- 1 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF NOVEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 9601 OF 2022 (T-IT) BETWEEN: LE ECOSYSTEM TECHNOLOGY PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 2013, AND PRESENTLY UNDER LIQUIDATION C/O MINT INSOLVENCY PROFESSIONALS LLP NO.RF4, SANTARA MAGAN PLACE HULIMAVU, BENGALURU - 560 076 REPRESENTED BY ITS INSOLVENCY RESOLUTION PROFESSIONAL AND LIQUIDATOR MR SRIKANTIAH SHIVASWAMY …PETITIONER (BY SRI. SHRAVANTH ARYA TANDRE, ADVOCATE AND SRI. MANU PRABHAKAR KULKARNI, ADVOCATE) AND: 1. NATIONAL FACELESS ASSESSMENT CENTRE ROOM NO.401, 2ND FLOOR, E-RAMP JAWAHAR LAL NEHRU STADIUM NEW DELHI - 110 003 REPRESENTED BY THE ASSISTANT COMMISSIONER OF INCOME TAX 2. THE DEPUTY COMMISSIONER OF INCOME TAX WARD-4(1)1, BMTC BUILDING 80 FEET ROAD, 6TH BLOCK NEAR KHB GAMES VILLAGE KORAMANGALA, BENGALURU - 560 095. …RESPONDENTS (BY SRI. E.I. SANMATHI, ADVOCATE) Digitally signed by CHANDANA B M Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR RECORDS RELEVANT TO THE ASSESSMENT OF THE PETITIONER FOR ASSESSMENT YEAR 2017.18, QUASH THE IMPUGNED ORDER DATED 31.03.2022 UNDER SECTION 270A OF THE INCOME TAX ACT 1961 DATED 31.03.2022 BEARING DOCUMENT IDENTIFICATION NUMBER FOR THE ASSESSMENT YEAR 2017.18 ISSUED BY R1 IN CASE OF THE PETITIONER REPRESENTED THROUGH ITS INSOLVENCY RESOLUTION PROFESSIONAL AND LIQUIDATOR(SHOWN BY R1 AS THE OFFICIAL LIQUIDATOR) (MARKED AS ANNEXURE-N), ETC. THIS WRIT PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, petitioner seeks for the following reliefs: "a) Call for records relevant to the assessment of the Petitioner for Assessment Year 2017 18; (b) Quash the impugned order dated 31.03.2022 under Section 270A of the Income Tax Act, 1961 dated 31.03.2022 bearing Document Identification Number ITBA/ COM/ F/ 17/ 2021-22/1042337442(1) for the Assessment Year 2017-18, issued by the Respondent No. 1 in the case of the Petitioner represented through its Insolvency Resolution Professional & Liquidator (shown by the Respondent No.1 as the Official Liquidator) (marked as Annexure 'N'); Consequent Notice of Demand dated 31.03.2022 bearing Document Identification & Notice Number ITBA/PNL/S/156/2021- - 3 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 22/1042320976(1) for the Assessment Year 2017-18, issued by Respondent No.1 (marked as Annexure 'P'); the order dated 16.03.2022 bearing Document Identification Number ITBA/ PNL/ F/ 271AAC (1) / 2021-22/ 1040835285(1), passed under Section 271AAC(1) of the Income Tax Act, 1961, for the Assessment Year 2017-18 issued by Respondent No.1 (marked as Annexure 'M'); the assessment order dated 29.06.2021 bearing Document Identification Number ITBA/ AST /S/ 143 (3) / 2021-22 / 1033838892(1), under Section 143(3) read with Sections 144C(3) & 144B of the Income Tax Act, 1961 issued by Respondent No. 1 (marked as Annexure 'A'), and consequent Notice of Demand under Section 156, dated 29.06.2021 bearing Document Identification ITBA/AST/S/156/2021-22/1033839036(1) & Notice No. for the Assessment Year 2017-18 issued by the Respondent No. 1 (marked as Annexure 'B'); and (c) Pass such other orders/directions as this Hon'ble Court may deem appropriate in the facts and circumstances of the case in hand, in the interest of justice and equity." 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3. A perusal of the material on record will indicate that for the assessment year 2017-18, the petitioner filed income tax - 4 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 returns on 13.11.2017 declaring the total income of Rs.15,34,553/-, pursuant to which, notice dated 13.08.2018 was issued by the respondents to the petitioner under Section 143(2) of the I.T.Act. On 09.11.2018, the NCLT, Bangalore, passed an order declaring moratorium under Section 14 of the IBC against the petitioner subsequent to which, an intimation dated 16.03.2019 was issued by the respondents assessing the total income tax refund payable to the petitioner in a sum of Rs.2,51,09,817/-. 4. On 22.03.2019, the NCLT passed an order in I.A.No.141/2019 in the Company Petition directing the respondents to expedite the process of income tax refund in favour of the petitioner within a period of six weeks. Thereafter, in I.A.Nos.267/2019 and 268/2019, the NCLT passed an order in terms of Section 33(5) of IBC directing liquidation of the petitioner by appointing a resolution professional as the liquidator, who submitted replies dated 05.10.2019, pursuant to which, the NCLT passed an order on I.A.No.644/2019 dated 02.01.2020 directing the respondents to release refund of Rs.2,51,09,817/- in favour of the petitioner for the assessment year 2017-18 which was credited to the account of the petitioner on 01.06.2020. - 5 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 5. Subsequently, the respondents passed an order dated 25.01.2021 under Section 92CA (3) of the I.T.Act treating alleged short fall of Rs.45,20,05,063/- as transfer pricing adjustment under Section 92CA of the I.T.Act and issued notices under Section 143(1) dated 15.02.2021 and 09.03.2021 to the petitioner, to which, the liquidator submitted a reply dated 25.03.2021, in pursuance of which, the respondents passed draft assessment order dated 30.03.1991 under Section 144C of the I.T.Act and thereafter, an assessment order dated 29.06.2021 under Section 143(3) r/w Section 144C(3) and Section 144B of the I.T.Act assessing the income of the petitioner for the assessment year 2017-18 at Rs.45,99,88,800/- by making addition to transfer pricing adjustment and unexplained expenditure under Section 69C to the tune of Rs.45,20,05,063/- and Rs.95,18,288/- respectively followed by demand notice dated 29.06.2021 under Section 156 of the I.T.Act. Thereafter, the respondents having issued show cause notice dated 04.07.2021 proposing to initiate penalty proceedings against the petitioner, who submitted a representation / reply dated 11.11.2021, in pursuance of which, the respondents passed a penalty order dated 16.03.2022, to which, the petitioner submitted - 6 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 representations / response dated 10.03.2022 and 22.03.2022, which culminated in the impugned penalty order dated 31.03.2022 passed by the respondents under Section 270A of the I.T.Act imposing a penalty in a sum of Rs.7,79,49,417/- along with demand notice dated 31.03.2022 against the petitioner, who is before this Court by way of the present petition. 