SWASTIK CERACON LIMITED vs OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-4(1)(1), AHMEDABAD

C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 6752 of 2026

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR. JUSTICE MAULIK J.SHELAT
==========================================================
Approved for Reporting Yes No
√
==========================================================
SWASTIK CERACON LIMITED & ANR.
Versus
OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-4(1)
(1), AHMEDABAD & ANR.
==========================================================
Appearance:
MR YUVRAJ G THAKORE(7785) for the Petitioner(s) No. 1,2
MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1,2
==========================================================
CORAM: HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR. JUSTICE MAULIK J.SHELAT

Date : 07/05/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. Heard learned Advocate Mr. Yuvraj G. Thakore for the petitioners
and learned Senior Standing Counsel Ms. Maithili D Mehta for the
Respondents.
2. With the consent of the learned advocates for the respective parties,
the matter is taken up for hearing, as the issue involved is very short.
3. The petition has been filed under Article 226 of the Constitution of
India with the following prayers:-
“8(A) Your Lordships be pleased to issue an appropriate writ, order or
direction to quash and set aside Assessment Order dated 12.03.2026 passed
under Section 147 read with Section 250, 144B of the Income Tax Act, 1961
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C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
and bearing DIN No. ITBA/AST/S/147/2025-26/1087248328(1) being the
impugned order [at Annexure-A] and
(B) Your Lordships be pleased to issue an appropriate writ, order or direction
to quash and set aside Demand Notice dated 12.03.2026
ITBA/AST/S/156/2025-26/1087248431(1) being the impugned Demand [at
Annexure- B];”
4. The brief facts of the case are as follows:
4.1. The petitioner No. 1 is a company incorporated under the
Companies Act, 1956 on 31.01.2005 with its Corporate Identification
Number being U26920GJ2005PLC045383, having its registered office
at Survey Nos. 1071-74, Nandasan-Mehsana Road, National Highway
No. 8, Kadi, Mehsana, Nandasan, Gujarat-380706. The petitioner No.
1 was engaged in the business of ceramics and manufacturing. The
petitioner No. 2 is a director and shareholder of the petitioner No. 1.
The petitioner No. 1 had filed the return of income under the
provisions of the Income Tax Act, 1961 (for short “the Act”) for the
Assessment Year 2011-12.
4.2. While the management and control of the petitioner No. 1
was under its erstwhile promoters, an Assessment Order dated
17.12.2018 was passed under Section 147 of the Act for the
Assessment Year 2011-12, raising a demand of INR 2,01,86,860/-
(INR Two Crore One Lakh Eighty-Six Thousand Eight Hundred and
Sixty Only). The said order was assailed by way of statutory appeal
before the Commissioner of Income Tax (Appeals), being CIT(A),
Ahmedabad - 4/1047478/2018-19.
4.3. The petitioner No. 1 was subjected to the insolvency
proceedings under the Insolvency and Bankruptcy Code, 2016 (for
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C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
short “IBC”), wherein an operational creditor, M/s. True Value Paper
Co., preferred Company Petition (IB) No. 175 of 2018 under the
provisions of Section 9 of the IBC before the National Company Law
Tribunal, Ahmedabad Bench ( for short “Tribunal”). A Corporate
Insolvency Resolution Process ( for short “CIRP”) was initiated and
the aforesaid Company Petition was admitted by the Adjudicating
Authority vide Order dated 15.01.2019, inter alia declaring
moratorium in terms of Section 14 of the IBC and appointing an
Interim Resolution Professional.
4.4. The Interim Resolution Professional issued a Public
Announcement on 29.01.2019 in accordance with Section 13, 15 and
other relevant provisions of the IBC read with the Regulation 6 of the
Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 (for short
“Regulations, 2016”) thereby inviting claims from the various
creditors including financial, operational and statutory creditors
(including the Income Tax Department) of the petitioner No. 1.
4.5. The Resolution Professional was formally appointed by the
Tribunal vide Order dated 20.03.2019 to take over the management of
the petitioner No. 1 company and steer the resolution process.
4.6. Further, under the CIRP, the Resolution Plan of M/s. Ajita
Sil Chem Private Limited, the successful Resolution Applicant, for the
revival of the petitioner No. 1 was approved by the Tribunal vide
Order dated 20.06.2022 passed in I.A. No. 428 of 2021 under Section
31 of the IBC. The said Resolution Plan provided for the
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C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
extinguishment and waiver of all liabilities, claims, and dues payable
prior to the ‘Appointed Date’ as defined in the Resolution Plan. The
Plan Approval Order has attained finality and the approved resolution
plan has been fully implemented.
