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CMA Final · Direct Tax Laws and International Taxation · Assessment of Companies

Under section 314 of the Income-tax Act, 2025, an order of business reorganisation applies to a tax year whose assessment was still pending when the successor furnished the modified return. Which statement is correct?

The Assessing Officer passes an order assessing or reassessing the total income in accordance with the reorganisation order and the modified return. Section 314(2)(b) covers pending proceedings, while the separate modifying order applies only to completed assessments, and rates are those of the relevant tax year.

  1. AThe Assessing Officer assesses the total income as per the reorganisation order, taking into account the modified returnCorrect
  2. BThe Assessing Officer must first complete the original assessment and then pass a separate modifying order
  3. CThe pending assessment lapses and no further assessment may be made
  4. DThe tax is chargeable at the rates applicable in the tax year in which the order was issued

Explanation

Section 314(2)(b) says that where proceedings are pending on the date of the modified return, the Assessing Officer passes an order assessing or reassessing total income as per the reorganisation order, considering the modified return. The modifying-order route applies to completed assessments under clause (a). Section 314(3) applies the rates of the relevant tax year, not the order year.

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