Penalty Orders U/S 270A Of Income Tax Act Cannot Be Issued After Approval Of Resolution Plan U/S 31 Of IBC: Gujarat HC

The Gujarat High Court has delivered a significant judgment stating that penalty proceedings initiated under Section 270A of the Income Tax Act cannot be sustained once a resolution plan has been duly approved under Section 31 of the Insolvency and Bankruptcy Code (IBC). This ruling strongly reinforces the principle of the IBC taking precedence in matters of corporate insolvency, particularly in providing a fresh start or a "clean slate" to successful resolution applicants. By shielding these applicants from the burden of legacy tax penalties that pertained to the period before the insolvency resolution, the court's decision aligns with the Supreme Court's established Ghanshyam Mishra principle. This legal stance effectively prevents the revival or continuation of claims, including tax penalties, that are considered extinguished after the approval of a resolution plan, thus promoting the efficacy of the IBC process and encouraging successful resolutions.