Murli Industries Limited v. ACIT (Bombay High Court (Nagpur Bench))

Case snapshot

Sections / provisions: 148

Questions before the Court / Tribunal

• S. 148: Reassessment-Issuance of notice of reassessment- Resolution personal-Provisions of this Code to override other laws-For period prior to approval of resolution plan under the Insolvency & Bankruptcy Code, 2016 (‘IBC’)-Once the public announcement is made under the IBC by the Resolution Professional calling upon all concerned, including the statutory bodies, to raise claim, it would be expected from all the stakeholders to diligently raise their claim- Not maintainable against the Corporate Debtor- Notice issue was quashed. (S. 147, The Insolvency and Bankruptcy Code, 2016, S. 7, 30(2), 238, Art. 226) Where notice under Section 148 of the Income Tax Act, 1961 (Act) to a Corporate Debtor, calling upon it to submit a return in the prescribed form for the assessment year falling prior to the date of approval of Resolution Plan under the IBC on the ground that the Ld. Assessing…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

wp2948.2021jud.docx 1/19 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH, NAGPUR. WRIT PETITION NO. 2948 OF 2021 Murli Industries Limited., Through its Dy . Ex. Director Block No.802, A Wing, 9th Floor, Shreeram Shyam Towers, S.V . Patel Marg, Kingsway, Civil Lines, Nagpur – 440 001 …. PETITIONER // VERSUS // 1. Assistant Commissioner of Income Tax MECL Building, Dr. Baba Saheb Ambedkar Bhavan, Seminary Hills, Nagpur. Maharashtra – 440 006 2. Principal Commissioner of Income Tax -1 Nagpur, Aaykar Bhavan, Civil Lines, Maharashtra – 440 001 3. Union of India Through the Secretary, Department of Finance, Ministry of Finance, Government of India, North Block, New Delhi – 110 001. …. RESPONDENTS WITH WRIT PETITION NO. 2965 OF 2021 Murli Industries Limited., Through its Deputy Director (Exc.) Tax, Block No.802, A Wing, 9th Floor, Shreeram Shyam Towers, S.V . Patel Marg, Kingsway, Civil Lines, Nagpur – 440 001 …. PETITIONER // VERSUS // 1. Assistant Commissioner of Income Tax MECL Building, Dr. Baba Saheb Ambedkar Bhavan, Seminary Hills, Nagpur. Maharashtra – 440 006 2. Additional/Joint Commissioner of Income Tax Range-1, Nagpur Aaykar Bhavan, Civil Lines, Maharashtra – 440 001

JUDGMENT: [PER: Anil L. Pansare, J.] Rule. Rule made returnable forthwith. The matter is heard finally by the consent of the learned counsel for the parties. 2. Heard Shri Sheth, learned counsel for the Petitioner and Shri S.N. Bhattad, learned counsel for the Respondent Nos. 1 and 2. 3. The question involved in the Petition is; “Whether the Authorities of the Income Tax Department can issue notice under Section 148 of the Income Tax Act, 1961 to a Corporate Debtor, calling upon it to submit a return in the prescribed form for the assessment year falling prior to the date of approval of Resolution Plan under Insolvency and Bankruptcy Code,

wp2948.2021jud.docx 3/19 2016 on the ground that Respondent No. 1 – Assessing Officer had a reason to believe that the income chargeable to tax of the Corporate Debtor has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961?” 4. There are two connected Petitions herein. The impugned notice in WP No. 2948 of 2021 is dated 25.03.2021 and in WP No. 2965 is dated 24.03.2021. For the sake of convenience, the facts of Writ petition No. 2948 of 2021 are being considered. The Petitioner - Murli Industries Ltd., is a company registered under the Companies Act, 1956, and is engaged in the business of manufacture and sale of cement. According to the Petitioner, the Petitioner – company had filed its return of income for the assessment year 2014 – 15 on 29.09.2014 declaring a loss of ₹ 2,80,30,74,365/-. The Petitioner’s case was selected for scrutiny by the Income Tax Authorities and an order to that effect was passed on 27.12.2016 under Section 143(3) read with Section 144 of the Income Tax Act, 1961 (hereinafter referred to as “ the Act ”). Respondent No. 1 is the Assessing Officer of the Petitioner who has issued the impugned notice. Respondent No. 2 is the Principal Commissioner of Income Tax, who has the administration jurisdiction over the cases of the Petitioner and who has allegedly

