The Bombay High Court rescinded the show cause notice to the debtor company, to submit a report for the tax year preceding the approval of the resolution plan under the IBC.
The petitioner, Murli Industries Limited has raised the question of whether the authorities of the Income Tax Department can issue an opinion under section 148 of the Income Tax Act 1961 to a company debtor, inviting her to submit a declaration in the prescribed form for the valuation year preceding the date of approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016 on the grounds that the respondent, agent appraiser had reason to believe that the taxable income of the debtor company escaped appraisal within the meaning of section 147 of the Income Tax Act, 1961.
The applicant maintains that the resolution plan having been approved by the decision-making authority, i.e. the NCLT under IBC and the effective date to make the resolution plan operational having been notified on 25.08. 2020, the defendants – Income Tax Service could not have issued the disputed opinion dated 25.03.2021, that is to say after the approval of the resolution plan. The assertions are based on the proposition that claims which were not part of the resolution plan are not sustainable against the debtor company, and no claim can be brought afterwards and, therefore, the respondents do not have the right to right to initiate proceedings for the recovery of any contributions from the applicant.
The division bench of Judge Sunil B. Shukre and Judge Anil L. Pansare held that the explanation of section 147 of the Income Tax Act 1961 creates a presumed fiction of cases where taxable income escaped evaluation. Clause (a) deals with a situation where no declaration of income has been provided by the assessor although his total income has exceeded the maximum amount which is not subject to income tax. Clause (b) deals with a situation in which an income statement has been provided by the appraisee but no appraisal has been made and it is noticed by the appraiser that the appraise has underestimated income or claimed excessive loss, deduction, allowances or relief on return. There are also other clauses which would indicate the reasons for evading the assessment. The point is that once the public announcement is made within the framework of the IBC by the resolution professional calling on all parties concerned, including statutory bodies, to make a complaint, it would be expected from all stakeholders. that they raise their complaint diligently. The tax authorities, in this sense, should have been diligent in verifying the valuation of previous years of the debtor company as permitted by law and in raising the claim in the prescribed form in time before the resolution professional . In this case, the tax authorities failed to do so and, therefore, the claim was extinguished.
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