TaxTMI 
TaxTMI 
2026 (9) TMI 1334
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....edings is principally on the ground that the Respondents could not have initiated fresh scrutiny proceedings in respect of the modified Return of Income furnished by the Petitioner under Section 170A of the IT Act when the assessment proceedings in respect of the original Return of Income for the relevant Assessment Year were pending. 3. By the notice dated 24 June 2025, Respondent No. 1 sought to scrutinise the modified Return of Income filed by the Petitioner under Section 170A of the IT Act on 28 March 2025. The Petitioner contends that, on the date of furnishing of the modified Return of Income, the assessment proceedings for the A.Y. 2022-23 were pending, and therefore, the case was governed by Section 170A(2)(b) of the IT Act. According to the Petitioner, the Assessing Officer was required to take the modified Return of Income into consideration in the pending assessment proceedings and complete the assessment. He could not initiate a fresh and parallel scrutiny proceeding in respect of the same Assessment Year, was the submission. 4. The Petitioner has also challenged the notice dated 24 February 2026 issued under Section 92CA(2) of the IT Act and the proceedings arisi....
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....eturn of Income, Confirmation.com India Private Limited received an intimation dated 4 November 2022 issued under Section 143(1) of the IT Act accepting the income declared in the Return filed by it. Furthermore, the original Return of Income of the amalgamating company was not selected for scrutiny under Section 143(2). f. Be that as it may, the Petitioner, thereafter, filed objections to the draft Assessment Order before the Dispute Resolution Panel (DRP) on 17 April 2025. Thus, on the date on which the modified Return of Income was furnished, the assessment proceedings of the Petitioner had not attained finality. g. On 23 May 2025, the Petitioner filed a letter with Respondent No. 2 (i.e. the Petitioner's Jurisdictional Assessing Officer) informing the filing of a modified Return of Income pursuant to the NCLT order dated 02 September 2024. In the said letter, it was clearly stated that Confirmation.com India Private Limited has not undertaken any international transactions with effect from 01 October 2019. h. On 24 June 2025, Respondent No. 1 (i.e. the Faceless Assessing Officer) issued a notice under Section 143(2) of the IT Act seeking to initiate f....
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....pondent No. 1 and notices dated 08 July 2026 and 6 August 2026, both issued under Section 92D(3) seeking various details from the Petitioner, constitute a continuation of the very proceedings which the Petitioner seeks to challenge before us. 7. In this factual backdrop, it was submitted by the Petitioner that Section 170A introduced in the IT Act by the Finance Act, 2022, provides for a modality to deal with the effect of business reorganisation. It was submitted that Section 170A(2) makes a clear distinction between two situations: (i) where the assessment or reassessment proceedings stood completed on the date of furnishing of the modified Return of Income; and (ii) where the assessment or reassessment proceedings are pending on such date. It was submitted that in the present case the assessment proceedings were pending on 28 March 2025, when the modified Return of Income was furnished. According to the Petitioner, although a draft Assessment Order under Section 144C(1) was passed on 24 March 2025, the same was not a final Assessment Order. The Petitioner had filed its objections before the DRP on 17 April 2025, and the DRP proceedings were pending. Therefor....
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....l as the directions of the DRP. 10. Reliance was placed upon the decision of this Court in Bajaj Electricals Ltd. Vs. Assistant Commissioner of Income-tax [2026] 183 taxmann.com 637 (Bom), wherein, according to the Petitioner, the Court had considered a situation where the assessment proceedings were pending when the modified Return of Income under Section 170A was furnished and, thereafter, the Assessing Officer issued fresh notices under Sections 143(2) and 142(1). This Court held that, in a case falling under Section 170A(2)(b), the Assessing Officer was required to deal with the modified Return of Income in the pending assessment proceedings and could not initiate fresh proceedings to scrutinise the modified Return of Income separately. 11. Reliance was also placed upon the judgment of this Court in Technoforce Solutions (I) Pvt. Ltd. Vs. Deputy Commissioner of Income-tax, [WP No. 2041 of 2026 decided on 1 April 2026], and more particularly for the distinction drawn by this Court between clauses (a) and (b) of Section 170A(2). 12. The Petitioner submitted that the statutory distinction is material. Where the assessment is completed, clause (a) applies and the Assessing....
