Gujarat High Court quashes tax reassessment of Reliance Infratel for period before resolution plan took effect

Reliance Infratel Limited (RITL) underwent a corporate insolvency resolution process.

The NCLT approved the petitioner’s resolution plan on 3 December 2020; the plan was implemented, and its effective date was determined as 22 December 2022.

The plan provided for the extinguishment of specified liabilities and termination of tax proceedings relating to periods before the effective date.

The Revenue issued a notice under Section 148A(1) of the Income Tax Act, 1961, concerning Assessment Year 2021–22, based on interest income of ₹34,98,722 appearing in Form 26AS, and subsequently passed an order under Section 148A(3) and issued a notice under Section 148.

The petitioner challenged those actions.

The Revenue argued, among other things, that the interest was credited after the resolution plan’s NCLT approval and that the petitioner had claimed tax refunds for the relevant period.

Whether the Revenue could initiate reassessment proceedings for Assessment Year 2021–22 in respect of a period preceding the resolution plan’s effective date of 22 December 2022, having regard to the approved plan’s terms.

Whether the petitioner’s claims for tax refunds for the relevant period justified the impugned reassessment proceedings.

Section 148A of the Income Tax Act requires the prescribed pre-notice process before a notice under Section 148 is issued; Sections 147 and 148 govern reassessment.

Under paragraph 3.3.12 of the approved resolution plan, tax assessments and other proceedings relating to periods before the effective date were to stand terminated or withdrawn, consequential liabilities were to be extinguished, and reassessment or revision proceedings under the Income Tax Act were deemed barred for such periods.

The Court applied the “clean slate” principle discussed by the Supreme Court in Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, holding that the principle supported the petitioner’s position.

It also relied on the effective date of 22 December 2022, as determined in the related Allahabad High Court proceedings.

The Court treated 22 December 2022—not the NCLT’s approval date of 3 December 2020—as the effective date of implementation, relying on the resolution plan and the related Allahabad High Court decision.

Since Assessment Year 2021–22 preceded that effective date, the Court held that paragraph 3.3.12 barred reassessment proceedings concerning that period.

It rejected the Revenue’s reliance on the earlier NCLT approval date and held that the petitioner’s refund claims were a separate matter and did not justify reopening the assessment.

It quashed the Section 148A(1) notice dated 27 March 2025, the Section 148A(3) order dated 30 June 2025, and the Section 148 notice issued on that date.

The petition was allowed, the Rule made absolute, and no order as to costs was made.