Modified return under section 170A: giving effect to a scheme, and no more

A scheme of amalgamation is sanctioned in July. The appointed date is three years earlier. Returns for those three years have been filed, assessed and in one case reassessed. Somebody now has to tell the Income-tax Department that two of the companies whose returns are on its system no longer exist, and that their income belongs to a third.

Section 170A is the vehicle for doing that, and it is a narrower vehicle than it looks. It gives the successor six months and a form. It tells the Assessing Officer to give effect to the order. It does not invite him to look at the year again, and three times in the last nine months the Bombay High Court has had to say so to officers who thought otherwise.

The section also exists in two versions, and most published commentary quotes the wrong one. What follows deals with both, with the machinery, with the orders the section cannot reach at all, and with what happens on 1 April 2026.

Key points

• Section 170A was inserted by the Finance Act 2022 with effect from 1 April 2022 and substituted in its entirety by the Finance Act 2023 with effect from 1 April 2023. For an order issued in the intervening year the section had no machinery for the Assessing Officer at all, and required the pre-order return to have been furnished by the successor, which in an amalgamation it never is.
• The window is six months from the end of the month in which the order was issued. There is no proviso and no condonation power, and no reported case rules on a modified return filed late without the benefit of a Board extension.
• The return is Form ITR-A under rule 12AD, electronically and under digital signature. Rule 12AD came into force on 1 November 2022, five months before the parent section acquired the machinery the rule assumed.
• Section 170A(2)(a) permits only an order modifying the income already determined where the assessment was complete. Section 170A(2)(b) requires the pending proceeding to be completed. Neither is a fresh assessment.
• Technoforce Solutions, Bajaj Electricals and Thomson Reuters, all Bombay High Court, have quashed notices under sections 143(2), 142(1) and 92CA(2) issued on the back of a modified return.
• No limitation is prescribed for the order under clause (a). Section 153 does not mention section 170A. Do not advise on the footing that a period exists.
• For a reorganisation order issued before 1 April 2022 the section is not the route. Dalmia Power governs, and the Board’s administrative window for those years closed on 30 June 2024. Whether the cut-off is the date of the order or the assessment year it relates to is unsettled: TSI Business Parks reasoned from the assessment year.
• “Successor” means all resulting companies. A non-corporate successor appears to be outside the section. “Business reorganisation” means only amalgamation, demerger or merger.
• Section 170(2A) protects the Department’s proceedings during pendency; section 170A gives the successor a vehicle. They are keyed to different concepts and neither does the other’s work. Filing Form ITR-A does not cure an assessment framed on a dissolved company.
• From 1 April 2026 the provision is section 314 of the Income-tax Act, 2025, substantially identical, with the gaps intact.

What does section 170A actually require?

The current text, substituted by the Finance Act 2023 with effect from 1 April 2023, reads:

Notwithstanding anything to the contrary contained in section 139, in a case of business reorganisation, where prior to the date of order of a High Court or tribunal or an Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter referred to as order in respect of business reorganisation), as the case may be, any return of income has been furnished by an entity to which such order applies under the provisions of section 139 for any assessment year relevant to the previous year to which such order applies, the successor shall furnish, within a period of six months from the end of the month in which the order was issued, a modified return in such form and manner, as may be prescribed, in accordance with and limited to the said order.

Four features of that sentence do the work.

The non-obstante clause operates against section 139. A modified return is therefore arguably not a return under section 139 at all, which matters when the Department later reaches for section 119(2)(b), and matters again when anyone asks whether the six-month period can be extended.

The trigger is that a return has already been furnished for a year to which the order applies. Where no return had been filed for that year before the order, the condition in sub-section (1) is not satisfied and, on the face of it, there is nothing to modify. No decision has tested that.

The obligation is the successor’s, and it is expressed as “shall furnish”. This is a duty, not an election. An Assessing Officer who treats the modified return as a concession he may decline to act on has misread the provision, and the three Bombay decisions discussed below all proceed on the footing that the return must be given effect.

