You signed an APA and filed a modified return under s.92CD. The Commissioner has now issued a s.263 notice on the old assessment order. Can he?
Not on this reasoning. Once a modified return is filed under the APA it has to be treated as a return filed under s.139, and the earlier return and earlier assessment order lose their efficacy for all practical purposes; a fresh assessment order is what has to be passed. Allowing the s.263 notice on the superseded order to run would make the APA and the modified return inconsequential, and nothing stops the Assessing Officer from taking the very same points while re-scrutinising the modified return. Both writ petitions were allowed and the show cause notices set aside.
Decided by the High Court (P. Sam Koshy J and Narsing Rao Nandikonda J) on 2025-06-19, reported as Writ Petition Nos. 32633 of 2024 and 32578 of 2024. It bears on section 92CD, section 92CD(1), section 92CD(3), section 92CC, section 263, section 139, section 154 of the Income Tax Act 1961, in Revision & Rectification and Assessment & Scrutiny matters.
It gives the practitioner a clean jurisdictional answer to a s.263 notice that arrives after an APA: the order sought to be revised is no longer the operative order. It is also candid about the limits of the relief, because the Court expressly leaves the Commissioner's points to be taken by the Assessing Officer in the fresh assessment under s.92CD(3). Use it to move the fight to the right forum, not to make the point disappear.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner is the transferee in an amalgamation, M/s. United Health Group Information Services Pvt. Ltd. having amalgamated with it. For assessment year 2017-18 the assessment order was passed on 26 March 2022 and was rectified on 3 September 2022, the rectification allowing MAT credit of Rs 21,28,50,670 brought in from the amalgamating company. A bilateral advance pricing agreement was entered into on 28 March 2023 and a modified return filed on 16 June 2023. On 14 October 2024 a show cause notice under s.263 was issued asking why the MAT credit should not be disallowed and recovered with interest. A companion petition concerned assessment year 2018-19. Both notices were challenged in writ.
Both writ petitions were allowed and the show cause notices set aside and quashed (para 20), with miscellaneous petitions closed and no order as to costs (para 21). The Court held at para 16 that on a plain reading of s.92CD(3), once a modified return under an APA is filed it has to be treated as a return filed under s.139, that the earlier return and the earlier assessment order 'will not be of much relevance any further and it would lose its efficacy for all practical purposes', and that 'a fresh assessment order is what is required to be passed and the Assessing Officer would be at liberty to scrutinize the modified return submitted and pass appropriate orders, which thereafter would be, either appealable or revisable'. At para 19 it held that permitting the notice to continue would render the APA and the modified return inconsequential, while nothing prevented the Assessing Officer from re-scrutinising the modified return as a s.139 return and passing a fresh order which may include the contents of the impugned notice. At para 18 it held that an order sanctioning a scheme of arrangement has statutory force, binds all concerned and operates as a judgment in rem.
The Court set out the sequence of dates at para 14 and reproduced s.92CD(3) at para 15, which requires the Assessing Officer, where assessment or reassessment for a covered year was completed before the time allowed for the modified return expired, to pass an order modifying the total income determined in that assessment having regard to and in accordance with the agreement. From that machinery the Court drew the consequence at para 16 that the earlier order is displaced and a fresh order is required, and that the fresh order, not the displaced one, is what may be appealed against or revised. At para 19 it tested the practical effect of allowing the s.263 notice to proceed against the rectified order of 3 September 2022 and found that even if that order were held erroneous it would be of no consequence given what had since happened, while the Commissioner's substantive objection could be taken up in the fresh assessment. The amalgamation point was decided on the binding character of a sanctioned scheme, the Court referring at para 17 to the Madras High Court's decision in Ponni Sugars (Erode) Ltd. v. Assistant Commissioner of Income-tax and summarising the position at para 18.
