Case Name: Gujarat NRE Coke Limited (through Mr. Sumit Binani, Liquidator) v.
Assessment Unit, Income Tax Department, Ministry of Finance, Government of India
Case Number: I.A. (IB) No. 490/KB/2025 in C.P. (IB) No. 182/KB/2017
Date: Date: Friday, 16 October Two Thousand and Twenty-Six
Court: National Company Law Tribunal, Division Bench (Court No. II), Kolkata
Quorum: Shri Labh Singh, Member (Judicial) and Ms. Rekha Kantilal Shah, Member
(Technical)
FACTS :
Gujarat NRE Coke Limited has been admitted into the insolvency dissolution process vide
order dated 7.4.2017 under section 10 of Insolvency and Bankruptcy Code (IBC) 2016. Mr.
Sumit Binani has been appointed as an interim resolution professional. As there was no
approval of any resolution plan hence the liquidation order was passed on 11.1.2018 and a
liquidator was appointed. As attempts for revival of the company have failed hence
employees were suspended on 23.9.2020, later discharged on 20.5.2021. The company had
accumulated losses of approximately 13,00,00,000 and a loss of approximately ₹56.51 crores
in FY 2019- 20. Creditors’ claims are approximately rupees 3900 crores. On 6.9.2024, notice
was issued by the Income Tax Department relating to AY 2020- 21. Response of liquidator
filed on 10.11.2024 and again on 22.1.25. Personal hearing held on 30.1.2025. Assessment
order u/s 270 & 271AAC(1). Liquidator moved the Tribunal under section 36(1)(n) & 60(5)
of Code for cancellation of the assessment order and show-cause notices. However, the
Income Tax Department did not appear even after being served through speed post and email.
LEGAL QUESTIONS
1. Is it mandatory to file an income tax return by the liquidator of an undertaking placed
under liquidation process?
2. Whether the action to be taken by the Income Tax Department in initiating the process
of assessment after the commencement of liquidation is permissible under the Code?
3. Whether issuing a notice of show cause amounts to initiation of legal proceedings
under section 33 (6) of the Code.
RELEVANT PROVISIONS UNDER LAW:
● Section 139, Income Tax Act, 1961 – Any Company whose income exceeds the
maximum amount which is not subject to tax shall submit its income return.
● Section 140(c), Income Tax Act, 1961 – Any return of a Company shall be verified by
the Managing Director, a Director or any other person as may be prescribed.
● Rule 12AA, Income Tax Rules, 1962 (w.e.f. 18.8.2021) – A return shall be verified by
the person appointed under the Code as interim resolution professional, resolution
professional and liquidator.
● Section 33(5) & 33(6) under the Code – No suit or any other legal proceedings can be
filed after the passing of the order of liquidation without the permission of the
Adjudicating Authority. (Section 33(6) inserted by 2026 Amendment w.e.f.
26.5.2026)
● Section 136, Income Tax Act, 1961 – Any proceedings before the income-tax
authorities shall be deemed as Judicial proceedings.
● Section 270A & 271AAC(1), Income Tax Act, 1961 – Penalty for under reporting
/misreporting of Income and Penalty for Unexplained income.
ARGUMENTS :
APPLICANT (LIQUIDATOR) – The applicant liquidator argues that the department has
acted in violation of the provisions of the scheme under the court by passing an order of
assessment despite being aware of the order of liquidation. He cited the case of Om Prakash
Agarwal v. Chief Commissioner of Income Tax (TDS), Company appeal (AT) (Insolvency)
No.624 of 2020, while submitting that there is no requirement for the liquidator to file
Income tax returns. Further, it was argued that neither the court nor the IBBI (Liquidation
Process) Regulation,2016 has any provision that provides for the preparation of financial
statements or annual returns by the liquidator. The liquidator also stated that due to the
shortened period of operation, no taxable income was generated. However, even if any
income was generated, it would be applied to the payment of creditors in the first instance.
Respondent (Income Tax Department)- the department fails to appear despite being duly
served.
ANALYSIS :
Regarding the first question, it was pointed out by the tribunal that liquidation is a process
carried out within the company and the liquidation only gets completed after the company is
dissolved. Therefore, it must file its return under section 139. Rule 12AA provides that the
liquidator appointed under the Code shall be the competent authority to authenticate & the
return. However, the tribunal held that the rule only identifies who verifies the return and
does not create the liability to file it. Since the rule came into force on 18.8.21.It can neither
be applied retrospectively as the liquidator was appointed in 2018 nor has the rule been in
operation for one year (FY 2019 – 20). Omprakash Agarwal, though rendered in the context
of tax deducted at the source on the sale proceeds, correctly stated the position before the
rule.
Regarding the second question, the tribunal referred to the decision EPFO v Jaykumar Arlani
and stated that the moratorium ceases to exist under section 14 upon liquidation. Further, the
word suit all legal proceeding in section 33(5) does not include assessment by a statutory
authority. Thus, no illegality or lack of jurisdiction could be attributed to the order of
assessment.
Regarding the 3rd question, the tribunal looked into the definition of legal proceedings. Legal
proceedings usually involve show cause notices. Then there is an opportunity for SCC to
make a comeback with their evidence before deciding on the case. In section 136, the court
process is brought in for income tax. Circulars of Central Excise state that a show cause
notice initiates the legal process. The act of imposing penalties is punitive in nature. It may be
noted that the process of seeking penalties cannot be treated as seeking information. It is
stated that penalty proceedings have been commenced in notices in assessment orders.
Sudaresh Bhatt (Liquidator of ABG Shipyard v CBIC), 2022. SC held that demand notices
issued by customs during moratorium or liquidation shall be deemed to have instituted legal
proceedings.
JUDGEMENT :
The NCLT Kolkata held that it was not the liability of the liquidator to file an income tax
return for the corporate Debtor before the introduction of Rule 12AA. Section 33(5) does not
prevent the assessment process. It was observed that the show-cause notice issued on
19.2.2025 under Sections 270A and 271 AAC(1) of the Income-tax Act was in contravention
of Section 33(6). Prayers (b) and (c) were allowed, while all others, including quashing of the
order of assessment, were rejected. I. A (IB) No. 490/KB/2025.
CONCLUSION :
The tribunal said the income tax department can assess the tax liability of the company but it
cannot impose penalty on the company without permission of the adjudicating authority.
“They are legal proceedings and are prohibited under section 33(6) of the code,” it said.
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Written by – Krittika Sengupta