The content is confined by seven words: “in accordance with and limited to the said order”. A modified return is not an opportunity to correct an earlier mistake, advance a claim that was not made, or revisit a position taken in the original return. It carries the consequences of the scheme and nothing else. ITAT Mumbai put the same point from the other side in Indus Valley Partners (India) Private Limited v. DCIT (ITA No. 6243/Mum/2024, 29 July 2026), holding that once a valid modified return is filed in consequence of an order approving business reorganisation, such modified return has to be considered in accordance with law and subject to the limits of the order approving such business reorganisation. The limitation runs against both sides.

Which version of section 170A applies to your order?

This is where most commentary goes wrong, and the error is not academic.

Section 170A was inserted by the Finance Act 2022 with effect from 1 April 2022. That version was a single unnumbered provision followed by an Explanation. Its operative words were materially the same as the present sub-section (1) with one critical difference: it required that, prior to the order, “any return of income has been furnished by the successor”.

In an amalgamation the return for a pre-order year is filed by the amalgamating company. It is not filed by the successor, because for that year the successor either did not exist or was a different taxpayer. On a literal reading the 2022 version was unworkable in the commonest case it was enacted to address. The Finance Act 2023 replaced those words with “furnished by an entity to which such order applies”, which fixes the defect.

The second and larger defect was that the 2022 version contained no machinery at all. It told the successor to file. It said nothing about what the Assessing Officer was to do with the filing, gave him no power to modify a completed assessment, and gave no direction about a pending one. Sub-sections (2) and (3) arrived only on 1 April 2023.

Rule 12AD(3) had tried to supply that machinery in the meantime, and this is worth pausing on. The rule was inserted with effect from 1 November 2022 and directs the Assessing Officer, where proceedings for the relevant year have been completed or are pending, to pass an order modifying the total income determined or to complete the proceedings in accordance with the reorganisation order and the modified return. For five months, therefore, a rule was conferring an assessment power that the parent section did not contain. No case has tested whether it could. For an order issued between 1 April 2022 and 31 March 2023, and a giving-effect order passed in that window, the argument is available and has not been run.

The Explanation, incidentally, was in the 2022 version from the start. The Finance Act 2023 did not introduce the definitions; it added sub-sections (2) and (3), the parenthetical shorthand for the reorganisation order, and the correction to the “furnished by” words.

What counts as a business reorganisation, and who is a successor?

The Explanation is short and confines the section considerably. It defines two expressions for the purposes of the section. “Business reorganisation” means:

the reorganisation of business involving the amalgamation or demerger or merger of business of one or more persons

And “successor” means:

all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation

Three consequences follow on the statute’s own terms.

The section reaches amalgamation, demerger and merger, and nothing else. A slump sale is outside it, even where a scheme was sanctioned; so is a bare transfer of assets, a conversion of a firm or LLP into a company, and a succession by inheritance. That a court or tribunal was involved does not bring a transaction within the definition if the transaction is not one of the three named.

“Successor” means all resulting companies. A successor that is not a company appears to fall outside the definition, so a firm, an LLP or an individual that succeeds to a business under a sanctioned scheme arguably cannot file a modified return at all. There is no authority either way, and the point is live: schemes under sections 230 to 232 of the Companies Act 2013 involving LLPs are not unknown.

The definitions are not those used in section 170(2A). That provision is keyed to “succession”, a broader concept, and carries its own Explanation. The two provisions inserted by the same Finance Act therefore have different scopes, which is discussed below.

When does the six-month clock start, and what happens if it is missed?

Six months from the end of the month in which the order was issued. An order issued on 5 July 2024 gives 31 January 2025.

The statute says “issued”. It does not say pronounced, uploaded to the tribunal’s site, received, or filed with the Registrar of Companies. In practice the Department reckons the period from the date the order bears, and that is the prudent date to calendar. But “issued” is not a defined term, and where an order is signed on one date and released on another the point is arguable and undecided; no case has addressed it. Nor, in a scheme sanctioned by more than one bench, which is routine where transferor and transferee sit in different jurisdictions, does the statute say which order starts the clock. In Dalmia Power the Supreme Court worked from “the last orders” sanctioning the schemes, but it was construing section 139(5), not section 170A.

