Gujarat High Court: In a civil application filed seeking quashing of a notice issued by the Principal Commissioner of Income Tax (‘IT Commissioner’) under Section 263 of the Income Tax Act, 1961 (‘the Act’) seeking to revise the assessment order for the Assessment Year 2020-21, the Division Bench of Bhargav D. Karia and D.N. Ray*, JJ., allowed the application, holding that there could be no occasion for the IT Commissioner to issue the impugned notice after the approval of the Resolution Plan (‘RP’), since, as stated in the RP, all tax liabilities of AMW Auto Component Limited (‘AMW Auto’) would completely extinguish.
Background
AMW Auto was a company in the business of manufacturing components for general engineering and automotive industries. AMW Auto filed its income tax return for the Assessment Year (‘AY’) 2020-21, declaring a loss of Rs. 17.09 Crores.
The case was selected for scrutiny and the assessment was completed under Section 143(3) read with Section 144B of the Act. Thereafter, AMW Auto was subjected to the insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (‘IBC Code’), wherein, a Corporate Insolvency Resolution Process (‘CIRP’) was initiated under Section 7 of the IBC Code.
The Interim Resolution Professional (‘IRP’) invited claims from the various creditors of AMW Auto. Further, under the CIRP, the Resolution Plan (‘RP’) for AMW Auto’s revival was approved by the National Company Law Tribunal (‘NCLT’) vide order dated 12-10-2023 under Section 30(6) of the IBC Code. The RP provided for the waiver and extinguishment of all the unassessed/assessed tax liabilities for the period prior to the NCLT approval date.
The IT Commissioner issued the impugned notice under Section 263 of the Act, seeking to revise the assessment order for the Assessment Year 2020-21. Aggrieved, AMW Auto filed the present application.
Analysis and Decisions
Upon perusal of the RP, the Court noted that it provided that all tax liabilities, assessed and unassessed under the Act, would stand waived and extinguished.
The Court placed reliance on Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta (2020) 8 SCC 531, wherein it was held that a successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant. Further, the Court relied on Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657, wherein it was held that on the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
Applying the above, the Court held that it was clear that on the complete extinguishment of all tax liabilities of AMW Auto upon the approval of the RP on 12-10-2023, there could be no occasion for the IT Commissioner to issue the impugned notice under Section 263 of the Act seeking to revise the assessment order for the Assessment Year 2020-21. The Court further held that the merits of the impugned notice under Section 263 of the Act became academic and were not required to be ventured into.
Resultantly, the application was allowed, and the impugned notice was quashed.
[AMW Auto Component Limited v. Principal Commissioner of Income Tax Rajkot 1, 2025 SCC OnLine Guj 1156, decided on 11-03-2025]
*Order Authored by Justice D.N. Ray
Advocates who appeared in this case:
For the applicant: BS Soparkar
For the respondent: Karan G Sanghani