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....ts became functus officio in respect thereof. Consequently, the notice dated 24 February 2026 issued by Respondent No. 3 under Section 92CA(2), as well as the subsequent notices issued by Respondent Nos. 1 and 3, being consequential to such proceedings, also could not survive. 18. On the other hand, the learned Counsel Mr. Vikas Khanchandani, appearing for the Respondents, submitted that the Petition is misconceived and that the impugned notice dated 24 June 2025 was issued for the purpose of scrutinising the modified Return of Income furnished by the Petitioner under Section 170A of the IT Act. It was submitted that Section 170A is an enabling provision introduced to give effect to business reorganisation and that the filing of a modified Return of Income necessarily opens the assessment to the extent required to give effect to the reorganisation order. 19. It was submitted on behalf of the Respondents that, upon filing of the modified Return of Income, the original Return of Income stands replaced by the modified Return of Income and, consequently, the original Return of Income becomes non-est. It was submitted that Section 170A of the IT Act does not prescribe any separate....
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....cted for scrutiny, notice under Section 143(2) was issued within the prescribed period, the assessment proceedings remained pending when the modified Return of Income was furnished, and no completed assessment under Section 143(3) existed on the date of filing of the modified Return of Income. The statutory scheme therefore required the modified Return of Income to be taken into account in the pending assessment and did not contemplate commencement of a fresh assessment cycle in respect of the same Assessment Year. 22. The Petitioner further submitted that the Respondents' own pleadings materially supported the Petitioner's case. The Respondents had accepted that the final Assessment Order dated 28 January 2026 was passed after taking into consideration the modified Return of Income and the directions issued by the DRP. The Respondents have also accepted that in the course of the assessment proceedings pursuant to the original Return of Income, the modified Return of Income was taken into consideration and an order dated 23 December 2025 was passed under Section 170A of the IT Act. Thus, having themselves taken the modified Return of Income into account in the pending as....
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....ied Return of Income. This distinction has also been noticed by this Court in Technoforce Solutions (I) Pvt. Ltd. (supra), where the Court explained the different consequences flowing from clauses (a) and (b) of Section 170A(2). 27. Hence, the question that we have to decide is whether the assessment proceedings in the present case stood completed on 28 March 2025, when the Petitioner furnished the modified Return of Income. In our view, they had not. The original Return of Income was selected for scrutiny pursuant to the notice issued under Section 143(2) dated 1 June 2023. The TPO thereafter passed an order dated 27 January 2025 and a draft Assessment Order under Section 144C(1) was passed on 24 March 2025. The draft Assessment Order, however, did not bring the assessment proceedings to an end. The statutory procedure contemplated by Section 144C thereafter remained to be completed. 28. In this regard, the principle laid down in the judgment of this Court in Vodafone India Services Pvt. Ltd. (supra) is apposite. This Court has held that the process before the DRP is a continuation of the assessment proceedings and that such proceedings continue until the final appealable As....
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....ceedings. The filing of the modified Return of Income, therefore, does not alter the character of the pending assessment proceedings or require the Assessing Officer to commence a fresh assessment proceeding. It does not contemplate that the filing of the modified Return of Income would extinguish the pending proceedings and simultaneously give rise to a second assessment proceeding for the same Assessment Year. All that has to be done is to incorporate the income/loss arising as a consequence of the business reorganisation into the income that is proposed to be assessed in the pending proceeding. 32. This interpretation is also supported by the decision of this Court in Bajaj Electricals Ltd. (supra) In that case, the Court considered the statutory scheme of Section 170A and the issuance of fresh notices in relation to a modified Return of Income. The Court held that where the assessment proceedings were pending on the date of furnishing of the modified Return of Income, the Assessing Officer was required to proceed in accordance with Section 170A(2)(b), and that the issuance of fresh notices for scrutinising the modified Return of Income separately was impermissible. The ratio....
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....as not an unconsidered document awaiting a separate assessment. It was taken into consideration in the assessment proceedings which had already commenced pursuant to the original Return of Income. 36. Once the modified Return of Income is taken into consideration in the pending assessment proceedings and the assessment proceedings culminated in the final Assessment Order, the subsequent initiation or continuation of another proceeding for scrutinising the very same modified Return of Income requires a clear statutory basis. No such statutory basis has been demonstrated before us. 37. Indeed, the Respondents' own affidavit records that the final Assessment Order was passed after taking the modified Return of Income into consideration and paragraph 14 further states that in such circumstances, "apparently, no separate proceedings under Section 143(2) were required". 38. The issuance of the notice dated 24 June 2025 under Section 143(2), therefore, cannot be sustained. The notice sought to initiate a separate scrutiny proceeding in respect of the modified Return of Income notwithstanding that the assessment proceedings in respect of the original Return of Income were pend....