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Facts
The assessee challenged assessment orders in light of NCLT discharge orders related to insolvency proceedings. The department argued that NCLT orders do not affect income tax proceedings, but the assessee contended that since the department did not file any claim during the insolvency proceedings, their claim became redundant.
Held
The Tribunal held that the department, like any other operational creditor, was supposed to be vigilant in raising claims during insolvency proceedings. Since the department failed to file a claim, the assessment order became non-est and unenforceable after the approval of the resolution plan.
Key Issues
Whether the income tax department's claim is rendered redundant and unenforceable due to failure to file a claim in insolvency proceedings, despite NCLT discharge orders.
Sections Cited
Section 143(1) of the Income-tax Act, 1961, Section 102(2) of IBC, Section 31 of IBC, Section 5(21) of IBC, Section 2(6) of IBC, Section 3(10) of IBC, Section 29 of IBC, Regulation 36 of IBC, Section 30(2) of IBC, Section 14 of IBC, Section 7 of IBC, Section 72(1) of the Act, Section 15 of IBC, Section 13 of IBC
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Income Tax Appellate Tribunal, “B” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
ITA No. & Ld. FAA who Appeal No. & Date of order AO who passed the AY passed the appellate of the Ld. FAA assessment order & order Date of order 2773/D/25 CIT(A)-27, Delhi DIN & Order No : Assessment Unit, 2013-14 ITBA/APL/M/250/2024- Income Tax 25/1073776739(1) Department 27.02.2025 Dated 29.05.2023 2774/D/25 CIT(A)-27, Delhi DIN & Order No : Assessment Unit, 2013-14 ITBA/APL/M/250/2024- Income Tax 25/1073781862(1) Department 27.02.2025 Dated 10.05.2023
The cases were heard together as common question of law and facts are involved in case of both the assessee who have been party to proceeding u/d 117/ 119 of the Insolvency & Bankruptcy Code, 2016 (IBC Code) and our
P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) attention has been drawn to discharge order dated 15.12.2025 in the case of assessee Charanbir Singh Sethi and discharge order dated 19.01.2026 in the case of assessee Amrit Pal Singh Chadha, from NCLT Delhi. Accordingly it was contented that as department has not made any claim in insolvency proceedings the present claim of department has become redundant.
Ld. DR has contended that NCLT proceeding are different from Income Tax proceeding and thus, any order by NCLT cannot effect the merits of the addition and the assessee’s appeals are required to be considered on merits.
We find no force in the contention of ld. DR as admittedly department has not made any claim in the proceeding under the IBC. The discharge orders categorically mentions that the personal guarantor stand discharged from all debts and liabilities mentioned and settled under the repayment plan approved by NCLT. The repayment plan mentions of notices being issued u/s 102(2) of IBC inviting claim from creditors, which includes claims of Government also, wherein the last date of submission of claim was notified as 04.06.2024 in case of both the assessee. The list of claim by creditors is part of the repayment plan and we find there is claim of banks and financial
P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) institutions. There is claim of Government through Assistant Commissioner of Customs & EPFO. However, there is no claim of the income tax department and thus, in the absence of filing any claim, the discharge order attained finality and consequently, the claim of department becomes redundant. As for aforesaid principles reliance is placed on the decision in JEKPL Private Limited Versus DCIT, Circle-13(1), Delhi order dated 17.1.2025, in which one of us, the judicial member was also in quorum, and the Coordinate Bench after considering decision of Hon’ble Supreme Court in Ghanashyam Mishra & Sons (P) Ltd.
Vs. EdelweissAsset Reconstruction Co. Ltd., (2021) 9 SCC 657 and Hon’ble Supreme Court in Case of Sundaresh Bhatt vs Central Board Of Indirect Taxes And Customs (CIVIL APPEAL No. 7667 of 2021) had held as follows:
“20. Now, in Ghanashyam Mishra’s case (supra), in para 98, the Hon’ble Supreme Court has clarified that even a claim in respect of the dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority would come within the ambit of ‘operational debts.’ The Central Government, any State Government or any local authority to whom an operational debt is owed would come within the ambit of ‘operational
P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) creditor’ as defined under clause (2) of section 5 of IBC. Consequently, a person to whom a debt is owed would be covered by the definition of ‘creditor’ as defined under clause (10) of section 3 of IBC. On this basis, in Ghanashyam Mishra’s case (supra), in para 102.1 to 102.3, the Hon’ble Supreme Court held as follows:-
“102.1 That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. 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.
102.2. The 2019 Amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the I&B Code has come into effect.
102.3. Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) which the adjudicating authority grants its approval under Section 31 could be continued.”
Thus, definition of "claim" u/s “Section 2 (6) and definition u/s 5 (21) of "operational debt", make it very apparent the RP is required to consider ‘claims’, which may or may not be ‘debt’. The ongoing assessment proceedings are likely to give rise to a debt but till same is not crystallized, it continues to be a ‘claim’ under IBC for which RP, was competent to consider to make it part of operational debt or at least inform the COC and prospective successful resolution applicant.
