Modified return under Section 170A requires assessments to follow the reorganisation; previous assessment and giving-effect orders quashed.

Where a business reorganisation took effect and the successor filed a modified return under the statutory scheme, assessments must proceed having regard to that modified return and the reorganisation order; proceeding separately against the transferor or issuing giving-effect orders without following Section 170A and related rules risks duplicative or conflicting demands and is unsustainable. The draft assessment dated 29.12.2023 and the giving-effect order dated 30.12.2023 for AY 2020-21 were quashed, and the Transfer Pricing Officer was directed to consider the modified return and pass fresh orders on merits, with subsequent remedies preserved.

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Issues: Whether the draft assessment order dated 29.12.2023 passed in the name of the transferor company and the giving effect order dated 30.12.2023 passed in the name of the transferee company for Assessment Year 2020-21 are sustainable in view of the scheme of amalgamation, filing of modified return under Section 170A of the Income-tax Act, 1961, and alleged violation of principles of natural justice.

Analysis: The petitioners established that the transferor and transferee companies were merged pursuant to NCLT orders dated 13.10.2021 and 28.04.2022 and that a modified/revised return was filed by the successor entity within the timeline mandated by Section 170A as incorporated by the Finance Act, 2022. Section 170A and Rule 12AD (Income-tax Rules, 1962) require filing of a modified return by the successor in a business reorganisation and contemplate that assessment or reassessment proceedings be carried out taking such modified return and the order of business reorganisation into account. Proceeding independently against the transferor without regard to the statutory mechanism under Section 170A and the modified return risks duplicative or conflicting demands. The petitions also raised lack of notice before issuing the giving effect order; the statutory scheme and requirements for modified return and consequent assessment were examined in light of the factual sequence of NCLT orders and the dates on which returns were filed.

Conclusion: The draft assessment order dated 29.12.2023 and the giving effect order dated 30.12.2023 for Assessment Year 2020-21 are quashed. The Transfer Pricing Officer is directed to consider the modified return filed on 30.11.2022 and pass fresh orders on merits; thereafter the petitioner may pursue remedies including before the Dispute Resolution Panel.

Ratio Decidendi: Where a business reorganisation has taken effect and a successor files a modified return under Section 170A of the Income-tax Act, 1961, assessment proceedings must be conducted with regard to the modified return and the order of reorganisation; independent proceedings in the name of the transferor or issuance of giving effect orders without compliance with the statutory scheme are unsustainable and liable to be quashed.

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