Thomson Reuters International Services Private Limited Vs Assessment Unit (Bombay High Court)
Summary: The Bombay High Court held that where assessment proceedings were pending when a modified return of income was furnished under Section 170A of the Income-tax Act, 1961, the Assessing Officer could not initiate a fresh and parallel scrutiny proceeding under Section 143(2) for the modified return. Thomson Reuters International Services Private Limited had filed its original return for AY 2022-23 on 28 November 2022 declaring total income of Rs.127,92,54,140/-.
The return was selected for scrutiny on 1 June 2023 and the matter was referred to the TPO, who passed an order on 27 January 2025 proposing transfer pricing adjustments. A draft assessment order under Section 144C(1) followed on 24 March 2025. Meanwhile, NCLT had approved the merger of Confirmation.com India Private Limited with the Petitioner with an appointed date of 1 September 2019.
Pursuant to the merger, the Petitioner filed a modified return under Section 170A on 28 March 2025. Although a draft assessment order had already been passed, the Court held that the assessment proceedings were still pending because proceedings before the DRP formed part of the continuing assessment machinery and the final assessment order had not yet been passed. The Court relied on Vodafone India Services Pvt. Ltd. Vs. Union of India for the principle that DRP proceedings are a continuation of assessment proceedings. Consequently, Section 170A(2)(b), and not Section 170A(2)(a), governed the case. Under Section 170A(2)(b), the Assessing Officer was required to assess or reassess the total income in the pending proceeding after considering the modified return; the provision did not contemplate extinguishing the existing assessment and starting a second assessment cycle for the same assessment year.
The Court also relied on Bajaj Electricals Ltd. Vs. Assistant Commissioner of Income-tax, where fresh notices for separately scrutinising a modified return during pending assessment proceedings were held impermissible, and referred to Technoforce Solutions (I) Pvt. Ltd. Vs. Deputy Commissioner of Income-tax regarding the distinction between clauses (a) and (b) of Section 170A(2). The Revenue’s contention that Section 170A(3) permitted application of the other provisions of the Act did not assist it because Section 170A(3) could not confer jurisdiction otherwise absent or permit an exercise contrary to the specific mechanism under Section 170A(2)(b). Significantly, the Revenue itself admitted that the final assessment order dated 28 January 2026 had been passed after considering the modified return and DRP directions, and its affidavit stated that apparently no separate Section 143(2) proceedings were required.
The Court accordingly quashed the notice dated 24 June 2025 under Section 143(2). Since the subsequent notice dated 24 February 2026 under Section 92CA(2) and the fresh transfer pricing proceedings had their foundation in that invalid scrutiny notice, those proceedings and all consequential, subsequent and parallel proceedings were also quashed. thomson-reuters-bhc-700703 thomson-reuters-bhc-700703 thomson-reuters-bhc-700703
Cases Discussed
- Vodafone India Services Pvt. Ltd. Vs. Union of India (2014) 361 ITR 531 (Bom) — Relied upon for the principle that proceedings before the DRP are a continuation of assessment proceedings and continue until the final appealable assessment order is passed.
- Bajaj Electricals Ltd. Vs. Assistant Commissioner of Income-tax [2026] 183 taxmann.com 637 (Bom) — Applied to hold that where assessment proceedings are pending on filing of a modified return under Section 170A, fresh notices for separately scrutinising the modified return are impermissible.
- Technoforce Solutions (I) Pvt. Ltd. Vs. Deputy Commissioner of Income-tax, WP No. 2041 of 2026, decided on 1 April 2026 — Referred to regarding the distinction and different consequences under clauses (a) and (b) of Section 170A(2).
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally.
2. By the present Petition, the Petitioner has impugned:- (i) a notice dated 24 June 2025 issued under Section 143(2) of the Income-tax Act, 1961 (for short “the IT Act”); (ii) a notice dated 24 February 2026 issued under Section 92CA(2) of the IT Act; and (iii) all consequential and subsequent proceedings arising therefrom. The relevant Assessment Year (for short “A.Y.”) is 2022-23. The challenge to the aforesaid notices and proceedings 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 arising therefrom.
5. The pleadings are complete, and therefore, with the consent of parties, we have heard the Petition finally.
6. The facts leading to the issuance of the notices impugned in the present Petition are as follows:
a. The Petitioner filed its original Return of Income for the AY 2022-23 on 28 November 2022 declaring a total income of Rs. 127,92,54,140/- under the normal provisions of the IT Act. An intimation was issued under Section 143(1) of the IT Act on 11 January 2023 accepting the income declared in the Return filed by the Petitioner.
b. Thereafter, the said Return was selected for scrutiny and a notice under Section 143(2) of the IT Act was issued on 1 June 2023. During the course of the assessment proceedings, the matter was referred to the Transfer Pricing Officer (for short “the TPO”) under Section 92CA of the IT Act. The TPO passed an order dated 27 January 2025, proposing transfer pricing adjustments, the correctness of which is not accepted by the Petitioner.
c. As per the recommendations of the TPO, a draft Assessment Order under Section 144C(1) of the IT Act was thereafter passed on 24 March 2025, incorporating the transfer pricing adjustments and not making any other adjustment to the income declared.
d. In the meantime, by an order dated 2 September 2024, the National Company Law Tribunal (NCLT) approved the merger of one “Confirmation.com India Private Limited” with the Petitioner, with the appointed date as 1 September 2019.
e. Pursuant to the aforesaid order of the NCLT, the Petitioner furnished a modified Return of Income in accordance with Section 170A of the IT Act on 28 March 2025, once again declaring its total income as Rs.127,92,54,140/-. In the modified Return of Income, the Petitioner chose not to claim the losses declared by Confirmation.com India Private Limited in its Return, which was accepted, and hence, the income of the Petitioner in the modified Return of Income remained the same as per the Petitioner’s original Return of Income. It may be worth mentioning that the amalgamating entity, i.e. Confirmation.com India Private Limited, had filed its original Return of Income for AY 2022-23 on 29 October 2022, wherein a loss of Rs.30,000/- was claimed. In the said Return of Income, there was neither any tax payable nor any refund claimed. In relation to the original Return 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 fresh scrutiny proceedings in respect of the modified Return of Income furnished under Section 170A.
i. The Petitioner, by its letter dated 21 July 2025, objected to the issuance of the notice under Section 143(2), specifically pointing out that the assessment proceedings were pending and that objections had been filed before the DRP.
j. The Petitioner also filed a letter with the DRP on 24 July 2025, informing it of the filing of the modified Return of Income pursuant to the NCLT order dated 02 September 2024.
k. The DRP, thereafter, issued directions under Section 144C(5) of the IT Act on 22 December 2025 affirming the variation proposed in the draft Assessment Order to the Petitioner’s income.
l. On 23 December 2025, Respondent No.2 passed an order under Section 170A of the IT Act accepting the income declared in the Return of Income filed.
m. Thereafter, on 28 January 2026, Respondent No. 1 passed the final Assessment Order in pursuance of the directions issued by the DRP, confirming the additions made as per the Draft Assessment Order.
n. Notwithstanding the aforesaid, on 24 February 2026, Respondent No.3 (TPO) issued a fresh notice under Section 92CA(2) of the IT Act in respect of the international transactions of the Petitioner for the very same Assessment Year. The said notice was issued pursuant to the fresh scrutiny proceedings initiated by the Respondents, notwithstanding that the transfer pricing proceedings had already been undertaken and the order passed by the Transfer Pricing Officer and the DRP had formed part of the assessment proceedings which culminated in a final Assessment Order dated 28 January 2026. The Petitioner, therefore, filed its response thereto on 11 March 2026, objecting to the issuance of the said notice by Respondent No.3.
o. The Petitioner thereafter filed the present Writ Petition before this Court on 29 April 2026, challenging, inter alia, the notice dated 24 June 2025 under Section 143(2), the subsequent notice dated 24 February 2026 under Section 92CA(2), and the consequential, subsequent and parallel proceedings arising therefrom.
p. During the pendency of the present Petition, the Respondents have continued to take further steps in pursuance of the impugned proceedings. The subsequent notices dated 22 May 2026 under Section 142(1) issued by Respondent 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. Therefore, it was submitted that the assessment proceedings were not concluded on 28 March 2025, and the case fell within the ambit of Section 170A(2)(b) of the IT Act. In this regard, reliance was placed upon the decision of this Court in Vodafone India Services Pvt. Ltd. Vs. Union of India (2014) 361 ITR 531 (Bom), wherein, while considering the nature of proceedings before the DRP, this Court held that the process before the DRP is a continuation of the assessment proceedings and continues until the final appealable Assessment Order is passed by the Assessing Officer. It was submitted that the draft Assessment Order cannot, therefore, be regarded as bringing the assessment proceedings to an end.
