Technoforce Solutions (I) Pvt. Ltd. Vs DCIT: How Section 170A(2)(a) Limits Fresh Assessments After Amalgamation

Background of the Dispute

The Bombay High Court in Technoforce Solutions (I) Pvt. Ltd. Vs DCIT examined whether the Assessing Officer (AO) can initiate a fresh scrutiny assessment after an amalgamation, when a modified return is filed under Section 170A of the Income Tax Act 1961. The core issue was whether such modified return permits a de novo assessment, or whether the AO is restricted to merely adjusting the already determined income to reflect the impact of the business reorganisation.

The assessee had undergone amalgamation pursuant to an order of the NCLT dated 05.07.2024, under which M/s. Promatics Solutions (I) Pvt. Ltd., a wholly owned subsidiary, was merged with the assessee with effect from 01.04.2021. This triggered the requirement to file a modified return under Section 170A.

However, before the amalgamation order, the assessee had already filed its original return for A.Y. 2023-24, and the return was processed under Section 143(1) without adjustments. After the amalgamation, the assessee filed a modified return on 23.01.2025 under Section 170A. Despite the earlier processing of the original return and expiry of limitation for scrutiny, the AO issued scrutiny and information-gathering notices under Section 143(2) and Section 142(1) and later passed a fresh assessment order. These actions formed the basis of the writ petition.

Chronology of Key Facts

Filing of Original Return and Intimation

• The assessee filed its original return of income for A.Y. 2023-24 on 27.11.2023, disclosing total income of Rs. 5,32,85,870/-.
• The Centralised Processing Centre issued an intimation under Section 143(1) on 05.12.2023, accepting the returned income and making no adjustment.
• No notice under Section 143(2) was issued on or before 30.06.2024, which was the last permissible date under the proviso to Section 143(2) for initiating scrutiny in relation to A.Y. 2023-24.

Amalgamation Proceedings and Order

• An application for amalgamation of M/s. Promatics Solutions (I) Pvt. Ltd. with the assessee had been filed before the NCLT on 28.12.2021, proposing an appointed date of 01.04.2021.
• The NCLT approved the scheme by order dated 05.07.2024, with effect from 01.04.2021. This constituted a case of “business reorganisation” within the meaning of the Explanation to Section 170A.

Modified Return under Section 170A

• Pursuant to the amalgamation order, the assessee filed a modified return for A.Y. 2023-24 on 23.01.2025 under Section 170A(1), declaring revised total income of Rs. 5,26,82,860/-.
• The reduction in income was attributable to the impact of the amalgamation, particularly elimination of interest income of Rs. 6,01,077/- charged to the amalgamating subsidiary on inter-company loans, which became redundant post-amalgamation.

Expiry of Limitation for Assessment

• Under the fourth proviso to Section 153(1), the time limit for completing the assessment for A.Y. 2023-24 expired on 31.03.2025.
• Accordingly, by the time the modified return was filed on 23.01.2025, the original assessment stood concluded by operation of law, given that:
  • The return had already been processed under Section 143(1); and
  • No scrutiny notice under Section 143(2) had been issued within the statutory time limit.

Impugned Notices and Writ Petition

• Despite the above, the AO issued:

  • A notice dated 23.06.2025 under Section 143(2) to scrutinise the modified return for A.Y. 2023-24; and
  • A notice dated 21.01.2026 under Section 142(1), requisitioning books, documents and details not confined to the amalgamation aspects.

• The assessee responded on 07.07.2025, under protest, asserting that:

  1. The Section 143(2) notice was time-barred, and
  2. The scope of examination could only extend to giving effect to the amalgamation order and not to a full-scale reassessment.

• The assessee filed the writ petition on 03.02.2026, challenging both notices as being beyond jurisdiction and barred by limitation. It was also brought on record that in the parallel proceedings for A.Y. 2022-23, where assessment was actually pending, the AO had given effect to the modified return while passing the order under Section 143(3), thus acknowledging the proper operation of Section 170A(2)(b).

Statutory Framework: Understanding Section 170A

Text and Structure of Section 170A

The Court reproduced Section 170A titled “Effect of order of tribunal or court in respect of business reorganisation.” Key features are: