Income Tax: HC Quashes Section 148 Reassessment Notice Post-IBC Resolution; Holds Tax Dues Extinguished Upon Plan Approval

Mr. B. S. Soparkar (petitioner) has filed a petition under Article 226 of the Constitution of India to High Court of Gujarat. Petitioner has made the following prayers:

• Quash and set aside the impugned notice u/s 148 of the Act dated 31/03/2015
• Pending the admission, hearing and final disposal of this petition, to stay further proceedings pursuant to the impugned notice
• Any other and further relief deemed just and proper granted in the interest of justice
• To provide for the cost of petition

Facts of this case, the petitioner, which is a company registered under the Companies Act, 1956, inter alia engaged in the business of manufacturing components for the general engineering and automotive industries. The Petitioner filed the return of income for the Assessment Year 2021-22.

The case was reopened by the issuance of a notice dated 31/03/2025 under Section 148 of the Income Tax Act, 1961. The petitioner was subjected to the insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

The Corporate Insolvency Resolution Process was initiated by the Indian Overseas Bank under Section 7 of the IBC code.

The High Court of Gujarat, Ahmedabad, appointed an Interim Resolution Professional, who made a public announcement in accordance with Sections 13, 15 and other related provisions of the code read with Regulation 6 of the Insolvency Regulations, thereby inviting claims from the different creditors of the petitioner.

Further, under the CIRP, the Resolution plan of Steel Wheels Limited (respondent) for the revival of the petitioner was approved by the High Court of Gujarat order dated 12/10/2023 under Section 30 (6) of the Code. The said Resolution Plan provided for the waiver and the extinguishment of all the unassessed/assessed tax liabilities for the previous period to the NCLT approval date.

The Karan G Sanghani (respondent) has issued the Challenged notice dated 31/03/2025, under Section 148 of the Act. Challenging the legality of the impugned notice, the petitioner has filed this petition. the experienced Counsel on behalf of the petitioner submitted that on the approval of the Resolution Plan under Section 31 of the IBC, all dues of the Corporate Debtor except those that have been specifically provided for in the Resolution Plan would stand eliminated in terms of the provisions of the IBC and the decisions of the High Court in the case of The Committee of Creditors of Essar Steel Ltd. vs. Satishkumar Gupta and the case of Ghanshyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd.

The Experienced Counsel for the respondent believes that Department is not in a position to argue the position of law as far as the extinguishment of the tax dues is concerned in terms of Section 31 of IBC.

Therefore, applying the decisions of the High Court to the facts of the present case, it clears that on the complete extinguishment of all tax liabilities of the Corporate Debtor on the approval of the Resolution Plan, there could be no occasion for the respondents to pass the challenged notice. In such a view of the matter, the facts of the challenged order result in the petition succeeding and the challenged notice being quashed and set aside.