Gauhati High Court quashes tax proceedings against Meghalaya Infratech

The Gauhati High Court has ruled that the Income Tax Department cannot recover tax dues that were not included in an approved insolvency resolution plan. The court quashed assessment orders and demand notices issued to Meghalaya Infratech Limited for assessment years 2011–12 and 2016–17.

The company had undergone corporate insolvency resolution proceedings initiated by Allahabad Bank, with its resolution plan approved by the National Company Law Tribunal (NCLT) in May 2020 and subsequently upheld by the Supreme Court. Following this approval, the Income Tax Department attempted to make additions totaling over ₹11 crore for periods preceding the plan.

In its decision, the Court applied the ‘clean slate principle,’ noting that under Section 31 of the Insolvency and Bankruptcy Code (IBC), an approved resolution plan is binding on the Central Government and all other stakeholders. The Court held that the subsequent discovery of alleged bogus transactions or under-assessments does not allow for the introduction of belated claims that fall outside the scope of the approved plan.