the said modified return has to be treated as the return filed under Section 139 of the Act
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Handle my notice → Ask a CA on WhatsAppNot on this reasoning. Once a modified return is filed under the APA it has to be treated as a return filed under s.139, and the earlier return and earlier assessment order lose their efficacy for all practical purposes; a fresh assessment order is what has to be passed. Allowing the s.263 notice on the superseded order to run would make the APA and the modified return inconsequential, and nothing stops the Assessing Officer from taking the very same points while re-scrutinising the modified return. Both writ petitions were allowed and the show cause notices set aside. This was decided by the High Court (P. Sam Koshy J and Narsing Rao Nandikonda J) and bears on section 92CD, section 92CD(1), section 92CD(3), section 92CC, section 263, section 139, section 154 of the Income Tax Act 1961. It is reported as Writ Petition Nos. 32633 of 2024 and 32578 of 2024. It gives the practitioner a clean jurisdictional answer to a s.263 notice that arrives after an APA: the order sought to be revised is no longer the operative order. It is also candid about the limits of the relief, because the Court expressly leaves the Commissioner's points to be taken by the Assessing Officer in the fresh assessment under s.92CD(3). Use it to move the fight to the right forum, not to make the point disappear. If it applies to you, the first step is this: Date the APA and the modified return and put both ahead of the s.263 notice in your reply.
The petitioner is the transferee in an amalgamation, M/s. United Health Group Information Services Pvt. Ltd. having amalgamated with it. For assessment year 2017-18 the assessment order was passed on 26 March 2022 and was rectified on 3 September 2022, the rectification allowing MAT credit of Rs 21,28,50,670 brought in from the amalgamating company. A bilateral advance pricing agreement was entered into on 28 March 2023 and a modified return filed on 16 June 2023. On 14 October 2024 a show cause notice under s.263 was issued asking why the MAT credit should not be disallowed and recovered with interest. A companion petition concerned assessment year 2018-19. Both notices were challenged in writ. The matter was decided on 2025-06-19 by the High Court (P. Sam Koshy J and Narsing Rao Nandikonda J). On those facts the High Court held as follows. Both writ petitions were allowed and the show cause notices set aside and quashed (para 20), with miscellaneous petitions closed and no order as to costs (para 21). The Court held at para 16 that on a plain reading of s.92CD(3), once a modified return under an APA is filed it has to be treated as a return filed under s.139, that the earlier return and the earlier assessment order 'will not be of much relevance any further and it would lose its efficacy for all practical purposes', and that 'a fresh assessment order is what is required to be passed and the Assessing Officer would be at liberty to scrutinize the modified return submitted and pass appropriate orders, which thereafter would be, either appealable or revisable'. At para 19 it held that permitting the notice to continue would render the APA and the modified return inconsequential, while nothing prevented the Assessing Officer from re-scrutinising the modified return as a s.139 return and passing a fresh order which may include the contents of the impugned notice. At para 18 it held that an order sanctioning a scheme of arrangement has statutory force, binds all concerned and operates as a judgment in rem.
The Court set out the sequence of dates at para 14 and reproduced s.92CD(3) at para 15, which requires the Assessing Officer, where assessment or reassessment for a covered year was completed before the time allowed for the modified return expired, to pass an order modifying the total income determined in that assessment having regard to and in accordance with the agreement. From that machinery the Court drew the consequence at para 16 that the earlier order is displaced and a fresh order is required, and that the fresh order, not the displaced one, is what may be appealed against or revised. At para 19 it tested the practical effect of allowing the s.263 notice to proceed against the rectified order of 3 September 2022 and found that even if that order were held erroneous it would be of no consequence given what had since happened, while the Commissioner's substantive objection could be taken up in the fresh assessment. The amalgamation point was decided on the binding character of a sanctioned scheme, the Court referring at para 17 to the Madras High Court's decision in Ponni Sugars (Erode) Ltd. v. Assistant Commissioner of Income-tax and summarising the position at para 18. In the words reproduced by the source cited on this page: "the said modified return has to be treated as the return filed under Section 139 of the Act" The decision followed or applied Ponni Sugars (Erode) Ltd. v. Assistant Commissioner of Income-tax (Madras High Court) — relied on for the binding effect of a sanctioned scheme of amalgamation (paras 17 to 18).
