Amalgamation-driven s.170A modified return after completed assessment: dispute over fresh 143(2)/142(1) notices; actions temporarily restrained

After a modified return was filed under s.170A to give effect to an amalgamation scheme, the AO had already completed assessment for the relevant AY by an order dated 26.03.2025, with supporting particulars (including loss and unabsorbed depreciation) having been disclosed in the tax audit material. The dominant issue was whether the AO could thereafter issue fresh notices under ss.143(2) and 142(1) for the same AY to reassess income on the basis of the s.170A modified return. The HC held that a strong prima facie case existed against such fresh initiation and that balance of convenience favoured the assessee; consequently, it granted ad-interim restraint against all steps pursuant to the impugned notices, including passing any assessment order.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, after an assessment order for the relevant assessment year has been passed upon considering the modified return filed under Section 170A (pursuant to an NCLT-approved amalgamation), the Assessing Officer becomes functus officio and lacks jurisdiction to issue a fresh notice under Section 143(2) and a consequential notice under Section 142(1) for the same assessment year on the basis of the same modified return.

(ii) Whether, pending final disposal of the writ petition, the impugned notices should be stayed by granting ad-interim injunctive relief, applying the tests of prima facie case and balance of convenience.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Jurisdiction to issue fresh Section 143(2)/142(1) notices after completion of assessment considering the modified return under Section 170A

Legal framework (as discussed by the Court): The Court considered the operation of Section 170A(2), namely that where assessment proceedings are pending on the date of furnishing a modified return consequent to an NCLT order, the Assessing Officer is to pass an order assessing/reassessing total income in accordance with the NCLT order and taking into account the modified return.

Interpretation and reasoning: The Court examined the record of the concluded assessment proceedings and noted that during those proceedings a detailed notice under Section 142(1) raised specific queries concerning the amalgamation and the resultant reduction of taxable income. The assessee furnished a comparative computation of original and revised/modified income and provided supporting details relating to losses and depreciation of the amalgamating entity. The Court treated these circumstances-followed by the assessment order dated 26 March 2025-as indicating that the amalgamation-related impact reflected in the modified return had already been put to scrutiny and formed part of the completed assessment exercise.

Conclusions (for interim stage): On these facts, the Court held that prima facie there was substance in the contention that, once assessment was completed after considering the modified return aspects, the Assessing Officer could not issue a fresh notice under Section 143(2) for the same year to reassess income on the basis of that very modified return, supporting the plea of want of jurisdiction/functus officio for purposes of interim protection.

Issue (ii): Grant of ad-interim restraint against steps pursuant to impugned notices

Legal framework (as applied by the Court): The Court applied the standard interim-relief considerations of (a) existence of a strong prima facie case and (b) balance of convenience.

Interpretation and reasoning: Given that the earlier assessment proceedings had specifically queried the amalgamation impact and the assessee's responses were on record before the assessment order was passed, the Court found "considerable force" in the challenge to the subsequent notices. It further found that the balance of convenience favoured the assessee in preventing further coercive or duplicative assessment steps during pendency of the challenge.

Conclusions: The Court granted ad-interim relief restraining the revenue authorities from taking any steps pursuant to the impugned notices, including passing any assessment order based on those notices, pending hearing and final disposal of the petition.

---