Section 170A Modified Return Cannot Trigger Parallel Scrutiny When Assessment Is Pending: Bombay High Court Rules in Thomson Reuters Case
Background and Context
The Bombay High Court recently delivered a significant ruling on the interplay between Section 170A and Section 143(2) of the Income-tax Act, 1961, addressing a question of considerable practical importance for assessees involved in business reorganisations. The core issue was whether, upon filing a modified return of income under Section 170A, the Assessing Officer could validly initiate a fresh and independent scrutiny proceeding under Section 143(2) when assessment proceedings in respect of the original return were already pending.
The Court answered this question firmly in the negative, quashing both the notice dated 24 June 2025 issued under Section 143(2) and the subsequently issued notice dated 24 February 2026 under Section 92CA(2), along with all proceedings arising therefrom.
Factual Matrix
Original Return and Scrutiny Selection
Thomson Reuters International Services Private Limited filed its original return of income for AY 2022-23 on 28 November 2022, declaring a total income of Rs. 127,92,54,140/- under the normal provisions of the Income-tax Act, 1961. An intimation was issued under Section 143(1) on 11 January 2023 accepting the declared income.
Subsequently, the return was selected for scrutiny and a notice under Section 143(2) was issued on 1 June 2023. During the course of assessment proceedings, a reference was made to the Transfer Pricing Officer (TPO) under Section 92CA. The TPO passed an order dated 27 January 2025, proposing transfer pricing adjustments on three counts:
- Provision of IT Services: Rs. 46,56,37,554/-
- Provision of ITeS: Rs. 53,28,16,031/-
- Interest on outstanding receivables: Rs. 51,28,664/-
- Total Adjustment Proposed: Rs. 1,00,35,82,249/-
Based on these recommendations, a draft assessment order under Section 144C(1) was passed on 24 March 2025 incorporating the transfer pricing adjustments.
NCLT Merger Order and Modified Return
Separately, the National Company Law Tribunal (NCLT) approved the merger of Confirmation.com India Private Limited with the assessee vide order dated 2 September 2024, with an appointed date of 1 September 2019. Pursuant to this NCLT approval, the assessee filed a modified return of income under Section 170A of the Income-tax Act, 1961 on 28 March 2025 — just four days after the draft assessment order was passed — once again declaring total income of Rs. 127,92,54,140/-. The assessee chose not to claim the losses declared by Confirmation.com India Private Limited in its return, resulting in no change in the declared income.
It is worth noting that Confirmation.com India Private Limited had filed its own original return for AY 2022-23 on 29 October 2022, declaring a loss of Rs. 30,000/-, with no tax payable and no refund claimed. That return was accepted under Section 143(1) and was never selected for scrutiny under Section 143(2).
Filing of Objections Before DRP
On 17 April 2025, the assessee filed objections to the draft assessment order before the Dispute Resolution Panel (DRP). Consequently, on the date the modified return was filed (28 March 2025), assessment proceedings had not attained finality — a fact that formed the cornerstone of the subsequent legal challenge.
Issuance of Fresh Section 143(2) Notice
Despite the above, on 24 June 2025, the Faceless Assessing Officer issued a fresh notice under Section 143(2) seeking to initiate independent scrutiny proceedings in respect of the modified return filed under Section 170A. The assessee objected to this by letter dated 21 July 2025, pointing out that assessment proceedings were still pending before the DRP.