8. Referring to the Transfer Pricing Order dated 27 January 2025, the learned Counsel for the Petitioner stated that, Respondent No. 3, after considering the various details and submissions filed, had suggested an adjustment of Rs.1,00,35,82,249/- on three counts;
| i) | Provision of IT Services | Rs.46,56,37,554/- |
| ii) | Provision of ITeS | Rs.53,28,16,031/- |
| iii) | Interest of outstanding receivables | Rs. 51,28,664/- |
| Total | Rs.1,00,35,82,249/- |
The draft order dated 24 March 2025 incorporated this addition, which was later confirmed by the DRP in its directions dated 22 December 2025.
9. The learned Counsel then drew our attention to the notice dated 24 February 2026 issued under Section 92CA(2) of the IT Act by Respondent No. 3, which called upon the Petitioner to furnish an extensive list of details and documents, as though he was seeking to undertake the entire transfer pricing exercise afresh. It was further submitted that once Section 170A(2)(b) of the IT Act applies, the Assessing Officer is required to pass an order assessing or reassessing the total income in accordance with the order of business reorganisation and by taking into account the modified Return of Income so furnished. The Petitioner submitted that the provision does not contemplate the initiation of a fresh or parallel assessment proceeding merely because a modified Return of Income has been furnished. Referring to paragraph 13 of the Respondents’ Affidavit-in-Reply, the learned Counsel pointed out that, by their own admission, the final Assessment Order dated 28 January 2026 was passed after taking into consideration the modified Return of Income as well 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 Officer is required to amend the completed assessment basis the modified Return of Income. Where the assessment proceedings are pending, clause (b) applies and the Assessing Officer is required to assess or reassess the total income taking the modified Return of Income into consideration.
13. It was therefore submitted that the issuance of the impugned notice dated 24 June 2025 under Section 143(2) amounted to initiation of a fresh and parallel scrutiny proceeding in respect of a modified Return of Income which was required to be considered in the pending assessment proceedings.
14. The notice dated 24 February 2026 under Section 92CA(2), according to the Petitioner, could not survive independently once the foundation for its issuance, namely the impugned notice under Section 143(2), was without jurisdiction.
15. It was submitted that the question was not whether the modified Return of Income could be examined by the Assessing Officer. The Act itself provides the manner in which a modified Return of Income is to be dealt with in Section 170A. The question was whether the Assessing Officer could invoke Section 143(2) to commence a fresh scrutiny proceeding of such modified Return of Income in the absence of any statutory provision authorising such an exercise over and above the exercise already conducted.
16. The learned Counsel submitted that particularly in the present case, where the assessment proceedings pursuant to the original Return of Income were already pending on the date on which the modified Return of Income was furnished, permitting a fresh notice under Section 143(2) would not only be contrary to Section 170A(2)(b), but would also amount to conferring jurisdiction by implication upon the Assessing Officer. Therefore, the impugned notice was liable to be quashed and set aside as being without jurisdiction.
17. The learned Counsel also drew our attention to the order dated 23 December 2025 passed by Respondent No. 2, in terms of Section 170A of the IT Act, whereby the income declared in the modified Return of Income was accepted. It was submitted, without prejudice to the aforesaid contentions, that even assuming that the proceedings arising from the modified Return of Income could be separately examined, upon passing of the order under Section 170A accepting the income declared, such proceedings stood concluded, and the Respondents 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 assessment procedure and that, save as otherwise provided therein, the other provisions of the IT Act continue to apply by virtue of Section 170A(3). According to the Respondents, there is no express prohibition contained in Section 170A against issuance of a notice under Section 143(2) for the purpose of scrutinising the modified Return of Income. Therefore, it was submitted that the modified Return of Income would be scrutinised in terms of Section 170A(3), and hence, to enable the Respondents to do so, a notice under Section 143(2) was validly issued.
