APHC010485502024 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3529] TUESDAY,THE THIRD DAY OF FEBRUARY TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR WRIT PETITION NO: 25332/2024 Between: 1. LAXME SAAI STEEL PRIVATE LIMITED, REGD. OFFICE AT TATAVARI KITTALI ROAD, PENUBARTHI VILLAGE, VIZIANAGARAM, GURLA, PINCODE- 535101, ANDHRA PRADESH, INDIA. REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE MR. SANJEEVA RAJU RAYAVARAPU, S/O. RAYAVARAPU SAMBASIVA RAO, AGED ABOUT 60 YEARS, R/O. 49-36-20, FLAT NO. BL, NIKHILS PRESIDENCY APARTMENTS, NGGO COLONY, AKKAYYAPALEM, VISHAKHAPATNAM(URBAN), VISAKHAPATNAM, ANDHRA PRADESH- 530016 2. MR. NAVAL KISHORE KHAITAN,, S/O., SRI KESHAW PRASAD KHAITAN AGE MAJOR, RESIDING AT 7-24-6/1/12, FLAT NO. 302, BALAJI APARTMENTS, KIRLAMPUDI LAYOUT, OPP. YMCA CLUB, CHINNAWALTAIR, L.B COLONY, VISAKHAPATNAM(URBAN), ANDHRA PRADESH - 530017 ...PETITIONER(S) AND 1. THE OFFICER INCHARGE, THE ASSESSMENT UNIT/VERIFICATION UNIT/ TECHNICAL UNIT/ REVIEW UNIT INCOME TAX OFFICE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA INFINITY TOWERS, SANKARAMATAM ROAD, VISHAKHAPATNAM, PRADESH-530016 ANDHRA AAYAKAR 2 DABAGARDENS, VISAKHAPATNAM-530020 BHAWAN, 2. THE PRINCIPAL, COMMISSIONER, INCOME TAX DEPARTMENT, INCOME TAX OFFICE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, INFINITY TOWERS, SANKARAMATAM VISHAKHAPATNAM, PRADESH-530016 ROAD, ANDHRA ALSO AT AAYAKAR BHAWAN DABAGARDENS, VISAKHAPATNAM-530020 3. ASSISTANT/DEPUTY COMMISSIONER, , CIRCLE-3(1), VSP/, INCOME TAX OFFICE, INFINITY TOWERS, SANKARAMATAM ROAD, VISHAKHAPATNAM, ANDHRA PRADESH-530016 ...RESPONDENT(S): Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased topleased to issue a writ, direction, or more particularly one in the nature of Writ of mandamus in declaring the action of Respondent No. 1 in passing the assessment order dated. 15.03.2024 vide ITBA/AST/S/147/2023-24/1062711339(1) under section.147 R/w. Section. 144 B of the Income Tax Act 1961 and consequently initiating Penalty proceedings U/s. 270A of Income Tax for under-reporting of income of Rs.53,66,210/-, vide assessment order 1TBA/PNL/F/270A/2024-25/1068680837( 1) dated 13.09.2024 raised a demand of Rs. 8,04,931/- vide notice no. lTBA/PNL/S/156/2024- 25/1068674822(1) as arbitrary, illegal and bad in law and may pass s IA NO: 1 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to suspend the assessment order dated. 15.03.2024 vide ITBA/AST/S/147/2023-24/1062711339(1) under section.147 R/w. Section.144 B of the Income Tax Act 1961 also consequently Penalty proceedings U/s. 270A of Income Tax for under-reporting of income of Rs.53,66,210/-, vide assessment order ITB/\/PNL/F/270A/2024- 25/1068680837(1) raised a demand of Rs. 8,04,931/- vide notice no. ITB/VPNL/S/156/2024-25/1068674822(1) 13.09.2024 and pass IA NO: 2 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may 3 be pleased pleased to direct Respondent No. 1 not to proceed with any steps against Petitioner Company, in the interest of justice and may pass IA NO: 1 OF 2025 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to declare that the action of the Respondents in adjusting the amount of Rs. 5,89,570/- from the Income Tax refund for the Assessment Year 2024-25 towards the dues or liabilities of the Company relating to the pre-Coiporate Insolvency Resolution Process period is in breach of the undertaking provided by the Counsel for the Respondents to this Hon’ble Court during the course of hearing on 07.11.2024 and direct the Respondents to reimburse the said amount of Rs. 5,89,570/-, being the Income Tax refund for the Assessment Year 2024-25, along with applicable interest, and pass IA NO: 2 OF 2025 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to vacate the interim stay granted in favour of petitioner vide orders dated 16.12.2024 in WP No. 25332 of 2024 and consequently dismiss captioned Writ Petition with exemplary cost and pass Counsel for the Petitioner(S): 1. V V S N RAJU Counsel for the Respondent(S): 1. ANUP KOUSHIK KARAVADI 4 The Court made the following order: (per Hon’ble Sri Justice R Raghunandan Rao) The 1st petitioner was incorporated under the Companies Act, 1956 on 20.08.2009. 2. The 1st petitioner subsequently became the subject matter of a Corporate Insolvency Resolution Process, under the provisions of Insolvency and Bankruptcy Code, 2016. In the course of the said the resolution process, the 2nd petitioner became the successful resolution applicant and the National Company Law Tribunal, Amaravati Bench in CP.