In the case before us the Assessing Officer being made aware of the pendency of insolvency proceedings and Resolution Professional calling for claim of all the operational creditors, which certainly includes the Department having a claim in respect of dues arising under the Act, then, the Assessing Officer had an opportunity to raise the claim before the Resolution Professional as well as Committee of Creditors. The ld. DR was unable to cite before us any material which would show that the Assessing Officer had at any stage informed the assessee that in spite of insolvency proceedings going on, the assessment for the year under consideration is being taken further and shall be concluded by imposing a tax liability which will be binding on the company in spite of the moratorium order u/s 14 or consequential orders of adjudicating authority accepting the resolution plan.
P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) 23. We are of the considered view that when the status of the Department is like any other operational creditors, the Department is supposed to be vigilant to raise the claim in the insolvency proceedings, once the fact of appointment of Resolution Professional calling for the claim of operational creditors with regard to operational debts is brought into the knowledge of the Department. Certainly the authorities established under the IBC are not entitled to examine the validity of the claim under the respective tax statute, but certainly for the purpose of conclusiveness of the IBC proceedings such claim of revenue need to be brought to the notice of the IBC authorities, so that prospective resolution applicants have an opportunity of being alive to all the prospective claims, not part of resolution plan. If after final resolution plan is accepted by the adjudicating authority under IBC, any such claim surfaces, certainly the successful resolution applicant will be prejudiced. This will lead to a situation where government will be a beneficiary of the resolution plan and create a disadvantageous situation for the successful resolution applicant.
The aforesaid conclusion of this bench are duly bolstered by the judgement in Ghanashyam Mishra (supra) which categorically holds that there is no special status to Central Government or State Government or any local authorities for the purpose of IBC and the words ‘other stakeholders’ include them. In Innovative Industries Ltd. vs. ICICI Bank (2018) 1 SCC 407, referring to statement of objects and P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) reasons of IBC, the Hon’ble Supreme Court has observed in para 13 that:
“One of the important objectives of the Code is to bring insolvency law in India under a single unified umbrella with the objective of speeding up of insolvency process.”
In Ghanashyam Mishra (supra), the Hon’ble Supreme Court has also observed as follows:-
“61. It could thus be seen that one of the dominant objects of the I&B Code is to see to it that an attempt has to be made to revive the corporate debtor and make it a running concern. For that, a resolution applicant has to prepare a resolution plan on the basis of the information memorandum. The information memorandum, which is required to be prepared in accordance with Section 29 of the I&B Code along with Regulation 36 of the Regulations, is required to contain various details, which have been gathered by RP after receipt of various claims in response to the statutorily mandated public notice. The resolution plan is required to provide for the payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the resolution plan; the implementation and supervision of the resolution plan. It is only after the adjudicating authority satisfies itself that the plan as approved by CoC with the requisite voting share of financial creditors meets the requirement as referred to in sub-section (2) of Section 30, grants its P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) approval to it. It is only thereafter that the said plan is binding on the corporate debtor as well as its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. The moratorium order passed by the adjudicating authority under Section 14 shall cease to operate once the adjudicating authority approves the resolution plan. The scheme of the I&B Code therefore is, to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency to continue the business of the corporate debtor as a going concern until a resolution plan is drawn up. Once the resolution plan is approved, the management is handed over under the plan to the successful applicant so that the corporate debtor is able to pay back its debts and get back on its feet.”
It is in this background that the Hon’ble Supreme Court in para 93 has come up with a theory of clean slate as follows:-
“93 As discussed hereinabove, one of the principal objects of the I&B Code is providing for revival of the corporate debtor and to make it a going concern. The I&B Code is a complete Code in itself. Upon admission of petition under Section 7 there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum. The resolution applicants submit their plans on the basis of the details provided in the information memorandum. The resolution plans undergo deep scrutiny by RP as well as CoC. In P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) the negotiations that may be held between CoC and the resolution applicant, various modifications may be made so as to ensure that while paying part of the dues of financial creditors as well as operational creditors and other stakeholders, the corporate debtor is revived and is made an on-going concern. After CoC approves the plan, the adjudicating authority is required to arrive at a subjective satisfaction that the plan conforms to the requirements as are provided in sub-section (2) of Section 30 of the I&B Code. Only thereafter, the adjudicating authority can grant its approval to the plan. It is at this stage that the plan becomes binding on the corporate debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. The legislative intent behind this is to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans would go haywire and the plan would be unworkable.”