20. The Revenue submitted that the modified Return of Income is required to be verified and examined so that the correct total income can be determined after giving effect to the business reorganisation. It was submitted that the interpretation advanced by the Petitioner would render the statutory mechanism unworkable and would prevent the Assessing Officer from examining the modified Return of Income. Since, according to the Respondents, the original Return of Income stands replaced and becomes non-est, the modified Return of Income should be deemed to be filed under Section 139(1) for the purposes of Section 143(2). On this basis, it was submitted that the proceedings initiated pursuant to the notice dated 24 June 2025 issued under Section 143(2) were in accordance with law and that the challenge at this stage was premature. The Respondents thus contended that the challenge to the notice dated 24 June 2025, on the ground of the alleged absence of jurisdiction under Section 170A, was misconceived and that the proceedings pursuant to the said notice were lawful.
21. In rejoinder, the Petitioner submitted that the issue was not whether the modified Return of Income could be considered, examined or given effect to, but whether the Assessing Officer could initiate a second and a parallel proceeding for the purpose of considering the very same modified Return of Income when the assessment proceedings were already pending. It was submitted that what was contemplated by Section 170A was a proper aggregation of the income consequent to the business reorganisation and the verification of such consolidation process by the Assessing Officer. It was not meant to enable the Revenue to scrutinise once again the claims made. It was submitted that the admitted position was that the original Return of Income was selected 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 assessment proceedings, and having completed those proceedings basis thereof, the Respondents thereafter could not contend that a fresh scrutiny proceeding was necessary for the purpose of examining the modified Return of Income, much less invoke Sections 143(2) and Section 92CA afresh without identifying any statutory provision conferring such jurisdiction.
23. We have heard the learned Counsel for the parties and have perused the record, papers, and proceedings.
24. The principal issue which arises for our consideration is whether, on the date of furnishing of the modified Return of Income in terms of Section 170A of the IT Act, the assessment proceedings for the A.Y. 2022-23 were pending, and if so, whether the Respondents could thereafter initiate a fresh scrutiny proceeding under Section 143(2) in respect of the modified Return of Income.
25. Section 170A of the IT Act deals with the effect of an order of a Tribunal or Court in respect of business reorganisation. Sub-section (1) provides for furnishing of a modified Return of Income in the prescribed form and manner in accordance with and limited to the order of business reorganisation. Sub-section (2) then provides for a procedure in two situations:-
i) Where the assessment or reassessment proceedings stand completed on the date of furnishing of the modified Return of Income, clause (a) applies and the Assessing Officer is required to pass an order modifying the total income determined in the completed assessment in accordance with the order of business reorganisation and taking into account the modified Return of Income.
ii) Where, however, the assessment or reassessment proceedings are pending on the date of furnishing of the modified Return of Income, clause (b) applies and the Assessing Officer is required to pass an order assessing or reassessing the total income in accordance with the order of business reorganisation and considering the modified Return of Income so furnished.
26. The distinction between clauses (a) and (b) of sub-section (2) of Section 170A is clear. Clause (a) operates where there is a completed assessment and provides for modification of the total income already determined. Clause (b), on the other hand, operates where assessment proceedings are pending and contemplates an order assessing or reassessing the total income, taking into account the modified 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 Assessment Order is passed by the Assessing Officer. The proceedings before the DRP are not appellate proceedings but form part of the assessment machinery and provide for a further consideration of the draft assessment before a final Assessment Order is passed. Consequently, the mere passing of a draft Assessment Order under Section 144C(1) cannot be regarded as completion of the assessment proceedings for the purpose of determining whether the proceedings were pending.
29. In the present case, the facts speak for themselves. The draft Assessment Order was passed on 24 March 2025. The modified Return of Income was furnished only four days thereafter, on 28 March 2025. The objections before the DRP were thereafter filed on 17 April 2025, and the DRP was intimated of the factum of the modified Return of Income. The DRP issued its directions only on 22 December 2025, and the final Assessment Order was passed on 28 January 2026. The assessment proceedings had thus plainly not reached their final conclusion on 28 March 2025 and had concluded only on 28 January 2026.