6. During the pendency of the present petition, the 2nd respondent has issued a notice dated 18.02.2025 proposing rectification under Section 154 of the I.T.Act, to which, the liquidator has submitted his reply dated 25.02.2025. 7. The material on record indicates that the issue in controversy involved in the present petition, in particular, the right of the respondents to proceed against the petitioner and the impugned notice and orders issued by them is directly and squarely covered by the judgment of the Apex Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd., vs. EDELWEISS Asset Reconstruction Company & others – (2021) 9 SCC 657, wherein it is held as under:- “94. We have no hesitation to say that the words “other stakeholders” would squarely cover the Central - 7 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 Government, any State Government or any local authorities. The legislature noticing that on account of obvious omission certain tax authorities were not abiding by the mandate of the I&B Code and continuing with the proceedings, has brought out the 2019 Amendment so as to cure the said mischief. We therefore hold that the 2019 Amendment is declaratory and clarificatory in nature and therefore retrospective in operation. 95. There is another reason which persuades us to take the said view. Clause (10) of Section 3 of the I&B Code defines “creditor” thus: “3. (10) “creditor” means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder;” 96. Clauses (20) and (21) of Section 5 of the I&B Code define “operational creditor” and “operational debt” respectively as such: “5. (20) “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; (21) “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment 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;” 97. “Creditor” therefore has been defined to mean “any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder”. “Operational creditor” has been defined to mean a person to whom an operational debt is owed and includes any person to whom - 8 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 such debt has been legally assigned or transferred. “Operational debt” has been defined to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the payment 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. 98. It is a cardinal principle of law that a statute has to be read as a whole. Harmonious construction of clause (10) of Section 3 of the I&B Code read with clauses (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 clause (20) of Section 5 of the I&B Code. Consequently, a person to whom a debt is owed would be covered by the definition of “creditor” as defined under clause (10) of Section 3 of the I&B Code. As such, even without the 2019 Amendment, the Central Government, any State Government or any local authority to whom a debt is owed, including the statutory dues, would be covered by the term “creditor” and in any case, by the term “other stakeholders” as provided in sub- section (1) of Section 31 of the I&B Code. 99. The Division Bench of the Rajasthan High Court in Ultra Tech Nathdwara Cement Ltd. v. Union of India [Ultra Tech Nathdwara Cement Ltd. v. Union of India, 2020 SCC OnLine Raj 1097] , by judgment and order dated 7-4-2020 has - 9 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 taken a view that the demand notices issued by the Central Goods and Service Tax Department, for a period prior to the date on which NCLT has granted its approval to the resolution plan, are not permissible in law. While doing so, the Rajasthan High Court has relied on the judgment of this Court in Essar Steel (India) Ltd. (CoC) [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] . Conclusion 102. In the result, we answer the questions framed by us as under: 102.1. That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. 102.2. The 2019 Amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the 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 - 10 - HC-KAR NC: 2025:KHC:49699 WP No. 9601 of 2022 the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued.” 8. In the instant case, it is an undisputed fact that insolvency proceedings were initiated before the NCLT, which passed orders not only declaring moratorium and appointing a resolution professional as a liquidator but also directed refund of the amount payable to the petitioner which was refunded to the petitioner. Under these circumstances, I am of the view that the impugned notices, orders, proceedings etc., initiated by the respondents against the petitioner are clearly illegal, arbitrary and without jurisdiction or authority of law apart from being contrary to law and the same deserve to be quashed. 9. Accordingly, I pass the following: ORDER (i) Petition is hereby allowed. (ii) The impugned orders/notices at Annexures A, B, M, N and P and all further proceedings, notices, orders, pursuant thereto are hereby quashed. Sd/- (S.R.KRISHNA KUMAR) JUDGE BMV/SRL