If the window is missed, the honest answer is that nobody knows. Section 170A has no proviso, no condonation power and no saving. No decision rules on the consequence of a modified return furnished beyond six months where no Board extension covers it; returns filed late but within an extension have been acted on without comment. What can be said is this.

Section 119(2)(b) is an awkward fit. If a modified return is not a return under section 139, because of the non-obstante clause, the Board’s power to admit a belated claim in a return may not reach it. Independently, Dalmia Power holds that section 119(2)(b), which operates in cases of genuine hardship, “would not be applicable where an assessee has restructured their business, and filed a revised Return of Income with the prior approval and sanction of the NCLT, without any objection from the Department”.

The Board’s own practice cuts the other way. It has twice relaxed the period by order under section 119: once by its order of 26 September 2022, read with the corrigendum of 27 September 2022, extending the time to 31 March 2023 where the competent authority’s order was issued between 1 April 2022 and 30 September 2022, and once by the order of 13 March 2024 dealing with pre-commencement orders. A Board that extends a period twice is not treating it as an absolute statutory bar. That is administrative conduct, not authority, but it is not nothing.

The strongest argument on a late return is Dalmia Power itself: a sanctioned scheme has statutory force and the Department is bound to give effect to it; section 170A is machinery, not a charging or extinguishing provision; and the successor’s obligation to bring the scheme on record was located by the Supreme Court in section 170(1), which has no time limit. That argument has not been tested, and anyone advising should say so.

How is the modified return filed?

Rule 12AD, headed “Return of income under section 170A”, was inserted by the Income-tax (Thirty-first Amendment) Rules, 2022 with effect from 1 November 2022, by Notification No. 110/2022 dated 19 September 2022. Its first two sub-rules are short:

(1) The modified return of income to be furnished by a successor entity to a business reorganisation, as referred to in section 170A, for an assessment year, shall be in the Form ITR-A and verified in the manner specified therein.

(2) The return of income referred to in sub-rule (1) shall be furnished electronically under digital signature.

Sub-rule (3) contains the Assessing Officer machinery described above, and sub-rule (4) leaves procedures, formats and standards to the Director General of Income-tax (Systems). The same notification inserted Form ITR-A and added the filing option referable to section 170A to the general form for companies.

Two practical points arise from the reported cases rather than the rule.

The portal has not always permitted the filing. In Pallava Textiles Private Limited v. Assessment Unit (W.P. No. 1801 of 2023, 30 January 2024) the Madras High Court recorded that the petitioner had placed on record an email of 22 June 2022 indicating that the option to file under section 170A had not been enabled on the portal, and that a physical copy of the modified return was therefore submitted on 24 August 2022. The assessment order was quashed and the matter remanded, the Court holding that it was open to the Department to proceed on the consolidated return once uploaded. The Department appealed, and a Division Bench disposed of the appeal in Writ Appeal No. 2804 of 2025 on 29 October 2025, leaving the single judge’s order standing while clarifying that the liberty granted entitles the Department to carry out a fresh assessment on the consolidated return. Where the portal refuses the filing, the answer is to file physically, keep the error and the correspondence, and treat the physical filing as the operative date.

Tax deducted at source in the predecessor’s name is a recurring nuisance. Chrysalis Play School Pvt Ltd v. DCIT (I.T.A. No. 3586/Chny/2025, pronounced 2 February 2026) was remanded to the Assessing Officer to verify credit of Rs 3,30,000 relating to the amalgamated entity. That order is also useful for showing the form the giving-effect order takes in practice: an order under section 170A read with section 143(1).

What must the Assessing Officer do with it?

Sub-section (2) draws one distinction and it decides everything. It opens by referring to “the assessment or reassessment proceedings for an assessment year relevant to a previous year to which the order in respect of the business reorganisation applies”, and then splits into two clauses:

(a) have been completed on the date of furnishing of the modified return in accordance with the provisions of sub-section (1), the Assessing Officer shall pass an order modifying the total income of the relevant assessment year determined in such assessment or reassessment, in accordance with such order and taking into account the modified return so furnished;

(b) are pending on the date of furnishing of the modified return in accordance with the provisions of sub-section (1), the Assessing Officer shall pass an order assessing or reassessing the total income of the relevant assessment year in accordance with the order of the business reorganisation and taking into account the modified return so furnished.

