of the Resolution Applicants had decided to withdraw their prospective Resolutions Plans. Therefore, a 2nd Eol was published and three Resolution Plans were received in the Ninth CoC.
4.9. In the Tenth CoC meeting held on Page 7 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined 06.11.2020, Resolution Professional stated that one Resolution Applicant being Ganeshram Chaudhari and Divyaben Makwana withdrew their Resolution Plan. CoC discussed the remaining Resolution Plans and suggested some changes. Resolution Applicant, Shyam Plastic Machinery, submitted that they had already submitted their best offer.
4.10. In the Eleventh CoC meeting held on 19.11.2020, after further revision of the Resolution Plan received from N.A. Roto Machines and Moulds India, its Resolution Plan was put for e-voting from 24.11.2020 to 27.11.2020. In the said e-voting, the Resolution Plan was approved by a majority of 96.37% of the CoC members and after following the procedure of law, the Resolution plan was approved.
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NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined 4.11. Thereafter, the Resolution Professional filed an application being Interlocutory Application No. 26 of 2020 in Company Petition (I.B.) No. 148 of 2019 before the Honble NCLT under Section 30(6)of the Code for obtaining the approval of the resolution plan in respect of the petitioner in accordance with Section 30 read with Section 31 of the Code.
4.12. It is the case of the petitioner that the NCLT was pleased to approve the resolution plan vide order dated 16.03.2021 in accordance with Section 31(1) of the Code.
4.13. It is the case of the petitioner that the provisions contained under Section 31 of the Code, an approved resolution plan is Page 9 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined binding on the Corporate Debtor i.e., petitioner and it's employees, members, and creditors, including the Central Government, any State Government, or any local authority. 4.14. It is further the case of the petitioner that even the resolution plan approved by the NCLT vide its order dated 16.03.2021 provided for disposal /settlement of all the notes, claims and other disputes for any period prior to the approval of the Resolution Plan.
4.15. It is further the case of the petitioner that the order dated 16.03.2021 passed by the NCLT in I.A. No.926 of 2020 in CP(IB) No. 148 of 2019 and upon approval of the Resolution Plan on 16.03.2021, a letter dated 07.06.2021 was written to the income tax Page 10 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined authorities informing them that the Resolution Plan has been approved and that the income-tax authorities are entitled to 1.5% of their admitted claim and therefore, a Demand Draft of Rs.3,06,268/- was also issued in their favour which has been accepted by the authorities.
4.16. It is the case of the petitioner that after approval of the Resolution Plan vide order dated 16.03.2021, the impugned notice under Section 148A(b) of the Act dated 13.03.2022 was issued by the respondent No.2 and reassessment proceedings for Assessment Year 2018-19 were initiated suggesting that income chargeable to tax has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961.
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NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined 4.17. It is the case of the petitioner that the initiation of such proceedings under the Act and issuance of such notice dated 13.03.2022 is wholly without jurisdiction. 4.18. Subsequently, the impugned order under passed under Section 148A(d) dated 23.03.2022 of the Act was passed by respondent NO.2 holding that there was no compliance by the petitioner and that the petitioner has made cash deposits and cash withdrawals and has other receipts on which TDS has been deducted during Financial Year 2018-19 and hence found it to be a fit case to issue a notice under Section 148 of the Act. Therefore, on 31.03.2022, the respondent No.1 issued a notice under Section 148 of the Act. 4.19. It is the case of the petitioner that Page 12 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined initiation of proceedings for Assessment Year 2018-19 is without jurisdiction and illegal in law and for the purpose of reassessment, respondent No.1 issued notices under Section 142(1) of the Act to the petitioner dated 21.10.2022, 24.11.2022, and 02.02.2023 asking to furnish certain information and a show- cause notice was issued on 17.02.2023. 4.20. The petitioner in its replies dated 07.12.2022, 04.02.2023 and 23.02.2023 informed the respondents that in the case of Perfect Boring Private Limited, a Resolution Plan has been approved by the NCLT, Ahmedabad vide order dated 16.03.2021 and therefore, no notices under the Act can be issued for assessments, reassessments or unpaid tax claims of any prior period and the notices issued by the respondent• authorities for Page 13 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined Assessment Year 2018-19 are invalid, non-est and without any jurisdiction.
4.21. However, the respondent No.1 has passed the impugned assessment order dated 12.03.2023 under Section 147 read with Section 144 and 144B of the Act determining the total income of the petitioner to be Rs 1,68,49,503/-. and notice of demand under Section 156 of the Act has been issued dated 12.03.2023 where a demand of Rs.1,25,58,480 has to be payable within a period of 30 days of the date of its issuance.