It was decided by the High Court on 2025-06-19 and is reported as Writ Petition Nos. 32633 of 2024 and 32578 of 2024. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 92CD, section 92CD(1), section 92CD(3), section 92CC, section 263, section 139, section 154, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Both writ petitions were allowed and the show cause notices set aside and quashed (para 20), with miscellaneous petitions closed and no order as to costs (para 21). The Court held at para 16 that on a plain reading of s.92CD(3), once a modified return under an APA is filed it has to be treated as a return filed under s.139, that the earlier return and the earlier assessment order 'will not be of much relevance any further and it would lose its efficacy for all practical purposes', and that 'a fresh assessment order is what is required to be passed and the Assessing Officer would be at liberty to scrutinize the modified return submitted and pass appropriate orders, which thereafter would be, either appealable or revisable'. At para 19 it held that permitting the notice to continue would render the APA and the modified return inconsequential, while nothing prevented the Assessing Officer from re-scrutinising the modified return as a s.139 return and passing a fresh order which may include the contents of the impugned notice. At para 18 it held that an order sanctioning a scheme of arrangement has statutory force, binds all concerned and operates as a judgment in rem. It arises in Revision & Rectification and Assessment & Scrutiny matters, on section 92CD, section 92CD(1), section 92CD(3), section 92CC, section 263, section 139, section 154 of the Income Tax Act 1961, and was decided by P. Sam Koshy J and Narsing Rao Nandikonda J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Plead that the order under revision has lost its efficacy because s.92CD(3) requires a fresh order modifying the total income in accordance with the agreement. Expect the same objection to reappear in the s.92CD(3) assessment and prepare the merits now; the Court expressly preserved that route. Where the item revised came in through an amalgamation, put the sanctioned scheme on record; the Court treated the sanction as a judgment in rem. Check whether the s.92CD(3) order has in fact been passed, since the relief here rests on that machinery having been set in motion.
Searched for later treatment; none was found. That is not the same as a source affirming it. Decided on 19 June 2025. Nothing applying, doubting or overruling it was found, and nothing was located about any special leave petition. The relief is in any event narrow: the Court quashed the notice but left the same objection open to the Assessing Officer under s.92CD(3), so the decision settles the forum rather than the merits. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in full to para 21, including the operative order. Two things a reader should carry away. The Court at para 14 describes the bilateral APA as having been entered into 'under Section 92CD(3) of the Act', which is loose: s.92CD(3) governs the officer's order after a modified return, while the agreement itself is entered into under s.92CC. Nothing turns on it in the reasoning. And the relief is expressly without prejudice to the department: para 19 records that nothing prevents the Assessing Officer from re-scrutinising the modified return and passing a fresh order which may include the very contents of the quashed notice. The substantive item in dispute, MAT credit inherited on amalgamation, was never adjudicated on its merits. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both writ petitions were allowed and the show cause notices set aside and quashed (para 20), with miscellaneous petitions closed and no order as to costs (para 21). The Court held at para 16 that on a plain reading of s.92CD(3), once a modified return under an APA is filed it has to be treated as a return filed under s.139, that the earlier return and the earlier assessment order 'will not be of much relevance any further and it would lose its efficacy for all practical purposes', and that 'a fresh assessment order is what is required to be passed and the Assessing Officer would be at liberty to scrutinize the modified return submitted and pass appropriate orders, which thereafter would be, either appealable or revisable'. At para 19 it held that permitting the notice to continue would render the APA and the modified return inconsequential, while nothing prevented the Assessing Officer from re-scrutinising the modified return as a s.139 return and passing a fresh order which may include the contents of the impugned notice. At para 18 it held that an order sanctioning a scheme of arrangement has statutory force, binds all concerned and operates as a judgment in rem.
TaxSphere, “Optum Global Solutions India Pvt Ltd v PCIT”, https://taxnotice.vittsphere.com/caselaw/case/optum-global-solutions-92cd-modified-return-displaces-the-earlier-order-and-263/ (validity last checked 2026-09-16)
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I signed an APA with rollback and filed a modified return under s.92CD offering additional income. The officer says the proviso to s.92C(4) bars any Chapter III deduction on that extra income. Is he right?
My APA was signed after the assessment and I filed a modified return under s.92CD(1) offering a smaller figure. The officer has levied s.270A penalty on the pre-APA assessed income. Is there anything I can do about it now?
Your client offered a transfer pricing adjustment itself because its APA required it. The officer says s.92C(4) bars the s.10AA exemption on that extra income. Is he right?
Your APA year has been reopened and the officer has himself re-examined whether you complied with the APA. Can he do that without a compliance audit by the Transfer Pricing Officer?
