Parallel Scrutiny After Section 170A Modified Return Invalid: Bombay High Court

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.