4.22. It is the case of the petitioner that such order dated 12.03.2023 and the various notices issued under the provisions of the Act for Assessment Year 2018-19 are in complete violation of Section 31 of the Code and the Page 14 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined judgements of Hon'ble Supreme Court in the case of Committee of Creditors of Essar Steel India Lta. US. Satish Kumar Gupta reported in [2019] 111 taxmann.com 234 (SC) and Ghanshyam Mishra and Sons Pvt. vs. Edelweiss Asset Reconstriction Company Limited reported in (2021) 9 SCC 657 and by virtue of Section 238 of the Code the provisions of the Insolvency and Bankruptey Code, 2016 will prevail over all other laws including Income Tax Act, 1961. Hence, being aggrieved and dis-satisfied with Assessment Order dated 12.03.2023 passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961 (for short 'the Act') and order passed under Section 148A(d) of the Act dated 23.03.2022 as well as the impugned notices dated 13.03.2022 passed under Section 148A(b) of the Act, notice dated 31.03.2022 issued under Section 148 of the Act and notice Page 15 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined dated 12.03.2023 issued under Section 156 of the Act for Assessment Year 2018-19, the petitioner has filed this petition. 5.1. Learned advocate Ms.Shrunjal Shah for the petitioner submitted that in view of the settled legal position and in view of resolution plan being approved by order dated 16.03.2021, all past dues of the Income Tax Department got extinguished and therefore, the impugned notice dated 13.03.2022 passed under Section 148A(b) of the Act, notice dated 31.03.2022 issued under Section 148 of the Act and notice dated 12.03.2023 issued under Section 156 of the Act for Assessment Year 2018-19 deserve to be quashed and set aside. 5.2. In support of her submissions, she relied upon decision of Hon'ble Supreme Court Page 16 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined in the case of Ghanashyam Mishra & Sons Private Limited versus Edelweiss Asset Reconstruction Company Limited & Ors reported in (2021) 9 SCC 657.
6. On the other hand, opposing the petition, learned Senior Standing counsel Mr.Karan Sanghani submitted that the notice issued under Section 263 of the Act was issued by the respondent for revising the demand for the Assessement Year 2018-19. It was submitted that in view of clear statutory provision, the powers of the respondent cannot be curtailed when procedure in accordance with law has been followed. He further submitted that the decision relied upon by the petitioner in case of Ghanashyam Mishra (Supra) is with regard to extinguish of the claim after approval of resolution plan by NCLT as in the present case, the proceedings under Section 263 of the Page 17 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined Act has been initiated and this being not the recovery proceedings, the decision would not be applicable.
7. Considering the submissions made on behalf of both the sides and upon perusal of the record, it is noticed that pursuant to insolvency proceedings initiated under the Code, a resolution plan was approved by the Tribunal under Section 30(6) of the Code. It is also on record that the claim which was lodged by the Deputy Commissioner of Income Tax, Rajkot was verified and admitted in the proceedings before NCLT after consideration of the claim filed by the Additional Commissioner of Income Tax, Rajkot. In the decision of Hon'ble Supreme Court in case of Ghanashyam Mishra (Supra) it is held as under :
"102. NCLT found, that by email dated 6.1.2018, EARC had submitted its Page 18 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined claim in Form 'C' for an amount of Rs.648,89,62,395/-. In response to the said email, RP sought a clarification, as to whether the corporate guarantee had been invoked by the applicant. RP had not received any response till 21.2.2018 from EARC. Despite repeated requests made by RP, EARC did not respond to the query made by RP. From the record placed before NCLT, it was clear, that EARC had not invoked the corporate guarantee. NCLT therefore posed a question to itself, as to whether an uninvoked corporate guarantee could be considered as matured claim of the applicant. NCLT found, that once the moratorium was applied under Section 14 of I&B Code, EARC was prevented from invoking the corporate guarantee. NCLT further found, that the OMML's guarantee had not been invoked by EARC till the date of completion of CIRP process and once the moratorium was imposed, it could not invoke the corporate guarantee. NCLT Page 19 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined therefore found, that there is no illegality or irregularity in not admitting the claim of EARC."
8. Thus, in view of above clear provisions of law no person would be entitle to initiate or continue any proceedings in respect of any claim for any dues relating to the period prior to approval of resolution plan. We therefore, deem it appropriate to quash and set aside Assessment Order dated 12.03.2023 passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961 (for short 'the Act') and order passed under Section 148A(d) of the Act dated 23.03.2022 as well as the impugned notices dated 13.03.2022 passed under Section 148A(b) of the Act, notice dated 31.03.2022 issued under Section 148 of the Act and notice dated 12.03.2023 issued under Section 156 of the Act. The Page 20 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024 NEUTRAL CITATION C/SCA/7222/2023 JUDGMENT DATED: 01/10/2024 undefined petition is accordingly allowed. Rule is made absolute. No orders as to cost.
(BHARGAV D. KARIA, J) (MAUNA M. BHATT,J) PALAK Page 21 of 21 Uploaded by PALAK BRAHMBHATT(HC01391) on Wed Oct 16 2024 Downloaded on : Sat Oct 19 22:07:44 IST 2024