Under clause (a) the power is to modify. The assessed figure exists; the order adjusts it to reflect the scheme. It is a giving-effect power, not a reopening power.

Under clause (b) the Assessing Officer completes the proceeding he already had, now taking the modified return into account. The proceeding continues; it does not restart, and the modified return does not enlarge its scope.

Sub-section (3) preserves the rest of the Act and fixes the rate of tax at the rate applicable to the relevant assessment year, which matters where the appointed date reaches back across a change of rate.

Can the Assessing Officer scrutinise the year again?

No, and this is now the most developed line of authority under the section. Three Bombay High Court decisions, all within the last nine months, have said so in escalating terms.

Technoforce Solutions (I) Pvt Ltd v. DCIT, Circle-1, Nashik (Writ Petition No. 2041 of 2026, decided 1 April 2026, B. P. Colabawalla and Firdosh P. Pooniwalla, JJ.) is the clearest on the completed-assessment limb. The original return for AY 2023-24 was filed on 27 November 2023 and an intimation under section 143(1) followed on 5 December 2023. The NCLT sanctioned an amalgamation by order of 5 July 2024, effective from 1 April 2021. The modified return went in on 23 January 2025. The Assessing Officer then issued a notice under section 143(2) on 23 June 2025 and one under section 142(1) on 21 January 2026, and passed an assessment order on 24 March 2026.

The Court held that section 170A(2) distinguishes between completed and pending assessments; that clause (a) provides for passing an order modifying assessed income to give effect to the reorganisation, with no scope for the issuance of notices under sections 143(2) and 142(1) for a de novo assessment; and that an assessment already completed can be modified under clause (a) by considering the modified return and giving effect to the amalgamation, information being capable of being called for only to that limited extent. Both notices were quashed, the assessment order was set aside, and the officer was directed to pass a fresh order modifying the income determined under section 143(1).

Bajaj Electricals Limited v. ACIT, Circle 2(1)(1), Mumbai (WP(L) No. 40696 of 2025) extends the principle to the pending limb, which is the harder case. An ad-interim order of 16 December 2025 restrained the Department from acting on notices of 24 June 2025 and 14 November 2025 or passing an assessment order, and the final judgment of 9 February 2026 held that the issuance of the impugned notices with a view to again scrutinize the said modified return is contrary to the express provisions of section 170A(2)(b). Both notices were quashed.

Thomson Reuters International Services Private Limited v. The Assessment Unit (WP(L) No. 15691 of 2026, decided 8 September 2026) states the reasoning most fully. Section 170A(2), the Court held, draws a clear distinction between two situations: where the assessment or reassessment stood completed on the date of furnishing of the modified return, and where it was pending on that date. And then the sentence that matters most: the filing of the modified return does not alter the character of the pending assessment proceedings or require the Assessing Officer to commence a fresh assessment proceeding. A notice under section 143(2) of 24 June 2025 and a notice under section 92CA(2) of 24 February 2026 were quashed, together with all consequential, subsequent and parallel proceedings. Note the second of those: the transfer pricing reference fell with the notice.

To be fair to the Department, none of the three holds that an addition can never be made. Where the proceeding is pending under clause (b), the Assessing Officer is completing an assessment whose ordinary scope continues, and nothing in these judgments confines him to arithmetic. What he cannot do is treat the modified return as the trigger for a fresh or repeat scrutiny. Where the assessment is complete under clause (a), the power is confined to modification, and an addition would have to come through section 147 or section 263 on their own conditions, not through section 170A.

The Delhi High Court has gone further in the assessee’s favour on one point and less far on another, and the case should be known about. In DLF Home Developers Ltd v. National Faceless Assessment Centre (W.P.(C) 17581/2022, orders of 22 December 2022 and 19 October 2023) it held that the Assessing Officer could not proceed with the assessment on the basis of the pre-merger return; but on the modified return being filed it gave him liberty to conduct a scrutiny assessment, excluding the period of the stay and allowing sixty days under section 153 to complete it. The assessment there was pending, so the decision sits with Bajaj Electricals rather than against it. What it shows is that the pending limb leaves the ordinary scope of the proceeding intact, and that section 153 was treated as applying to the resulting assessment.

Is there a limitation period for the giving-effect order?

Not an express one, and the gap is real.

Section 153 of the Income-tax Act, 1961 contains no reference to section 170A and none to a modified return. Section 170A itself prescribes no period for the order under clause (a) or clause (b).

For clause (b) the answer is straightforward: the proceeding is the same one, so the ordinary limitation for it under section 153 continues to govern.

For clause (a) there are two readings and neither has been tested. The first is that the order is one made to give effect to an order of a court, so that section 153(6)(i) applies. That clause covers an assessment, reassessment or recomputation made in consequence of or to give effect to any finding or direction contained in an order under sections 250, 254, 260, 262, 263 or 264, or in an order of any court in a proceeding otherwise than by way of appeal or reference under the Act, and it requires the order to be made within twelve months from the end of the month in which that order is received or passed by the Principal Commissioner or the Commissioner. On that reading the period is twelve months, but it turns on two undecided things: whether an order of the NCLT sanctioning a scheme is “an order of any court” for this purpose, and the date on which the Commissioner received it. The second reading is that no period runs at all, which would be an odd result but follows from the silence.

The practical consequence is visible in the reported cases. In Technoforce Solutions the modified return was filed in January 2025 and the Assessing Officer was still issuing notices in June 2025 and January 2026 and passing an order in March 2026. Nothing in the section told him he was out of time, and nothing told him he was not. Advice on this point should identify the gap rather than fill it.

What if the order predates 1 April 2022?

Section 170A has no application, and two decisions say so squarely.

In TSI Business Parks (Hyderabad) Pvt Ltd v. DCIT (W.P. No. 6892 of 2023, decided 11 April 2023, Ujjal Bhuyan CJ and N. Tukaramji J) the NCLT had sanctioned an amalgamation on 26 April 2021 with effect from 1 April 2020. The revised return for AY 2021-22 was filed on 23 December 2022 and the Department rejected it. The Telangana High Court held that neither the provisions of section 170A of the Act nor the notification dated 19 September 2022 would be applicable to the facts of the present case as section 170A had come into effect from 1 April 2022, set the rejection aside, and directed the Department to take the revised return on board and process it in accordance with law. That is the Dalmia Power route, applied.

Read the reason carefully, because it is not the one usually attributed to the case. The Court reasoned from the assessment year: it recorded that “the assessment year in the present case is 2021-2022”, and then held the section and the notification inapplicable. On those facts the NCLT order and the assessment year both fell before the commencement, so the judgment does not choose between the two possible cut-offs. Which one governs, the date of the order or the year to which it relates, remains open, and Visionary RCM (below) proceeded on a modified return for AY 2020-21 filed on the strength of a later order.

ITAT Pune took the same position in Kumar Urban Development Pvt Ltd v. DCIT and the companion appeal in Kumar Housing Corporation Pvt Ltd (ITA Nos. 2875/PUN/2024, 341/PUN/2025 and 2874/PUN/2024, order pronounced 18 August 2025), holding that section 170A operates only from 1 April 2022 and that the CIT(A) had been wrong to hold against the assessee for not having used portal machinery that did not exist at the relevant time.

The Board plugged the gap administratively, and then let the plug expire. By an order under section 119 dated 13 March 2024 it permitted successor companies whose reorganisation order was issued after 1 June 2016 but before 1 April 2022 to furnish a return with modified particulars for the relevant years in accordance with and limited to that order, using functionality on the e-filing portal and without a separate application under section 119(2)(b). The sequence required a communication to the Jurisdictional Assessing Officer by 30 April 2024, verification and enablement on the Department’s system preferably within thirty days, and electronic filing by 30 June 2024. Note what functionality the Board chose: the portal option is the one labelled as being under section 119(2)(b), after condonation of delay, the Board having condoned by general order so that no individual application was needed. That the Board routed the relief through exactly that provision is itself an argument against the view that section 119(2)(b) can have no application to a modified return.

Those dates have gone. A pre-2022 case surfacing now has no administrative route, and must be pressed on Dalmia Power and TSI Business Parks, by writ if the Department will not receive the return.

What did Dalmia Power actually decide?

Dalmia Power Ltd and another v. Assistant Commissioner of Income Tax, Circle 1, Trichy (Civil Appeal Nos. 9496 to 9499 of 2019, decided 18 December 2019, Indu Malhotra and Uday Umesh Lalit, JJ., reported (2020) 14 SCC 736) arose for AY 2016-17. Schemes of arrangement and amalgamation were sanctioned by the NCLT at Guwahati and Chennai across 2017 and 2018. Revised returns were filed on 27 November 2018, well beyond the 31 March 2018 due date under section 139(5). The Department refused to accept them and said the assessees should first have obtained condonation under section 119(2)(b).

The Supreme Court reversed the Division Bench of the Madras High Court and restored the single judge’s order. Four holdings carry forward.

The schemes attained statutory force inter partes and in rem, no objection having been raised by any statutory authority or by the Department within the prescribed thirty-day period, and on amalgamation the amalgamating companies lost their separate identity and character and ceased to exist upon the approval of the schemes.

Section 139(5) did not apply, because the revised returns “were not filed on account of an omission or wrong statement or omission contained therein”; they followed from the time taken to obtain sanction.

It was, in the Court’s words, “an impossibility for the assessee companies to have filed the revised Returns of Income for the A.Y. 2016-2017 before the due date of 31.03.2018, since the NCLT had passed the last orders granting approval and sanction of the Schemes only on 22.04.2018 and 01.05.2018”.

And section 119(2)(b) was not the route, for the reason quoted earlier.

The operative direction was that the Department receive the revised returns and complete the assessment after taking the schemes into account. The Court grounded the successor’s obligation in section 170(1).

One citation warning, because the error is in circulation: 418 ITR 242 is the Madras High Court Division Bench decision that the Supreme Court reversed. It is not the Supreme Court citation.

How do sections 170, 170(2A), 170A and 156A fit together?

Four provisions, two of them inserted by the same Finance Act, and they are regularly conflated.

Section 170 allocates who is assessed for which period. The predecessor is assessed for the income of the previous year up to the date of succession and the successor for the period after; where the predecessor cannot be found the assessment is made on the successor; and section 170(3) makes the successor liable where the sum cannot be recovered from the predecessor. It is an allocation and recovery provision.

Section 170(2A), inserted with effect from 1 April 2022, reads:

Notwithstanding anything contained in sub-sections (1) and (2), where there is succession, the assessment or reassessment or any other proceedings, made or initiated on the predecessor during the course of pendency of such succession, shall be deemed to have been made or initiated on the successor and all the provisions of this Act shall, so far as may be, apply accordingly.

Three points of accuracy, each of which published commentary gets wrong. The enacted provision says “succession”, not “business reorganisation”, so its scope is wider than section 170A, which is confined to amalgamation, demerger and merger. It says “made or initiated”, so both the initiation of a proceeding against the predecessor and its completion are covered. And the deeming is confined to the “pendency” window defined in the Explanation, which begins when the application is filed before the High Court or tribunal or the insolvency application is admitted, and ends when the order is received by the Principal Commissioner or the Commissioner.

That closing date is the boundary of the provision on its own terms, though no decision has yet construed it. On the language, section 170(2A) does not validate a proceeding initiated after the Department has the order. A proceeding initiated during pendency is a different matter: it may be completed afterwards and the deeming still bites, which is the mid-stream case the provision was written for. So the sub-section protects the Revenue mid-stream and no further, which is why an assessment initiated in the name of a dissolved company once the Department knows of the amalgamation remains a nullity. Consistently with that, ITAT Kolkata quashed assessments as void ab initio in Happy Suppliers Pvt Ltd v. ACIT (ITA Nos. 2577 and 2578/Kol/2025, order of 12 February 2026) even though the amalgamation had been brought to the Department’s notice by filing Form ITR-A under section 170A, although the Tribunal decided the case on the non-existent-entity principle and did not address section 170(2A). A modified return is not a cure for a jurisdictional defect, and the two questions should never be run together. That subject is dealt with separately in assessment framed on a company that no longer exists.

Section 170A is the successor’s vehicle. It does not validate anything; it obliges the successor to put the scheme on record and obliges the Assessing Officer to give effect to it.

Section 156A is confined to the demand side and to insolvency. It applies only where a sum in respect of which a notice of demand has been issued is reduced as a result of an order of the Adjudicating Authority under the Insolvency and Bankruptcy Code. It does not apply to an order of a High Court or the NCLT sanctioning a scheme of amalgamation or demerger under sections 230 to 232 of the Companies Act 2013. So where a scheme reduces the liability for a year in which a demand is outstanding, there is no express provision modifying the demand: the route is the modifying order under section 170A(2)(a), followed by consequential rectification. The insolvency side is dealt with in what happens to a tax demand when a resolution plan is approved.

Note the mismatch this produces. Section 170A covers both scheme orders and insolvency orders. Section 170(2A) covers both. Section 156A covers only insolvency, and only demands. The gap is on the demand side of a scheme merger.

Can the Department run a parallel assessment on the predecessor?

No. Visionary RCM Infotech (India) Private Limited v. DCIT (W.P. Nos. 1882 and 1888 of 2024, decided 12 December 2025) is directly on the point. The transferor had amalgamated into another company under an NCLT-sanctioned scheme and the transferee had filed the modified return under section 170A on 30 November 2022, within the time allowed by the Board’s order of 26 September 2022. The Department nonetheless passed a draft assessment order in December 2023 and a giving-effect order against the transferor, which had ceased to exist.

The Madras High Court held that the purpose of section 170A would be defeated by independent proceedings against the transferor, and that the result would be two demands, one against a non-existent transferor and one against the transferee that had filed the modified return. The draft assessment order and the giving-effect order were quashed, with a direction to the Transfer Pricing Officer to pass a fresh order on merits.

The same instinct appears in Pallava Textiles, where the Court would not countenance the Assessing Officer examining the standalone returns of the assessee, and the standalone and consolidated returns of the merged entity, for different purposes.

Can a modified return reduce income, and what about refunds?

The section does not say, and the cases show movement in both directions. In Technoforce Solutions the income came down, from Rs 5,32,85,870 to Rs 5,26,82,860. In CreditAccess Grameen it went up. Neither Court treated the direction as relevant, and the words “in accordance with and limited to the said order” are direction-neutral: if the scheme produces a lower figure, the lower figure is what the order requires.

Whether interest under section 244A runs on a refund generated by a modified return has not been decided, and the answer is not obvious given that the original return was correct when filed.

Indus Valley Partners deals with a related obstruction. The Dispute Resolution Panel had refused to examine a claim in a modified return on the ground that it was not a variation contemplated by section 144C(1). ITAT Mumbai held that a valid modified return has to be considered in accordance with law and subject to the limits of the order, and directed the Assessing Officer to verify the return filed on 30 April 2023 and recompute the income accordingly. A modified return does not fall into a procedural crack between the Assessing Officer and the Panel.

Is the resulting assessment open to revision?

Yes, on ordinary principles. CreditAccess Grameen Limited v. PCIT (ITA No. 341/Bang/2026, order of 7 July 2026) concerned AY 2022-23, where the NCLT had approved an amalgamation by order of 7 February 2023 with retrospective effect from 1 April 2020, and the modified return was filed on 26 August 2023. The Principal Commissioner issued a notice under section 263 in July 2025 and passed a revision order in November 2025.

ITAT Bangalore quashed the revision, holding that the Assessing Officer had examined the claim under section 80JJAA during the assessment and that once such enquiry is evident from the assessment record, the mere absence of an elaborate discussion in the assessment order does not make the order erroneous. The Tribunal also accepted that section 170A permits a modified return only to give effect to the order of business reorganisation, so that reports already filed need not be furnished again where the claim has not substantively changed.

The proposition to take from it is narrow but useful: the fact that an order was passed on a modified return does not by itself expose it to revision, and the giving-effect exercise is procedural.

What is the position under the Income-tax Act, 2025?