Thus, we are of the considered view that whatever contentions the ld. DR has made are devoid of any substance. His heavy reliance on the Hon’ble Supreme Court decision in Sundaresh Bhatt (supra) is also of no assistance as in that case the issue was not at all concerning the claim of respondent Central Board of Indirect Taxes and Customs subsequent to the culmination of insolvency proceedings by approval of Resolution Plan. Rather, that was a case of liquidation and in that case, we find that the respondent Department had issued a notice on P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) 04.07.2019 to the corporate debtor u/s 72(1) of the Act for customs dues and the Respondent also filed a concurrent claim of the customs dues before the Interim Resolution Professional, and the petitioner before the Hon’ble Supreme Court, defending the property of company, was the liquidator. Further, the issue in that case examined was with regard to the powers of the Customs Authorities to continue with the determination of quantum of Customs Duties and other levies and to that extent, the Hon’ble Supreme Court recognized the powers but also held that after assessment the respondent authority has to submit its claim concerning customs dues/operational debts in terms of the procedure laid down in strict compliance of the time period prescribed under the IBC before the adjudicating authority. There is nothing cited before, us as observed above, that in the case before us the Assessing Officer had made such claim or the Department had made any claim even in respect of any other tax due in regard to any previous assessment years for which the assessee was agitating.
Then in the case of TUF Metallurgical Pvt. Ltd. vs. UOI (W.P.(C) 10528/2022) & connected matter Hon’ble High Court of Delhi has also applied the principles laid down by the Hon’ble Supreme Court in the case of Ghanashyam Mishra (supra). In this case Hon’ble Delhi High Court entertaining a Writ petition filed on behalf of the successful resolution applicant has taken into consideration the fact that the successful resolution applicant had taken over the management of a company, the erstwhile corporate debtor in terms of resolution plan on P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) 20.05.2019. Pertaining to the commencement of the CIRP, a public advertisement u/s 15 of the Code was notified declaring last date of submission of claim as 21.01.2019, but, till 21.01.2019 or even thereafter, the Revenue had not opted to submit any claim. Thereafter, the Department had passed an assessment order and a demand notice on 12.12.2019, i.e., after the resolution plan was approved and the management was taken over. When this and subsequent notices arising out of the assessment order for the assessment year 2017-18 were challenged before the Hon’ble Delhi High Court, the issue was adjudicated in favour of the Petitioner, successful resolution plan applicant, holding as follows:-
“8. In the present cases, as described above, the admitted factual matrix is that the notices and orders impugned in these writ petitions pertain to the income tax claims of the respondents/revenue pertaining to the period much prior to the date of approval of the Resolution Plan. The impugned notices and orders were issued by the respondents/ revenue admittedly subsequent to the public announcement under Section 15 of the Code regarding CIRP process pertaining to the petitioner/assessee. As noted above, pertaining to the WP(C) 10528/2022, the public announcement under Section 15 of the Code called for submission of claims by 21.01.2019, but the respondents/revenue did not file any claim till that date or even thereafter; it is only subsequent to approval of the Resolution Plan vide order dated 05.11.2019 of the Tribunal, (which order was P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) communicated to respondents/revenue on 02.12.2019) that the respondents/revenue issued the impugned Assessment Order and Demand Notice both dated 12.12.2019. Similarly, in the other writ petition WP(C) 10628/2022, the impugned notices and orders were issued by the respondents/revenue much subsequent to the public announcement dated 30.09.2019 of commencement of CIRP under Section 13 of the Code; vide order dated 21.02.2022, the Tribunal approved the final Resolution Plan and that order was communicated by the petitioner/ assessee to the respondents/revenue, calling upon the latter to withdraw the earlier notices, but to no avail.
In nutshell, the Resolution Plans qua the petitioners/ assessees having been approved by the National Company Law Tribunal on 05.11.2019 (in WP(C) 10528/2022) and on 21.02.2022 (in WP(C) 10628/2022), the tax claims pertaining to the Assessment Year 2017-18 (in WP(C) 10528/2022) and Assessment Year 2014-15 (in WP(C) 10628/2022) stood extinguished.
The argument on behalf of respondents/revenue that being the State exchequer, it cannot be bound by the Resolution Process provisions of the Code has been recorded only to be rejected in view of the above quoted extract from the judgment in the case of Ghanshyam Mishra (supra).’’
P a g e | Charanbir Singh Sethi & Amrit Pal Singh Chadha (AY: 2013-14) 29. As a consequence of the aforesaid, we are inclined to hold that the assessment order may be valid so far as authority of ld. AO to conclude assessment is concerned. However, the same being not enforceable after 04.02.2020, it is non est and no recovery can be effected under the impugned assessment order subsequent to approval of resolution plan. Thus we sustain grounds no. 2.1, 2.2 and 2.3. As we hold that the claim of department under the impugned assessment is non est and unenforceable, the remaining grounds on merits become academic and need no formal adjudication further.”
In the light of aforesaid we hold that the claim of department under the impugned assessment stands non-est and unenforceable. The appeals are allowed for statistical purposes.
Order pronounced in the open court on 13.02.2026
Sd/- Sd/- (Manish Agarwal) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 13.02.2026 Rohit, Sr. PS