Pre-CIRP Tax Claims Extinguished After Plan Approval, Bombay High Court Quashes Tax Notices To V Hotels

The Bombay High Court has recently reaffirmed that income-tax assessment proceedings for any period prior to the approval of a resolution plan under the Insolvency and Bankruptcy Code (IBC) stand extinguished once the National Company Law Tribunal (NCLT) approves the plan, ruling that the tax department cannot initiate or continue such proceedings thereafter.A Division Bench of Justice B P Colabawalla and Justice Amit S Jamsandekar observed, “Once a resolution plan is approved by the adjudicating authority, the said plan becomes binding on the corporate debtor and all stakeholders, including the central and state governments or any local authority, in respect of statutory dues. The Hon'ble Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. has categorically held that all claims that are not part of the approved Resolution Plan stand extinguished, and no person is entitled to initiate or continue any proceedings in respect thereof.”The case concerns V Hotels Limited, whose corporate insolvency resolution process (CIRP) began in 2019. Though the NCLAT later set aside the process, the Supreme Court restored it, and in 2024 the NCLT approved the resolution plan submitted by Macrotech Developers Limited. After the new management took charge, it filed the income-tax return for AY 2024–25. Despite this, the National Faceless Assessment Centre issued two types of notices, one under Section 143(2), which is a notice issued when the tax department wants to conduct a detailed scrutiny assessment of a return; and another under Section 142(1), which empowers the department to demand additional information, documents or accounts before completing such an assessment. Both notices sought to reopen assessment for a period that fell before the resolution plan was approved.V Hotels approached the High Court under Article 226, arguing that the NCLT had not only admitted the CIRP application but had also declared a moratorium, and that once the resolution plan was approved, all claims and liabilities relating to any earlier period stood settled or extinguished. Since the alleged tax liabilities related to a time prior to approval of the plan, they could not be revived by issuing scrutiny or information-seeking notices under Sections 143(2) or 142(1). The petitioner submitted that prior to initiation of the impugned assessment proceedings, the NCLT admitted the section 7 IBC application and declared a moratorium. It argued that once the resolution plan is approved, any liability or claim pertaining to prior to the approval of the resolution plan stands extinguished and/or settled in terms of the resolution plan.The High Court relied on the Supreme Court rulings in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss ARC and Vaibhav Goel vs. DCIT, which confirm that all claims predating approval of the resolution plan stand wiped out once the plan attains final approval. The bench also noted that in an earlier case involving V Hotels, reassessment proceedings were already quashed on the same principle, as the alleged tax dues related to a pre-approval period. The same logic, the court said, squarely applied here because the notices sought information for a period that the law treats as extinguished once the resolution plan takes effect. Holding that the department lacked jurisdiction to reopen assessments for an extinguished period, the High Court quashed the notices issued under Sections 143(2) and 142(1), declaring them unsustainable in law.Case Name: V Hotels Limited v. The National Faceless Assessment Centre,Delhi & Ors. Case Number: WRIT PETITION (L) NO.34996 OF 2025 For Petitioners: Senior Advocate Prakash Shah along with Advocate Jas Sanghavi, Suyog Bhave, Linzy Sharan instructed by PDS Legal, For Respondents: Advocate Vipul Bajpayee Click Here To Read/Download Order

Pre-CIRP Tax Claims Extinguished After Plan Approval, Bombay High Court Quashes Tax Notices To V Hotels

Mohd.Rehan Ali

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