NCLT Guwahati Quashes Income Tax Reassessment Against Maxim Infrastructure; Holds Unclaimed Pre-CIRP Dues Extinguished Under ‘Clean Slate’ Doctrine

NCLT Guwahati Quashes Income Tax Reassessment Against Maxim Infrastructure; Holds Unclaimed Pre-CIRP Dues Extinguished Under ‘Clean Slate’ Doctrine

Introduction

The National Company Law Tribunal (NCLT), Guwahati Bench, has held that the Income Tax Department cannot reopen reassessment proceedings for pre-CIRP dues which were not claimed during the corporate insolvency resolution process (CIRP). The Tribunal applied the “clean slate” doctrine and quashed reassessment proceedings initiated nearly five years after approval of the resolution plan.

Factual Background

Maxim Infrastructure & Real Estate Pvt. Ltd. was admitted into CIRP on 31 August 2018. Public announcements were issued inviting claims from all creditors, including statutory authorities. However, the Income Tax Department did not lodge any claim during the CIRP.

The resolution plan submitted by a consortium led by Rare Asset Reconstruction Ltd. was approved by the Committee of Creditors on 26 September 2019 and subsequently approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016.

Nearly five years later, on 12 August 2024, the Income Tax Officer issued a show cause notice under Section 148A of the Income Tax Act alleging escaped income of ₹1,22,32,000 for Assessment Year 2018–19. Reassessment proceedings were initiated on 31 August 2024 for the same assessment year.

Aggrieved by the reassessment proceedings pertaining to the pre-insolvency period, the corporate debtor approached the NCLT seeking quashing of the notices.

Procedural Background

The applicant contended that the Income Tax Department, having failed to lodge its claim during the CIRP, was barred from raising fresh demands for pre-insolvency dues after approval of the resolution plan. The respondent department argued that reassessment proceedings under the Income Tax Act were independent and could be initiated in accordance with statutory powers.

The coram comprising Judicial Member Rammurti Kushawaha and Technical Member Yogendra Kumar Singh examined the legal position in light of Section 31(1) of the IBC and the Supreme Court’s judgments in Essar Steel and Ghanashyam Mishra, which recognise the binding nature of an approved resolution plan and the extinguishment of unclaimed liabilities.

Issues

1. Whether the Income Tax Department can initiate reassessment proceedings for pre-CIRP dues after approval of a resolution plan under Section 31(1) of the IBC.

2. Whether failure to lodge a claim during CIRP bars statutory authorities from raising demands for the pre-insolvency period.

3. Whether reassessment proceedings under Section 148A of the Income Tax Act can survive the “clean slate” principle.

Contentions of the Parties

The petitioner submitted that once the resolution plan was approved, all claims not forming part of the plan stood extinguished by operation of law. It was argued that the Income Tax Department, having failed to file its claim during CIRP, could not reopen assessments or raise demands for the pre-insolvency period.

The respondent contended that statutory powers under the Income Tax Act permitted reassessment of escaped income and that such proceedings were independent of insolvency proceedings.

Reasoning and Analysis

The Tribunal held that Section 31(1) of the IBC makes an approved resolution plan binding on all stakeholders, including statutory authorities. Relying on the Supreme Court’s pronouncements on the “clean slate” doctrine, the Bench observed that once a plan is approved, all claims not included in the plan stand extinguished.

The Tribunal found that the Income Tax Department had ample opportunity to lodge its claim during CIRP but failed to do so. Consequently, it was legally barred from initiating reassessment proceedings under Section 148A or raising demands for alleged escaped income pertaining to the pre-insolvency period.

The Bench emphasised that permitting such reassessment would undermine the finality of the resolution plan and defeat the objective of the IBC. The Income Tax Department was duty-bound to honour the extinguishment of liabilities and could not resurrect settled dues by invoking reassessment provisions.

Decision

The NCLT, Guwahati Bench, quashed the reassessment notices issued under Section 148A of the Income Tax Act for Assessment Year 2018–19. The Tribunal held that the Income Tax Department is barred from raising demands or initiating reassessment proceedings in respect of pre-CIRP liabilities not claimed during the insolvency process.

In this case the petitioner was represented by Mr. A. Gaggar, V. Sureka, Advocate. Meanwhile the respondent was represented by Mr. B. N. Gogoi, Advocate.