Bombay High Court Quashes Fresh Scrutiny Of Thomson Reuters Over Modified Return Filed After Merger

The Bombay High Court on 8 September quashed the fresh scrutiny and transfer pricing proceedings initiated against Thomson Reuters International Services Private Limited for Assessment Year 2022-23.

A Division Bench of Justices B.P. Colabawalla and Farhan P. Dubash held that filing a modified return after a business reorganisation does not require a fresh assessment when proceedings for the same year are already pending. Under Section 170A(2)(b) of the Income Tax Act, the modified return must be considered as part of the pending assessment. The judges observed:

“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.”

The NCLT had approved the merger of Confirmation.com India Private Limited with Thomson Reuters. Following the merger, Thomson Reuters filed a modified return under Section 170A while its original assessment for AY 2022-23 was pending. The Income Tax Department subsequently issued a fresh notice under Section 143(2) for scrutiny, followed by a notice under Section 92CA(2) for transfer pricing proceedings.

The High Court observed that a draft assessment order does not conclude assessment proceedings. Proceedings before the Dispute Resolution Panel are a continuation of the assessment proceedings, which remain pending until the final assessment order is passed.

The Bench further noted that the Department had already considered the modified return while completing the original assessment. It held that a second scrutiny of the same return required a clear statutory basis, which the Revenue had failed to establish.

Accordingly, the High Court quashed the fresh Section 143(2) notice, the consequential Section 92CA(2) notice and all proceedings arising from them.

Appearances: Mr. P.J. Pardiwalla, Senior Advocate, with Mr. Paras Savla, Mr. Harsh Shah, Mr. Pratik Poddar and Ms. Rajnandini Shukla, appeared for the Petitioner. Mr. Vikas T. Khanchandani, with Mr. Siddharth Bhatia, appeared for the Respondents.