wp2948.2021jud.docx 4/19 granted approval for issuance of impugned notice. Respondent No. 3 is the Union of India and is the employer of Respondent Nos. 1 & 2. The Respondent No. 1 – Assessing Officer has issued the notice dated 25.03.2021 under Section 148 of the Act, seeking to reopen the concluded assessment of the Petitioner company for the assessment year 2014 – 15. The Petitioner has challenged the legality and validity of the said notice mainly on the ground that it is contrary to the decision of the Hon’ble Supreme Court of India in the case of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited and others reported in 2021(9) SCC 657. 5. In the present case, one M/s. Edelweiss Asset Reconstruction Company Limited filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “ IBC”) to initiate Corporate Insolvency Resolution Process (hereinafter referred to as “ CIRP Proceedings”) against the Petitioner. The said Application was admitted by the National Company Law Tribunal, Mumbai (hereinafter referred to as “NCLT”) vide order dated 05.04.2017 and on 11.04.2017, an Interim Resolution Professional (hereinafter referred to as “ IRP”) was appointed by the NCLT . The IRP was later appointed as the

wp2948.2021jud.docx 6/19 7. In this background, learned counsel for the Petitioner contends that the Resolution Plan having been approved by the Adjudicating Authority i.e., the NCLT under IBC and the effective date for making the resolution Plan operational having been notified as on 25.08.2020, the Respondents – Income Tax Department could not have issued the impugned notice dated 25.03.2021 i.e., subsequent to the approval of the Resolution Plan. The contentions are based on the proposition that the claims which were not a part of the Resolution Plan are not maintainable against the Corporate Debtor, nor can any claim be initiated thereafter and hence, the Respondents are not entitled to initiate any proceedings for recovery of any dues from the Petitioner (Corporate Debtor). 8. There is no dispute that the claim raised through the impugned notice was not a part of the Resolution Plan. However, Shri Bhattad, learned counsel for the Respondent Nos. 1 and 2, has come up with a defense that the claim raised through the impugned notice could not be a part of the Resolution Plan inasmuch as the claim was not crystallized at that time. According to him, the notice has been issued under Section 148 of the Act on the ground that the income chargeable to tax for the assessment year 2014-15 has escaped assessment and therefore, the Petitioner has been called

Appellant / petitioner / assessee submissions

wp2948.2021jud.docx 7/19 upon to submit its return under the provisions of the Income Tax Act, 1961. The claim itself has been disclosed subsequent to the approval of the Resolution Plan and therefore, it could not have been raised before the Resolution Professional under the CIRP proceedings. Thus, according to Mr. Bhattad, such statutory claim is maintainable even after the approval of the Resolution Plan. In fact, he has raised a preliminary objection of maintainability of the Petition by contending that once notice under Section 148 is issued, a proper course of action for the noticee is to file its returns and if he so desires, then to seek reasons for issuing notice. After which, the Respondent No. 1 – Assessing Officer is bound to furnish reasons as sought by the noticee. On receipt of such reasons, the noticee is entitled to file objections for issuance of notice. After the objections are filed, Respondent No. 1 – Assessing Officer is bound to dispose of the same by passing a speaking order. The aforesaid argument has been made in view of the law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. Income-Tax Officer, reported in 2002 (125) Taxman 963 SC . Accordingly , it is argued by the learned counsel for the Respondent Nos. 1 and 2 that the alternate and only remedy for the Petitioner is to seek reasons for issuance of notice from the Respondent No. 1 – Assessing Officer and thereafter, to file objections.

Revenue / respondent submissions

wp2948.2021jud.docx 8/19 9. We are unable to accede to the submissions made by Mr. Bhattad, learned counsel for Respondent Nos. 1 and 2, raising preliminary objections, the reasons for which will follow in the later part of the judgment. 10. Coming back to the core issue as to whether the impugned notice could have been issued by the Respondent No. 1 – Assessing Officer subsequent to approval of the Resolution Plan, the answer is traceable in Ghanashyam Mishra’s case (supra) . The Hon’ble Supreme Court while dealing with the batch of matters relating to CIRP proceedings, framed the following important questions. “2.1. (i) As to whether any creditor including the Central Government, State Government or any local authority is bound by the resolution plan once it is approved by an adjudicating authority under sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016. 2.2. (ii) As to whether the amendment to Section 31 by Section 7 of Act 26 of 2019 is clarificatory/declaratory or substantive in nature? 2.3 (iii) As to whether after approval of resolution plan by the adjudicating authority a creditor including the Central Government, State Government or any local authority is entitled to initiate any proceedings for recovery of any of

Court / Tribunal analysis and reasoning

We therefore hold, that the 2019 amendment is declaratory and clarificatory in nature and therefore retrospective in operation. 98. It is a cardinal principle of law, that a statute has to be read as a whole. Harmonious construction of sub section (10) of Section 3 of the I&B Code read with sub sections (20) and (21) of Section 5 thereof would reveal, that even a claim in respect of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority would come within the ambit of ‘operational debt’. The Central Government, any State Government or any local authority to whom an operational debt is owed would come within the ambit of ‘operational creditor’ as defined under sub section (20) of Section 5 of the I&B Code.

