Penalty Orders U/S 270A Of Income Tax Act Cannot Be Issued After Approval Of Resolution Plan U/S 31 Of IBC: Gujarat HC

The Gujarat High Court bench of Justices Bhargav D. Karia and D.N.Ray has held that Penalty orders under Sections 270A, 271(1)(c), and 271AAC(1) of the Income Tax Act, 1961 (Income Tax Act) cannot be issued after the approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 (Code). Once the Resolution Plan is approved by the Adjudicating Authority, all claims, including statutory dues, stand extinguished, and no further proceedings in respect of such dues can be initiated. Brief Facts: An application was filed by Operational Creditor under Section 9 of the Code against the Technovaa Plastic Industries Pvt. Ltd. (Corporate Debtor/Petitioner) before the National Company Law Tribunal ("NCLT"), Ahmedabad. The NCLT admitted the application on 12.11.2018 and imposed a moratorium under Section 14 of the Code thereby initiating Corporate Insolvency Resolution Process (CIRP) against the Petitioner. The Respondent No. 4, namely, the National Faceless Assessment Centre, issued penalty orders under various provisions of the Income Tax Act, 1961. Aggrieved by the demand notices issued by the Respondents in respect of the period prior to 04.09.2020, the Petitioner has filed the present Writ Petition under Article 226 of the Constitution of India. Following the Committee of Creditors' approval of the resolution plan, the Resolution Professional filed Interlocutory Application No. 617 of 2019 in CP(IB) No. 189 of 2018 before the NCLT, seeking its approval under Section 31 of the Code. After detailed consideration, the NCLT approved the resolution plan by its order dated 04.09.2020. Contentions: The Petitioner submitted that notices have been issued by the Department to the Petitioner for the period prior to 04.09.2020. whereas, the NCLT by virtue of the order dated 04.09.2020 has approved the Resolution Plan of one, Kankariya Enteprises Pvt. Ltd. under Section 31 of the IBC. It was further submitted that the tax dues of the Department, unless futuring in the Resolution Plan as due and payable, shall be extinguished and no demand can be raised for the period prior to 04.09.2020, i.e. the date of NCLT order approving the Resolution Plan. Observations: The court at the outset perused the relevant clauses of the Resolution Plan and held that after the NCLT approved the Resolution Plan on 04.09.2020, only the claims included in the plan are binding on the successful resolution applicant. All other statutory claims not covered under the plan stand extinguished, and no further proceedings can be continued for such dues, as per Section 31 of the Code. The Supreme Court recently in Vaibhav Goel and Anr. Vs. Deputy Commissioner of Income Tax & Anr. reported in 2025 held that section 31(1) of the Code states that once the Adjudicating Authority approves the Resolution Plan, it becomes binding on all stakeholders, including creditors and government authorities. The 2019 amendment to Section 31(1), which clarified the inclusion of statutory dues owed to government authorities, was held to be declaratory and applicable from the inception of the Code. The Apex Court in the above case also referred to the judgment of Ghanashyam Mishra and Sons Pvt. Ltd. wherein it was held that any claim not included in the Resolution Plan stands extinguished and cannot be pursued further. This principle was reaffirmed in Committee of Creditors of Essar Steel India Ltd., where the Court emphasized that a successful resolution applicant must not be burdened with undecided or belated claims after plan approval. Based on the above and applying the above law to the facts of the present case, the court held that in the present case, since the income tax dues for the assessment years 2012–13 and 2013–14 were not part of the approved Resolution Plan, they stand extinguished and cannot be enforced against the corporate debtor. Accordingly, the impugned demand notices issued pursuant to the assessment and penalty orders were quashed and set aside. Case Title: Technovaa Plastic Industries Pvt. Ltd. Versus Assistant Commissioner Of Income Tax, Circle, Gandhinagar & Ors. Case Number: R/SPECIAL CIVIL APPLICATION NO. 21289 of 2022 Judgment Date: 09/05/2025 MR. M.R.BHATT, SR.ADVOCATE WITH MS SHAILEE S JOSHI(11582) for the Petitioner(s) No. 1 MR.VARUN K.PATEL(3802) for the Respondent(s) No. 3,4 MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1,2 Click Here To Read/Download The Order Citation: 2025 LiveLaw (Guj) 71

Penalty Orders U/S 270A Of Income Tax Act Cannot Be Issued After Approval Of Resolution Plan U/S 31 Of IBC: Gujarat HC

Mohd Malik Chauhan

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