4.7. The Resolution Professional, by way of Communication
dated 01.07.2022, duly intimated the respondents of the passing of the
Plan Approval Order, explicitly stating inter alia that under Section 31
of the IBC, all pre-CIRP claims and statutory dues not included in the
plan stood permanently extinguished.
4.8. Thereafter, the Commissioner of Income Tax (Appeals)
passed an order dated 27.11.2024 in the pending appeal, setting aside
the first Assessment Order dated 17.12.2018 and remanding the matter
back to the Assessing Officer for fresh adjudication.
4.9. Thereafter, the respondent No. 1 issued a Notice dated
03.11.2025 under Section 142(1) of the Act upon the petitioner No. 1.
In response, the petitioner No. 1 issued a Communication dated
08.11.2025 explaining the IBC immunity and the factum of the
approval of the Resolution Plan. Despite the same, the respondents
issued a Communication dated 16.12.2025 rejecting the petitioner’s
argument.
4.10. The respondents thereafter issued a Show Cause Notice
dated 20.02.2026 proposing an addition of INR 2,01,71,445/- as
unexplained cash credit under Section 68 of the Act and INR 15,414/-
as interest income for the Assessment Year 2011-12, ignoring the
statutory ‘Clean Slate’ protections. In response, the petitioner No. 1
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C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
issued a Communication dated 25.02.2026 reiterating the contents of
the earlier communications and citing the Supreme Court precedents.
4.11. Disregarding all statutory mandates and judicial precedents,
the respondents passed the impugned Assessment Order dated
12.03.2026 under Section 147 read with Section 250 read with Section
144B of the Act and issued the impugned Demand Notice dated
12.03.2026, illegally seeking to recover extinguished dues from the
successful Resolution Applicant in respect of the pre CIRP period.
4.12. Challenging the legality of the impugned Assessment Order
dated 12.03.2026 and the impugned Demand Notice dated 12.03.2026,
the petitioners have filed this petition.
5. Learned Advocate Mr. Yuvraj G Thakore appearing on behalf of
the petitioners submitted that on the approval of the Resolution Plan
under Section 31 of the IBC, all dues of the Corporate Debtor except
those which have been specifically provided for in the Resolution Plan
would stand extinguished in terms of the provisions of the IBC and the
decisions of the Apex Court in the case of Committee of Creditors of
Essar Steel India Ltd. Through Authorised Signatory Vs. Satishkumar
Gupta reported in (2020) 8 SCC 531 and in case of Ghanshyam Mishra
and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd.
through the Directors & Ors., reported in (2021) 9 SCC 657. Learned
Advocate submitted that in the present case, the tax dues for the
Assessment Year 2011-12, which pertain to a period prior to the approval
of the Resolution Plan, stand extinguished in terms of the Resolution
Plan.
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C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
5.1. Learned Senior Standing Counsel Ms. Maithili D Mehta for the
respondent-Department is not in a position to controvert the position of
law as far as the extinguishment of the tax dues are concerned in terms of
Section 31 of the IBC. He however submits that in view of the said
position, this Court may not enter into the merits of the issuance of the
Assessment Order and Demand Notice.
6. DISCUSSION & FINDINGS :-
6.1. A perusal of the Resolution Plan of M/s. Ajita Sil Chem Private
Limited which came to be approved on 20.06.2022 by the Tribunal would
reveal that the following provisions as evident from the relevant portion
extracted below :-
“ 9. All dues under the provisions of Income Tax Act, 1961("IT Act"), including
taxes, duty, penalties, interest, fines, cesses, unpaid TDS / TCS, whether admitted
or not, due or contingent, whether part of above claim of Income-tax authorities
or not, whether part of Tax due diligence finding or not, asserted or unasserted,
crystallized or not crystallized, known or unknown, secured or unsecured,
disputed or undisputed, present or future, in relation to any period prior to the
Effective Date pursuant to this Resolution Plan, shall stand extinguished by virtue
of the order of the NCLT approving this Resolution Plan and the Corporate
Debtor and Resolution Applicants shall not be liable to pay any amount against
such demand/ claim. All assessments/appellate or other proceedings pending in
case of the Corporate Debtor, on the date of the order of NCLT relating to the
period prior to that date, shall stand terminated and all consequential liabilities, if
any, shall be deleted and shall be considered to be not payable by the Corporate
Debtor by virtue of the order of the NCLT, All notices proposing to initiate any
proceedings against the Corporate Debtor in relation to the period prior to the
date of the NCLT order and pending on that date, shall be considered deleted and
shall not be proceeded against. Post the order of the NCLT, no re-assessment /
revision or any other proceedings under the provisions of the Income Tax Act
1961 or allied Act shall be initiated on the Corporate Debtor or Resolution
Applicants in relation to period prior to the Effective Date and any consequential
demand shall be considered non-existing and as not payable by the Corporate
Debtor. Any proceedings which were kept in abeyance in view of insolvency
process or otherwise shall not be revived post the order of the NCLT.”