2019 amendment to Section 31 of the I&B Code is clari - ficatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect; 102.3. Consequently, all the dues including the statutory dues owed to the Central 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.” 17. A careful reading of the above findings, would show that even a claim in respect of dues arising under any law for the time being in force, including claims under the Income Tax Act, 1961 which is payable to the Central Government or the State Government, would come within the ambit of Operational Creditors.

wp2948.2021jud.docx 16/19 21. We may add here that the Explanation to Section 147 of the Income Tax Act, 1961 creates a deeming fiction of cases where the income chargeable to tax has escaped assessment. Clause (a) deals with a situation where no return of income has been furnished by the assessee although his total income exceeded maximum amount which is not chargeable to income tax. Clause (b) deals with a situation where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowances or relief in the return. There are other Clauses also that would indicate the reasons for escaping the assessment. The point is, once the public announcement is made under the IBC by the Resolution Professional calling upon all concerned, including the statutory bodies, to raise claim, it would be expected from all the stakeholders to diligently raise their claim. The Income Tax authorities in that sense, ought to have been diligent to verify the previous years’ assessment of the Corporate Debtor as permissible under the law and to raise the claim in the prescribed form within time before the Resolution Professional. In the present case, the Income Tax Authorities failed to do so and therefore, the claim stood extinguished.

wp2948.2021jud.docx 19/19 (2) where there has been a violation of the principle of natural justice; and (3) where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.” 26. We find that the impugned notice falls under category – 3 above. Accordingly , the preliminary objection is rejected. 27. We hold that both the Petitions are maintainable. Both the Petitions are allowed. The impugned notices dated 25.03.2021 and 24.03.2021 are hereby quashed and set aside. 28. Rule is made absolute in the above terms. No costs. JUDGE JUDGE Prity

Operative decision and relief

The operative relief must be read from the final paragraphs of the complete packaged judgment.

Ratio and legal principle

The narrow proposition associated with Murli Industries Limited v. ACIT (Bombay High Court (Nagpur Bench)) concerns s. 148: reassessment-issuance of notice of reassessment- resolution personal-provisions of this code to override other laws-for period prior to approval of resolution plan under the insolvency & bankruptcy code, 2016 (‘ibc’)-once the public announcement is made under the ibc by the resolution professional calling upon all concerned, including the statutory bodies, to raise claim, it would be expected from all the stakeholders to diligently raise their claim- not maintainable against the corporate debtor- notice issue was quashed. (s. 147, the insolvency and bankruptcy code, 2016, s. 7, 30(2), 238, art. 226) where notice under section 148 of the income tax act, 1961 (act) to a corporate debtor, calling upon it to submit a return in the prescribed form for the assessment year falling prior to the date of approval of resolution plan under the ibc on the ground that the ld. assessing… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in WRIT PETITION NO. 2948 OF 2021.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: S. 148: Reassessment-Issuance of notice of reassessment- Resolution personal-Provisions of this Code to override other laws-For period prior to approval of resolution plan under the Insolvency & Bankruptcy Code, 2016 (‘IBC’)-Once the public announcement is made under the IBC by the Resolution Professional calling upon all concerned, including the statutory bodies, to raise claim, it would be expected from all the stakeholders to diligently raise their claim- Not maintainable against the Corporate Debtor- Notice issue was quashed. (S. 147, The Insolvency and Bankruptcy Code, 2016, S. 7, 30(2), 238, Art. 226) Where notice under Section 148 of the Income Tax Act, 1961 (Act) to a Corporate Debtor, calling upon it to submit a return in the prescribed form for the assessment year falling prior to the date of approval of Resolution Plan under the IBC on the ground that the Ld. Assessing… Its practical value lies in the way the Bombay High Court (Nagpur Bench) connected the governing provisions—148—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 148 and the decision date 2021-12-23; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Murli Industries Limited v. ACIT (Bombay High Court (Nagpur Bench)), the proceeding is WRIT PETITION NO. 2948 OF 2021, and the decision is dated 2021-12-23. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as SUNIL B. SHUKRE, AND ANIL L. PANSARE, JJ.. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 148. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 148 — apply the exact version considered in the judgment.

Case network

• Divya Capital One (P) Ltd. v. ACIT — Delhi High Court · Quashed / set aside
• ITO (Exemption) v. Innovative Welfare and Educational Society — ITAT Delhi · Quashed / set aside
• Harsh Kaushal Corporation v. ITO — Bombay High Court · Quashed / set aside
• Maharashtra Oil Extraction Pvt. Ltd. v. Dy.CIT — Bombay High Court · Quashed / set aside

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