Initiation of Reassessment Proceedings After Exclusion in NCLT-Approved Plan Was Without Jurisdiction & Arbitrary | HC

Case Details: McNally Bharat Engineering Co. Ltd. v. Union of India - [2025] 170 taxmann.com 268 (HC - Calcutta) 

Judiciary and Counsel Details

• Rajarshi Bharadwaj, J.
• Pranit Bag, Debdutta Saha, Bhaskarmaoy Dey, Ms. Chumki Das, Baragya and Ms. Kamalika Mukherjee for the Petitioner.
• Amit Sharma for the Respondent.

Facts of the Case

In the instant case, the petitioner filed its return of income for Assessment Year 2016-17, declaring a loss. The said return was processed under section 143(1) of the Income Tax Act, leading to a refund sanctioned in favour of the petitioner.

Meanwhile, the CIRP was initiated against the petitioner and the resolution plan was approved. The resolution plan, binding on all stakeholders, had expressly stipulated that no proceedings or inquiries could be initiated or continued against the petitioner for the period prior to the effective date.

However, the revenue authorities issued a notice under section 148A(b) of the Income Tax Act, alleging suspicious transactions involving the petitioner and, a consequential notice under section 148, initiating reassessment proceedings against the petitioner.

On writ petition, the petitioner alleged that the provisions of the IBC, a special statute, had an overriding effect over the Income Tax Act, 1961. The moratorium imposed under section 14 of the IBC, along with the resolution plan approved by the NCLT, categorically prohibited the initiation or continuation of any proceedings against the petitioner for the period prior to the effective date stipulated in the resolution plan.

It was noted that section 14 imposes a moratorium that prohibits proceedings against a company undergoing the CIRP. Further, the resolution plan approved by the NCLT has overriding authority, as per section 238 of the IBC, and expressly precludes reassessment or revision proceedings for a period prior to the effective date stipulated in the plan.

High Court Held

The High Court held that the reassessment proceedings initiated against the petitioner were without jurisdiction, arbitrary, and unsustainable in law and the impugned notices and orders issued under sections 148A(b), 148A(d), and 148 of the Income Tax Act, along with all consequential proceedings were to be quashed.

List of Cases Reviewed

• Dishnet Wireless Ltd. v. Asstt. CIT (OSD) [2022] 139 taxmann.com 493/288 Taxman 197/446 ITR 227 (Madras) (para 20).