The provision is section 314, with the same marginal note, “Effect of order of tribunal or court in respect of business reorganisation”. Sub-section (1) reads:

Irrespective of anything to the contrary contained in section 263, if prior to the date of order in respect of business reorganisation, any return of income has been furnished under the provisions of the said section by an entity for any tax year to which such order applies, the successor shall furnish, within six months from the end of the month in which the order was issued, a modified return in such form and manner, as may be prescribed, in accordance with and limited to the said order.

Sub-section (2) keeps the completed-and-pending split in clauses (a) and (b). Sub-section (3) preserves the rest of the Act and the rate for the tax year. Sub-section (4) contains three definitions rather than two: “business reorganisation” in the same terms; “order in respect of business reorganisation”, now expressed rather than left as a mid-sentence parenthetical; and “successor”, still confined to all resulting companies in a business reorganisation, whether or not the company was in existence prior to it.

Three drafting matters are worth stating precisely.

The 2025 Act’s non-obstante formula is “irrespective of anything to the contrary contained in”, not “notwithstanding anything”, and secondary sources routinely misquote it. The clause here runs against section 263 of the 2025 Act, which is the return-of-income provision, and must not be confused with section 263 of the 1961 Act, which is revision by the Commissioner.

“Previous year” and “assessment year” become “tax year” throughout.

And the gaps survive. There is still no condonation power for the six-month window and still no express limitation for the order on a completed assessment. Everything said above about those two questions applies equally after 1 April 2026.

On the rules, Form ITR-A remains in use, but the operative rule number under the Income-tax Rules, 2026 should be confirmed on the portal or against the notified rules before it is cited. The draft rules published before notification were renumbered, and a rule number taken from the draft will be wrong.

One transitional point deserves attention because it is easy to get backwards. Section 536(2)(c) of the 2025 Act provides that the repealed Act continues to apply not only to proceedings pending on 1 April 2026 but also to proceedings initiated on or after that date in respect of any tax year beginning before it, and that such proceedings are to be carried out as per the procedure specified in the repealed Act. So for a scheme whose appointed date and affected years fall before 1 April 2026, section 170A and rule 12AD continue to govern, even where the order issues afterwards. Section 314 is not the provision for a 2024-25 year merely because the NCLT signed the order in 2026. Which statute governs a given proceeding is addressed more fully in which Act governs an appeal filed today.

How should the modified return be built?

Six things, in order.

Fix the date the clock starts, and calendar the outer date on the day the order is received. Six months from the end of the month of issue, not of receipt. If two benches sanctioned the scheme, calendar from the earlier order and treat the later one as an argument, not a plan.

Confirm which version of the section governs. If the order was issued before 1 April 2022, section 170A is not the route and Dalmia Power is. If it was issued between 1 April 2022 and 31 March 2023, the section had no Assessing Officer machinery, and any giving-effect order passed in reliance on rule 12AD alone is open to challenge.

Establish, for each affected year, whether the assessment was complete or pending on the date the modified return is furnished. That single fact decides which limb applies and therefore what the officer may lawfully do next. Record it contemporaneously, with the intimation or order that completed the assessment.

Keep the return inside the scheme. Anything in Form ITR-A that does not follow from the order is outside “in accordance with and limited to”, and invites the argument that the return is something other than a modified return.

Preserve the filing trail. If the portal will not accept the form, capture the error, write to the Assessing Officer, file physically, and keep the acknowledgement. Pallava Textiles turned on an email.

Deal with the predecessor’s PAN and TDS credits separately and early. Surrender or cancellation of the amalgamating company’s PAN, on the record, is cheap. Its absence is what keeps an Assessing Officer in ignorance, and ignorance is what produces both parallel assessments on the predecessor and the far more damaging argument that the successor never told him anything.

And if a notice under section 143(2) or 142(1) arrives after the modified return on a year that was already assessed, the answer is Technoforce Solutions, and it is a jurisdictional answer rather than a plea for indulgence.

Related reading on this site: the provision page for section 170A; what happens to a tax demand when an insolvency resolution plan is approved, under section 156A; assessment framed on a company that no longer exists; and, on the transactions that fall outside section 170A, conversion of a firm, company or LLP and slump sale taxation.

This note is general commentary on the law as at 27 September 2026 and is not advice on any matter. The position in a particular case depends on its own facts.