30. Having regard to these indisputable facts, we are of the view that the case of the Petitioner fell within Section 170A(2)(b) of the IT Act. The statutory consequence is that the Assessing Officer was required to pass an order assessing or reassessing the total income in accordance with the order of business reorganisation and by considering the modified Return of Income so furnished. In fact, in the affidavit in reply of the Respondent, it also admitted that the final Assessment Order dated 28 January 2026 was passed considering the modified Return of Income and the directions of the DRP.
31. The question then is whether Section 170A(2)(b), in such circumstances, permits the Assessing Officer to initiate a fresh and parallel scrutiny proceeding under Section 143(2) and a fresh transfer pricing assessment in respect of the modified Return of Income. In our view, it does not. Section 170A(2)(b) specifically deals with the situation where assessment proceedings are pending on the date of furnishing of the modified Return of Income. The provision requires the Assessing Officer to assess or reassess the total income in accordance with the order of business reorganisation and considering the modified Return of Income. The provision thus operates within the framework of the pending assessment proceedings. 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 of the judgment in Bajaj Electricals Ltd. (supra) is directly relevant to the controversy before us. The modified Return of Income is not a mechanism for creating a second assessment proceeding where the statute has already provided for the manner in which such modified Return of Income is to be dealt with in pending proceedings. To hold otherwise would mean that the same Assessment Year could simultaneously be subjected to the original assessment proceedings and a fresh scrutiny proceeding arising merely because a modified Return of Income is filed. Such an interpretation would render the distinction drawn by Parliament in Section 170A(2) between completed and pending assessments substantially meaningless.
33. The submission of the Respondents that Section 170A is an enabling provision and that the other provisions of the IT Act continue to apply does not alter the position. There is no dispute that Section 170A does not exist in isolation and that, save as otherwise provided, the other provisions of the IT Act continue to apply. However, Section 170A(3) cannot be construed as conferring jurisdiction which is otherwise absent. Section 170A(3) cannot be read as permitting what Section 170A(2)(b) does not contemplate, nor can the general provisions of the IT Act be invoked so as to defeat the specific mechanism which Parliament has provided for in Section 170A(2)(b).
34. We are also unable to accept the submission that unless a fresh scrutiny proceeding is permitted, the modified Return of Income cannot be examined. Section 170A(2)(b) itself provides the mechanism. Where the assessment proceedings are pending, the Assessing Officer is required to pass an order assessing or reassessing the total income in accordance with the order of business reorganisation and considering the modified Return of Income. Therefore, there is no enabling statutory provision which requires the Assessing Officer to commence a fresh proceeding under Section 143(2).
35. In the present case, the Respondents’ own subsequent conduct fortifies this conclusion. The final Assessment Order dated 28 January 2026 was passed after the modified Return of Income had been taken into consideration. The Respondents have also acknowledged that an order dated 23 December 2025 was passed under Section 170A of the IT Act accepting the income declared. Thus, the modified Return of Income was 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 pending when the modified Return of Income was furnished. The impugned notice is consequently contrary to the scheme of Section 170A(2)(b) of the IT Act.
39. Once the notice dated 24 June 2025 under Section 143(2) is held to be without jurisdiction, the notice dated 24 February 2026 under Section 92CA(2) cannot independently survive. The reference to the Transfer Pricing Officer and the consequential proceedings emanating therefrom have their foundation in the impugned notice under Section 143(2). Once the foundation fails, the subsequent proceedings cannot be sustained.
40. In view of the foregoing discussion, we are of the view that the impugned notice dated 24 June 2025 issued under Section 143(2) of the IT Act, the notice dated 24 February 2026 issued under Section 92CA(2) of the IT Act, and the consequential and subsequent proceedings arising therefrom, including the notices issued during the pendency of the present Petition, are unsustainable in law. In these circumstances, the impugned notice dated 24 June 2025 under Section 143(2) of the IT Act and the subsequent notice dated 24 February 2026 under Section 92CA(2) of the IT Act are quashed and set aside. Any consequential, subsequent and parallel proceedings arising therefrom are also quashed and set aside.
41. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.
42. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
