Gujarat High Court

Amw Auto Component Limited vs Assistant Commissioner Of Income Tax ... on 8 July, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

                                                                                                                     NEUTRAL CITATION




                           C/SCA/5221/2025                                          JUDGMENT DATED: 08/07/2025

                                                                                                                      undefined




                                    IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                      R/SPECIAL CIVIL APPLICATION NO. 5221 of 2025


                       FOR APPROVAL AND SIGNATURE:


                       HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                       and
                       HONOURABLE MR. JUSTICE PRANAV TRIVEDI
                       ==========================================================

                                   Approved for Reporting                          Yes           No

                       ==========================================================
                                         AMW AUTO COMPONENT LIMITED
                                                    Versus
                               ASSISTANT COMMISSIONER OF INCOME TAX ACIT CIRCLE
                                                 GANDHIDHAM
                       ==========================================================
                       Appearance:
                       MR B S SOPARKAR(6851) for the Petitioner(s) No. 1
                       KARAN G SANGHANI(7945) for the Respondent(s) No. 1
                       ==========================================================

                         CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                               and
                               HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                                                              Date : 08/07/2025

                                            ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)

1. Heard learned advocate Mr.B.S.Soparkar for

the petitioner and learned Senior Standing

Counsel Mr. Karan G. Sanghani for the

respondent.

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

2. Rule returnable forthwith. Learned Senior

Standing Counsel Mr. Karan G. Sanghani waives

service of the notice of rule on behalf of the

respondent.

3 With the consent of the learned advocates

for the respective parties, the matter is

taken up for hearing, as the issue involved is

very short.

4 The petition has been filed under Article

226 of the Constitution of India with the

following prayers :-

"(a) Quash and set aside the impugned notice u/s 148 of the Act dated 31.03.2015 at Annexure A to this petition;

(b) Pending the admission, hearing and final disposal of this petition, to stay further proceedings pursuant to the impugned notice;

(c) Any other and further relief deemed just and proper by granted in the interest of justice;

(d) To provide for the cost of petition."

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

5. The brief facts of the case are as follows:

5.1 The petitioner is a company registered

under the Companies Act, 1956, inter alia

engaged in the business of manufacturing of

components for the general engineering and

automotive industries. The Petitioner filed

the return of income for the Assessment Year

2021-22.

5.2 The case was reopened by the issuance of a

notice dated 31.03.2025 under Section 148 of

the Income Tax Act, 1961 (hereinafter referred

to as"the Act").

5.3 The petitioner was subjected to the

insolvency proceedings under the Insolvency

and Bankruptcy Code, 2016 ("IBC Code"),

wherein, a Corporate Insolvency Resolution

Process ("CIRP") was initiated by the Indian

Overseas Bank under Section 7 of the IBC Code,

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

which was admitted by the Adjudicating

Authority vide order dated 01.09.2020.

5.4 An Interim Resolution Professional was

appointed by the Hon'ble Tribunal, who made a

public announcement in accordance with Section

13, 15 and other relevant provisions of the

Code read with the Regulation 6 of the

Insolvency Regulations, 2016, thereby inviting

claims from the various creditors of the

Petitioner.

5.5 Further, under the CIRP, the Resolution

Plan of Steel Wheels Limited for the revival

of the Petitioner was approved by the Hon'ble

Tribunal vide order dated 12.10.2023 under

Section 30(6) of the Code. The said Resolution

Plan provided for the waiver and

extinguishment of all the unassessed/assessed

tax liabilities for the period prior to the

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

NCLT approval date.

5.6 The respondent has issued the impugned

notice dated 31.03.2025, under Section 148 of

the Act.

5.7 Challenging the legality of the impugned

notice dated 31.03.2025, the petitioner has

filed this petition.

6. Mr. B.S.Soparkar, learned advocate

appearing 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

which have been specifically provided for in

the Resolution Plan would stand extinguished

in terms of the provisions of the IBC and the

decisions of the Hon'ble Apex Court in the

case of The Committee of Creditors of Essar

Steel Ltd. Vs. Satishkumar Gupta reported in

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

(2020) 8 SCC 531 and in case of Ghanshyam

Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset

Reconstruction Company Ltd., reported in

(2021) 9 SCC 657. Mr. Soparkar, learned

advocate submitted that in the present case,

the tax dues stand extinguished in terms of

the Resolution Plan.

6.1 Mr. Karan G.Sanghani, learned Senior

Standing Counsel for the respondent-Department

is not in a position to controvert the

position of law as far as the extinguishment

of the tax dues are concerned in terms of

Section 31 of the IBC. He however submits that

in view of the said position, this Court may

not enter into the merits of the issuance of

notice under Section 263 of the Act.

7. DISCUSSION & FINDINGS :-

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

7.1 A perusal of the Resolution Plan which

came to be approved on 12.10.2023 by the

learned NCLT would reveal the following

provisions as evident from the relevant

portion extracted below:-

"EFFECT OF THE RESOLUTION PLAN"

8.1 In terms of Section 31(1) of the IBC, this Resolution Plan shall be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a Debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders of the Corporate Debtor on and from the NCLT Approval Date.

8.2 Upon approval of this Resolution Plan by the NCLT, the following settlements shall be deemed to have been approved by the NCLT and be binding in terms of Section 31(1) of the IBC"

.....

