NCLT Guwahati Quashes Income Tax Reassessment Against Maxim Infrastructure For Pre-CIRP Dues

A coram comprising Judicial Member Rammurti Kushawaha and Technical Member Yogendra Kumar Singh on January 15, allowed an application filed by Maxim Infrastructure & Real Estate Pvt. Ltd. It quashed reassessment proceedings for Assessment Year 2018–19.

“Since the Respondent failed to lodge its claim during the CIRP, it is now legally barred from initiating re-assessment proceedings under Section 148A or raising demands for 'escaped income' for the pre-insolvency period. The Respondent is duty-bound to honor the extinguishment of these liabilities and past dues. By persisting with demands raised after approval of the plan, Respondents has acted inconsistently with its binding terms and in derogation of the Code.”, the bench observed.

Maxim Infrastructure was admitted into CIRP on August 31, 2018. Public announcements were issued inviting claims from all creditors, including statutory authorities. However the Income Tax Department did not lodge any claim during the process. The resolution plan submitted by a consortium led by Rare Asset Reconstruction Ltd. was approved by the Committee of Creditors on September 26, 2019.

Nearly five years later, on August 12, 2024, the income tax officer issued a show cause notice under Section 148A of the Income Tax Act alleging escaped income of Rs. 1,22,32,000 for Assessment Year 2018 to 2019 followed by reassessment proceedings on August 31, 2024.

The tribunal held that since the department failed to submit its claim during CIRP, it is legally barred from initiating reassessment proceedings for the pre-insolvency period. It relied on the “clean slate” doctrine laid down in Essar Steel and Ghanashyam Mishra and observed that once a plan is approved under Section 31(1), all claims not forming part of the plan stand extinguished.

“By virtue of Section 31(1), the Respondents are legally barred from initiating reassessment proceedings, raising tax demands, or seeking recovery of any alleged 'escaped income' pertaining to the pre-CIRP period. The Respondent is duty-bound to honor the 'Clean Slate' principle and treat all pre-insolvency tax liabilities as extinguished.”, it said. 

The tribunal said the income tax department was duty-bound to honour the extinguishment of liabilities and could not resurrect settled dues. It accordingly quashed the reassessment notices.