Chapter XVI - Procedure for Assessment
Section 290
Section 290: modification and revision of notice in certain cases
Section 290 applies where an existing Section 289 demand on an assessee is reduced by an order of the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. The Assessing Officer must serve a modified demand notice stating the sum payable, if any, and revise it if the specified appellate authority modifies that order.
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Need advice on Section 290?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Where,—
(a) any tax, interest, penalty, fine or any other sum in respect of which a notice of demand has been issued earlier under section 289; and
(b) such tax, interest, penalty, fine or any other sum is reduced as a result of an order of the Adjudicating Authority as defined in section 5(1) of the Insolvency and Bankruptcy Code, 2016, the Assessing Officer shall serve on the assessee a modified notice of demand specifying the sum payable, if any, and such notice shall be treated as a notice under section 289 and the provisions of this Act shall accordingly apply in relation to such notice.
(2) The modified notice of demand as referred to in sub-section (1) shall be revised where the order referred to in sub-section (1)(b) is modified by the National Company Law Appellate Tribunal or the Supreme Court.
Introduction
Section 290 deals with a revised tax-demand notice when an Insolvency and Bankruptcy Code order reduces a sum already demanded under section 289.
A later change to that order by the appellate tribunal or Supreme Court requires the modified demand notice to be revised.
Key takeaways
An existing Section 289 demand is required
Section 290 applies when a demand notice was already issued for tax, interest, penalty, fine or another sum.
IBC order reduction changes the notice
If an Adjudicating Authority order reduces that sum, the Assessing Officer must serve a modified notice stating the sum still payable, if any.
Later appellate change requires revision
If the NCLAT or Supreme Court modifies the IBC order, the modified demand notice must be revised accordingly.
Modified notice of demand
Where a notice of demand has earlier been issued under section 289 for any tax, interest, penalty, fine or other sum, and that sum is reduced as a result of an order of the Adjudicating Authority (as defined in section 5(1) of the Insolvency and Bankruptcy Code, 2016), the Assessing Officer must serve a modified notice of demand on the assessee specifying the sum payable, if any.
This modified notice is treated as a notice under section 289, and the provisions of the Act apply to it accordingly.
Revising the modified notice
If the Adjudicating Authority's order is subsequently modified by the National Company Law Appellate Tribunal or the Supreme Court, the modified notice of demand must itself be revised.
When this provision applies
Match the existing Section 289 notice to the particular tax, interest, penalty, fine or other sum reduced by the Adjudicating Authority’s order. Starting insolvency proceedings or proposing a reduction is not itself the reduction specified in Section 290.
Read the operative order and identify the sum payable, if any, after its effect is applied. The Assessing Officer must serve the modified notice, which is treated as a Section 289 notice.
Limits and procedural safeguards
Do not assume every component of an earlier demand is reduced to nil merely because one part is affected by the insolvency order. Reconcile the actual scope and amount of the reduction.
A later NCLAT or Supreme Court modification requires revision of the modified notice. Keep the latest operative order and demand together rather than continuing to rely on an earlier reduction.
Step-by-step review
1. Obtain the original Section 289 demand and the relevant Adjudicating Authority order.
2. Identify each affected sum and calculate the amount remaining payable under that order.
3. Check service and content of the modified notice against the order.
4. Monitor any NCLAT or Supreme Court modification and reconcile the resulting revised notice.
Hypothetical example
Hypothetical illustration: an existing ₹10 lakh demand is reduced to ₹4 lakh by an order falling within Section 290. The modified notice should state the sum payable under that order, rather than continue the unchanged ₹10 lakh demand. If the specified appellate forum subsequently modifies the order, the notice must be revised accordingly.
Records to prepare
Original demand, component-wise computation and service records.
The complete Adjudicating Authority order and its operative directions.
Modified notice, any appellate order and the updated demand reconciliation.
Official amended Act source
Step-by-step flow for a modified demand under Section 290
- 1
Was a notice of demand issued earlier under Section 289?
- No: Section 290 does not apply.
- Yes: Go to the next step.
- 2
Has the sum been reduced by an order of the Adjudicating Authority?
The Adjudicating Authority is as defined in Section 5(1) of the Insolvency and Bankruptcy Code, 2016. Starting insolvency proceedings is not enough; there must be a reducing order.
- No: The earlier demand stands.
- Yes: Go to the next step.
- 3
Serve a modified notice of demand
Under Section 290(1), the Assessing Officer serves a modified notice specifying the sum payable, if any. It is treated as a notice under Section 289.
- 4
Has the National Company Law Appellate Tribunal or the Supreme Court modified the order?
Under Section 290(2), the modified notice must then be revised.
- Yes: A revised modified notice follows the appellate order.
- No: The modified notice stands.
Practical checklist
Do
- Keep the original section 289 demand and the Adjudicating Authority’s reduction order together.
- If an appellate order changes the reduction, request or check the revised demand notice against the latest order.
- Original demand, component-wise computation and service records.
- The complete Adjudicating Authority order and its operative directions.
- Modified notice, any appellate order and the updated demand reconciliation.
Avoid
- Continue using the original demand amount after an applicable insolvency order reduces it.
Illustrative example
Worked example: demand reduced in a resolution plan
Hypothetical facts (illustration only, not a real taxpayer): A company has an income-tax demand of ₹45 lakh under a Section 289 notice. In its insolvency proceedings, the Adjudicating Authority passes an order that reduces this to ₹12 lakh. On appeal, the National Company Law Appellate Tribunal modifies that order and the amount becomes ₹15 lakh. All amounts are assumed.
First condition
There was an earlier notice of demand under Section 289 for ₹45 lakh.
Reduction
The Adjudicating Authority's order reduces the sum by ₹45 lakh − ₹12 lakh = ₹33 lakh. The Assessing Officer serves a modified notice for ₹12 lakh, treated as a Section 289 notice.
Appellate change
The National Company Law Appellate Tribunal's order changes the amount to ₹15 lakh, so the modified notice is revised under Section 290(2).
Net position
The revised sum is ₹15 lakh, which is ₹3 lakh more than the first modified notice.
Outcome
- The company's demand follows the latest order: ₹15 lakh after the revision.
- Section 290 deals with the demand notice only. How the amount is fixed comes from the insolvency orders.
Glossary
- Modified demand
- The Section 290 notice reflecting the sum payable after the specified reduction.
- Appellate modification
- A change by NCLAT or the Supreme Court that requires revision under Section 290(2).
Frequently asked questions
What happens to an income-tax demand if the Adjudicating Authority under the IBC reduces it?
The Assessing Officer must serve a modified notice of demand specifying the reduced (or nil) sum payable, and this modified notice is treated as a fresh notice under section 289.
What if the insolvency order reducing the demand is later overturned on appeal?
Under Section 290(2), if the NCLAT or the Supreme Court modifies the Adjudicating Authority's order, the modified notice of demand must be revised again to reflect that.
Does the start of insolvency proceedings itself satisfy the reduction condition?
No. Identify an order of the specified Adjudicating Authority that reduces the sum covered by the earlier demand.
Must every demand component become nil?
No. The modified notice states the sum payable, if any, after applying the actual order.
Need help applying this provision to your situation?
Talk to our team about a demand notice affected by insolvency proceedingsLast updated 10 October 2026