Gauhati High Court Quashes Section 153C Proceedings Initiated After NCLT Approval of Resolution Plan
Overview
The Gauhati High Court delivered a significant ruling in the case of Meghalaya Infratech Limited Vs DCIT, setting aside assessment orders and demand notices dated 29 March 2023 for Assessment Years 2011–12 and 2016–17. The Court held that proceedings initiated under Section 153C of the Income-tax Act, 1961 after the approval of the company's resolution plan under the Insolvency and Bankruptcy Code, 2016 were without jurisdiction. The ruling reinforces the clean slate principle and the binding nature of an approved resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC).
Background and Factual Matrix
Corporate Insolvency Resolution Process
Meghalaya Infratech Limited, an assessee within the meaning of Section 2(7) of the Income-tax Act, 1961, underwent a Corporate Insolvency Resolution Process (CIRP) initiated by Allahabad Bank. The application was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 as CP(IB) No. 13/GB/2019. The NCLT, Guwahati admitted the application vide order dated 28.08.2019, upon which CIRP commenced. One Mr. Amit Pareek was appointed as the Interim Resolution Professional and was subsequently confirmed in that role during the first Committee of Creditors meeting.
Four resolution applicants submitted plans. During the Committee of Creditors meeting held on 11–12 February 2020, Mr. Ngaitlang Dhar emerged as the H-1 bidder, with Mr. Abhishek Agarwal as the H-2 bidder. In the 7th Committee of Creditors meeting on 6 March 2020, the resolution plan of Mr. Ngaitlang Dhar received 100% voting approval. The NCLT formally approved the resolution plan on 18 May 2020.
Appellate Journey and Supreme Court Confirmation
The NCLT's approval order was challenged before the National Company Law Appellate Tribunal, New Delhi, which allowed the appeal vide order dated 19.10.2020. Mr. Ngaitlang Dhar and the Resolution Professional filed Civil Appeal Nos. 3665–3666 of 2020 and Civil Appeal Nos. 3742–3743 of 2020 respectively before the Supreme Court. In the case of Ngaitlang Dhar Vs Panna Pragati Infrastructure Private Limited and Ors., the Supreme Court, vide its detailed judgment dated 17 December 2021, set aside the NCLAT's order and upheld the NCLT's approval of the resolution plan.
Post-Approval Income Tax Proceedings
Notwithstanding the finality of the resolution plan, the Income Tax Department subsequently issued notices under Section 153C of the Income-tax Act, 1961 for Assessment Years 2011–12 and 2016–17. Assessment orders were then passed on 29 March 2023, accompanied by demand notices of the same date.
- For AY 2011–12: An addition of ₹83,00,000/- was made to the assessee's total income, resulting in a determined payable amount of ₹1,01,56,212/-.
- For AY 2016–17: An addition of ₹10,55,00,000/- was made, resulting in a determined payable amount of ₹6,71,81,020/-.
Aggrieved by these orders, Meghalaya Infratech Limited filed writ petitions — WP(C) No. 3001/2023 for AY 2011–12 and WP(C) No. 3007/2023 for AY 2016–17 — before the Gauhati High Court, challenging both the assessment orders and the demand notices. A coordinate bench of the Court had already, vide order dated 29.05.2023, directed that these assessment orders and demand notices shall not be put to execution or recovery, and those interim orders continued throughout the proceedings.