(ii) It is also clarified that any Tax liabilities pertaining to a period prior to and Including the NCLT Approval Date (including penalties levied or leviable, prosecution and interest), even if such past liability pertaining to the aforesaid

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

period arises any time in the future post the NCLT Approval Date whether assessed or unassessed or determined or undetermined, by the relevant Governmental Authority shall be deemed to be extinguished and written off with effect from the NCLT Approval Date.

(jj) With effect from the NCLT Approval Date, the Corporate Debtor shall be entitled to carry forward and set off all the accumulated Tax losses and unabsorbed depreciation of the Corporate Debtor for the maximum period as provided in the relevant statute.

(kk) With effect from the NCLT Approval Date, all benefits, incentives, subsidies, schemes, policies, etc., which the Corporate Debtor was entitled to and all such benefits thereunder (including any EPCG Schemes) shall remain vested with the Corporate Debtor, notwithstanding any change in ownership or control on account of this Resolution Plan and any penalties or liabilities owing to non-compliance thereunder or pursuant to any notices and Proceedings for the period prior to the NCLT Approval Date shall stand waived and extinguished in entirety. The Corporate Debtor shall file requisite applications for the same as may be required.

(ll) All liabilities and obligations relating to any adjustment to income / recovery proceeding/ penalty proceedings u/s 270A of the Income Tax Act, 1961 or any other provisions of thereunder on

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

account of income tax Proceedings outstanding for FY 12-13 or any other assessment year/financial year upto the NCLT Approval Date, shall stand extinguished.

(mm) On and from the NCLT Approval Date, all outstanding TDS demands against the Corporate Debtor for various years including TDS demand amounting to INR 0.65 cr shall stand waived and extinguished in entirety.

(nn) With effect from the NCLT Approval Date, any prosecution risk on account of delayed/non-deposit of TDS/TCS for the period prior to the NCLT Approval Date shall stand waived and extinguished and in the event and Proceedings have been initiated pursuant to the aforesaid, the same shall stand extinguished and abated.

The Corporate Debtor shall file necessary applications as may be required to give effect to the aforesaid and as may be required under the provisions of Applicable Laws. It is further clarified that such filings shall not be condition to the implementation of this Plan or affect the timelines for Implementation in any manner whatsoever.

(oo) On and from the NCLT Approval Date, all unassessed / assessed Tax liabilities for period prior to the NCLT Approval Date, in relation to any dues arising out of withholding tax compliance including penalties, fees, interest, levies, etc. or any other charges whatsoever arising of

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

assessment, re-assessment, search and seizure, revision, rectification, under section 201,250, 263, 264, 220(2) of the Income Tax Act, 1961 shall stand waived and extinguished.

(pp) On and from the NCLT Approval Date, any adverse tax implication on the Corporate Debtor on account of past transactions with related parties including section 40A(2b) of the Income Tax Act, 1961 shall stand waived and extinguished and no Proceedings shall be initiated by any Person in this regard for any transaction done during the period prior to the NCLT Approval Date. The Corporate Debtor shall necessary applications as may be required to give effect to the aforesaid and as may be required under the provisions of Applicable Laws. It is further clarified that such filings shall not be condition to the implementation of this Plan or affect the timelines for implementation in any manner whatsoever.

(qq) On and from the NCLT Approval Date, any adverse tax implication under section 41(1) of the Income Tax Act, 1961 on account of write off of trade payables shall stand waived and extinguished given that no tax deduction was claimed for such amounts in the past years and no Proceedings shall be initiated by any Person in this regard for the period prior to the NCLT Approval Date."

8. From the perusal of the above, it is

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

evident that all tax liabilities, assessed and

unassessed under the Income Tax Act, 1961

"shall stand waived and extinguished".

9. In case of The Committee of Creditors of

Essar Steel Ltd.(Supra),the Hon'ble Apex Court

has held as under:-

"107. For the same reason, the impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count."

10. In the case of Edelweiss Asset

Reconstruction Company Ltd.,(Supra), the

Hon'ble Apex Court has categorically held as

under:-

"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 IBC is clarificatory and declaratory in nature and therefore will be effective from the date on which IBC has come into effect.

102.3 Consequently all the dues including the statutory dues owed to the Central

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

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 which the adjudicating authority grants its approval under Section 31 could be continued.

138 In the forgoing paragraph, we have held that the 2019 Amendment to Section 31 IBC is clarificatory and declaratory in nature and therefore will have a retrospective operation. As such, when the resolution plan is approved by NCLT, the claims, which are not part of the resolution plan, shall stand extinguished and the proceedings related thereto shall stand terminated. Since the subject-matter of the petition are the proceedings which relate to the claims of the respondents prior to the approval of the plan, the same cannot be continued. Equally the claims, which are not part of the resolution plan, shall stand extinguished."

11. Therefore, applying the decisions of the

Hon'ble Apex Court to the facts of the present

case, it is clear that on the complete

extinguishment of all tax liabilities of the

Corporate Debtor upon the approval of the

Resolution Plan on 31.03.2025, there could be

NEUTRAL CITATION

C/SCA/5221/2025 JUDGMENT DATED: 08/07/2025

undefined

no occasion whatsoever for the respondents to

issue the impugned notice under Section 148 of

the Act on 31.03.2025. In such view of the