The Daily Star says a final deal for long-term target Falcao, 27, was discussed this week and is expected to be worth in the region of £40m.
Torres has flopped at Stamford Bridge since his British record £50m move from Liverpool two years ago. He was a huge favourite at Atletico where he began his career before moving to Anfield in 2007.
Boss Diego Simeone hinted last week that Atletico would welcome Torres back.
He said: "We were team-mates. I know how important he can be.
"Fernando knows about the club's history, what it means to play here and I don't need to speak about his ability.
"We have to wait for the season to end and decide which of the available players could come here and do a good job."