Delhi High Court Sets Aside ₹232 Crore Ex Parte IT Assessment Against Nayati Healthcare During Insolvency

The Delhi High Court has recently set aside an ex-parte best judgment assessment assessing the Nayati Healthcare and Research NCR Private Limited's income at Rs. 232 crore, which was passed while the company was undergoing Corporate Insolvency Resolution Process (CIRP).

A Division Bench of Justice Dinesh Mehta and Vinod Kumar allowed the writ petition filed by the assessee, observing that at the relevant time the company was under CIRP and neither the suspended management nor the Interim Resolution Professional (IRP) was in a position to effectively represent the assessee before the Assessing Officer.

The impugned assessment order had been framed under Section 143(3) read with Section 144B of the Income Tax Act, whereby the total income of the petitioner was assessed at staggering Rs 232 crore on a best judgment basis.

The healthcare company contended that during CIRP, the management stood suspended and the IRP did not have access to the complete books of accounts and records necessary to place the correct factual position before the tax authorities.

The Revenue argued that the assessee had failed to respond to statutory notices and that an alternative appellate remedy was available under the Act.

Rejecting the objection on maintainability, the High Court held that in the peculiar facts of the case, the appellate remedy would be illusory, since the assessment itself was framed at a time when meaningful participation in the proceedings was practically impossible.

“The IRP and the present management of the petitioner-company were bonafidely deprived of placing the material before the AO. The IRP continued de-jure but could not effectively do so, as he was not having knowledge of facts, transactions and access to the documents whereas, the management was not having legal authority, maybe having acquaintance with the affairs of possession of material and documents. Hence, all factual and legal pleas which could have been taken before the AO were not taken,” it noted.

Accordingly, the Court quashed the ex-parte assessment order and remanded the matter to the Assessing Officer with a direction to conduct a fresh assessment after granting adequate opportunity to the assessee.

For Petitioner: Advocates Giriraj Subramanium, Aadhyaa Khanna, & Aditya Sarma

For Respondent: Advocates Shlok Chandra, SSC with Ms. Naincy Jain & Ms. Madhavi Shukla, JSCs.