The Sirpur Paper Mills Limited & Another Vs Union of India & Two others
Date- 18th January 2022
Forum-Telangana High court

Sub-Whether notice u/s 143(2)/142(1) of the Income-tax Act ,1961 for the period before the order of the NCLT passing the resolution plan is valid even when a revised return is filed subsequently after the date of NCLT’s order. Also can a different view be taken in view of the fact that brought forward loss is claimed to be carried forward to future years which are not covered by the order of the NCLT?

The division bench of Telangana high court in this case was considering a case where the Notices u/s 142(1)/143(2) for AY 2017-18 were challenged under article 226 of the Constitution of India on the pretext that the proceedings for assessment in respect of the above year had lapsed in view of order of the NCLT having been passed on 19.7.2018. However, the department interalia contended that as revised return was filed after 19.7.2018 and brought forward loss was claimed in the original return as well as revised return to be carried forward to the future years, the department was within its right to scrutinise the said claim particularly in the light of the fact that the said losses would be adjusted against future profits and also the provisions of Section 79 of the IT Act,1961. The Court however relying on Dena Bank (2000) 5 SCC 694(SC), Monnet Inspat (2018 )SCC OnLine SC 984 and other decisions held that in view of NCLT’s order all dues under the Act whether asserted or unasserted, crystallized or uncrystallized, present or future in relation to any period prior to the completion date shall stand extinguished and the corporate debtor shall not be liable to pay any amount against such demand. All assessments or other proceedings relating to the period prior to the completion date shall stand terminated and all consequential liabilities would stand abated. It further clarified that all notices proposing to initiate any proceeding against the corporate debtor in relation to the period prior to the date of the Tribunal’s order and pending on that date shall stand abated and should not be proceeded against.

Also in view of clear statement in the resolution plan, the corporate debtor is entitled to carry forward the unabsorbed and accumulated losses and to utilize such amounts to set off future tax obligations, though the department can verify such claims in the year in which the adjustment is claimed. The writ was thus allowed.

Ramesh Patodia
23-01-2022