(IB) No.74/7/AMR/2021, by order dated 16.08.2022, had approved the resolution plan submitted by the petitioner No.2. The scheme of restructuring in the resolution plan was that a sum of Rs.20,27,61,239/- was to be brought in by the 2nd petitioner. This amount was to be used for clearing the CIRP costs as well as the claims of the operational and financial creditors. The plan also provided for time lines for payments of the amounts that were to be paid out to the operational and financial creditors. By virtue of this plan and the approval granted by the National Company Law Tribunal, all claims against the 1st petitioner company came to be closed. 3. At that stage, the 1st respondent initiated proceedings, under the Income Tax Act, for the assessment year 2018-19, resulting in a demand notice, dated 15.03.2024, being issued for of Rs.51,17,030/- as Income 5 Tax and other amounts due under the Income Tax Act, for the assessment year 2018-19. Apart from this, a penalty notice was also issued under the provisions of the Income Tax Act. The petitioner being aggrieved by the said order, dated 15.03.2024, has approached this Court by way of the present writ petition for setting aside the order of assessment and all consequential proceedings including penalty proceedings. 4. The case of the petitioner is that all claims of the Income Tax Department, in relation to any period prior to the approval of the resolution plan, dated 16.08.2022, shall stand extinguished and that the respondent authorities cannot undertake any exercise of assessment or recovery of tax, in relation to any period prior to the order approving the resolution plan. 5. Sri Anup Kowshik Karavadi, learned Standing Counsel appearing for the respondents would contend that, there is no bar for the completion of the assessment proceedings and levy of penalty proceedings inasmuch as the said claims of the Income Tax Department had never crystallized, until the order of assessment, dated 15.03.2024, came to be passed. He would submit that, in such circumstances, the order of National Company Law Tribunal dated 16.08.2022 would not be binding on the Income Tax Department. 6 6. The Hon’ble Supermen Court in the case of Ghanashyam Moshra and Sons (P) Ltd. v. Edeiweiss Asset Reconstructions Co. Ltd.1 had considered the very same issue, as to whether the tax authorities can assess and seek recovery of tax dues, in relation to a period prior to the date on which the adjudicating authority grants its approval. The Hon’ble Supreme Court after taking into consideration the amendment of the Section 31 of the Insolvency and Bankruptcy Code, on 16.08.2019 had held as follows: It is clear that the mischief which was noticed prior to amendment of Section 31 of the I & B Code was that though the legislative intent was to extinguish all such debts owed to the Central Government, any State Government or any local authority, including the tax authorities once an approval was granted to the resolution plan by NCLT; on account of there being some ambiguity, the State/Central Government authorities continued with the proceedings in respect of the debts owed to them. In order to remedy the said mischief, the legislature thought it appropriate to clarify the position that once such a resolution plan was approved by the adjudicating authority, all such claims/dues owed to the State/Central Government or any local authority including tax authorities, which were not part of the resolution plan shall stand extinguished. 7. In that view of the matter, the assessment proceedings could not have been continued beyond 16.08.2022 and consequently the order of assessment dated 15.03.2024 could not have been passed. 1 AIRONLINE 2021 SC 196 7 8. Accordingly, this writ petition is Allowed, setting aside the order of assessment dated 15.03.2024 passed by the 1st respondent and all consequential proceedings thereto. There shall be no order as to costs. As a sequel, pending applications, if any, shall stand closed. _______________________ R RAGHUNANDAN RAO, J ________________ T.C.D. SEKHAR, J Dt.03.02.2026 DSB 8 123 HON’BLE SRI JUSTICE R RAGHUNANDAN RAO AND HON’BLE SRI JUSTICE T.C.D. SEKHAR WP.No.25332 of 2024 Dated 03.02.2026 U DSB