The Supreme Court has declared the income tax demands raised after the approval of resolution plan (RP) by the National Company Law Tribunal (NCLT) is invalid.
The bench of Justice Abhay S Oka and Justice Ujjal Bhuyan has observed that the additional demands made by the income tax department in respect of the assessment years 2012-13 and 2013-14 will operate as roadblocks in implementing the approved Resolution Plan, and appellants will not be able to restart the operations of the Corporate Debtor (CD) on a clean slate.
The Corporate Insolvency Resolution Process (CIRP) was initiated concerning the corporate debtor M/s. Tehri Iron and Steel Casting Ltd. (CD). The appellants are the Joint Resolution Applicants. They submitted a Resolution Plan dated 21stJanuary 2019. The National Company Law Tribunal (NCLT), approved the Resolution Plan submitted by the appellants.
The Resolution Plan had referred to the liability of Rs.16,85,79,469 of the Income Tax Department for the assessment year 2014-15 based on the demand dated 18th December 2017 which was rectified under section 154 of the Income Tax Act, 1961.
The liability was shown in the Resolution Plan under the heading “Contingent liabilities”. After the approval of the Resolution Plan, the first respondent issued demand notices dated 26th December 2019 and 28th December 2019 under the IT Act concerning assessment years 2012- 13 and 2013-14, respectively, in respect of the CD.
However, no claim about the demands for the two assessment years was submitted before the Resolution Professional. The Monitoring Professional, addressed a letter to the income tax department, contending that the demands for the two aforesaid assessment years were unsustainable in law.
As the income tax department issued a letter asserting the demands, the Monitoring Professional applied to the NCLT for declaring that the demands made by the income tax department pertaining to assessment years 2012-13 and 2013-14 were invalid.
It was urged that the demands were invalid as no claim in respect thereof was made before the Resolution Professional until the Resolution Plan was approved by the order dated 21st May 2019. By the order dated 17th September 2020, the NCLT dismissed the application, holding it to be frivolous.
The costs of Rs.1 lakh were made payable by the appellants and the second respondent. Being aggrieved by the said order, an appeal under Section 61 of the IB Code was preferred before the NCLAT. By the judgment and order dated 25thNovember, 2021, the NCLAT dismissed the appeal.
The court held that once the Resolution Plan is approved by the NCLT, no belated claim can be included therein that was not made earlier. If such demands are taken into consideration, the appellants will not be in a position to recommence the business of the CD on a clean slate.
Case Details
Case Title: Vaibhav Goel & Anr. Versus Deputy Commissioner of Income Tax & Anr.
Case No.: CIVIL APPEAL NO. 49 OF 2022
Date: 20/03/2025