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C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
From the perusal of the above, it is evident that all tax liabilities,
assessed and unassessed under the Income Tax Act, 1961 for the period
prior to the approval of the Resolution Plan “shall stand waived and
extinguished.
6.2. Furthermore, the Communication dated 01.07.2022 issued by the
Resolution Professional to the respondents categorically stated that upon
approval of the Resolution Plan by the NCLT under Section 31 of the
IBC, all pre-CIRP claims and statutory dues stood permanently
extinguished, and the ownership of the entity vests with the Resolution
Applicant as clean slate.
6.3. Despite the above, the respondents proceeded with the remanded
proceedings by passing an order to give effect to the CIT(A)’s directions
dated 27.11.2024, thereby reviving an assessment for a period (A.Y.
2011-12) that was legally resolved by the NCLT order.
7. In case of Committee of Creditors of Essar Steel India Ltd.
(Supra) , the Apex Court has held as under:-
“ 107. For the same reason, the impugned NCLAT judgment in holding
that claims that may exist apart from those decided on merits by the
resolution professional and by the Adjudicating Authority/Appellate
Tribunal can now be decided by an appropriate forum in terms of Section
60(6) of the Code, also militates against the rationale of Section 31 of the
Code. A successful resolution applicant cannot suddenly be faced with
“undecided” claims after the resolution plan submitted by him has been
accepted as this would amount to a hydra head popping up which would
throw into uncertainty amounts payable by a prospective resolution
applicant who would successfully take over the business of the corporate
debtor. All claims must be submitted to and decided by the resolution
professional so that a prospective resolution applicant knows exactly what
has to be paid in order that it may then take over and run the business of
the corporate debtor. This the successful resolution applicant does on a
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C/SCA/6752/2026 JUDGMENT DATED: 07/05/2026
fresh slate, as has been pointed out by us hereinabove. For these reasons,
NCLAT judgment must also be set aside on this count.”
8. In the case of Ghanshyam Mishra and Sons Pvt. Ltd. (Supra) ,
the Apex Court has categorically held 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 IBC is clarificatory and
declaratory in nature and therefore will be effective from the date on
which IBC 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 the period prior to the date on which the
adjudicating authority grants its approval under Section 31 could be
continued.
138. In the forgoing paragraph, we have held that the 2019 Amendment to
Section 31 IBC is clarificatory and declaratory in nature and therefore
will have a retrospective operation. As such, when the resolution plan is
approved by NCLT, the claims, which are not part of the resolution plan,
shall stand extinguished and the proceedings related thereto shall stand
terminated. Since the subject-matter of the petition are the proceedings
which relate to the claims of the respondents prior to the approval of the
plan, the same cannot be continued. Equally the claims, which are not part
of the resolution plan, shall stand extinguished.”
9. Therefore, applying the decisions of the Apex Court to the facts of
the present case, it is clear that on the complete extinguishment of all tax
liabilities of the Corporate Debtor upon the approval of the Resolution
Plan on 20.06.2022, there could be no occasion whatsoever for the
respondents to pass the impugned Assessment Order dated 12.03.2026
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under Section 147 read with Section 250 and Section 144B of the Act or
to issue the impugned Demand Notice dated 12.03.2026 for the
Assessment Year 2011-12. The assessment pertains to a period well prior
to the approval of the Resolution Plan and therefore the tax dues, if any,
for the said period stand extinguished by operation of law. In such view
of the matter, the merits of the impugned Assessment Order and Demand
Notice have become academic and need not be ventured into by this
Court.
10. Resultantly, the petition succeeds and the impugned Assessment
Order dated 12.03.2026 passed under Section 147 read with Section 250
read with Section 144B of the Income Tax Act, bearing DIN No.
ITBA/AST/S/147/2025-26/1087248328(1) and the impugned Demand
Notice dated 12.03.2026 bearing DIN No. ITBA/AST/S/156/2025-
26/1087248431(1) are hereby quashed and set aside. Rule is made
absolute to the aforesaid extent. No order as to costs.
(A. S. SUPEHIA, J)
(MAULIK J.SHELAT,J)
Radhika/2
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