Any proceedings for assessment, reassessment or re-computation initiated in terms of the faceless assessment procedure under Section 144B of Income Tax Act, 1961, after approval of Resolution Plan is contrary to the Clean Slate theory under IBC – M Tech Developers Pvt. Ltd. Vs. National Faceless Assessment Centre, Delhi and Anr. – Delhi High Court
Hon’ble Delhi High Court held that:
(i) The Section 144B of the Income Tax, 1961 power entails proceedings for assessment, reassessment or re-computation being initiated in terms of the faceless procedure of assessment as prescribed therein. Any effort to assess, reassess or re-compute could tend to lean towards a re-computation of liabilities which otherwise stands freezed by virtue of the Resolution Plan having been approved. Such an action or recourse would clearly be barred by Section 31 of the IBC.
(ii) A Section 144B action is what the Supreme Court frowned upon and chose to describe as the “hydra head ” and thus being contrary to the clean slate principle which the IBC advocates.
(iii) Referring Dishnet Wireless Ltd. Vs. Assistant Commissioner of Income Tax (OSD) (2022) ibclaw.in 141 HC held that the IBC does not erect different levels of protection or insulation dependent upon whether corporate insolvency had been initiated voluntarily or on the basis of a petition referable to Section 7 of the IBC.
(iv) The Tax Authorities cannot sustain the invocation of Section 144B based on their own failure to lodge a claim within the time stipulated.