The Income Tax Appellate Tribunal (ITAT/ Tribunal) has quashed a reassessment order against former IPL commissioner Lalit Kumar Modi with respect to his taxable income for the assessment year 2010–11 [Lalit Modi Vs DCIT].
The reassessment had increased his taxable income from ₹54.81 lakh to ₹20.12 crore over unexplained credit card spending of ₹4.24 crore, private jet lease rental and fuel expenses of ₹9.65 crore and liabilities of ₹5.66 crore linked to entity Golden Wings Pvt Ltd.
However, the ITAT held that the reassessment proceedings initiated by the Income Tax Department were without jurisdiction as they were launched while regular scrutiny assessment proceedings were still pending.
"To sum up, in the first place the action of the AO in initiating reassessment proceedings u/s.148/147 of the Act during pendency of scrutiny assessment u/s. 143(3) of the Act is without jurisdiction. Hence, such assessment order passed u/s.148/147 of the Act is null and void. Further, the assessment is also liable to be quashed on the ground that the assessment order has been passed without deciding objections of the assessee i.e. in violation of the law expounded by Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd," the ITAT held.
A Bench comprising Judicial Member Vikas Awasthy and Accountant Member Brajesh Kumar Singh also found that the Assessing Officer had completed the reassessment without deciding the taxpayer’s objections to the reopening, in violation of the procedure laid down by the Supreme Court.
Modi had filed his income tax return for the assessment year 2010–11 declaring income of ₹54.81 lakh. The return was selected for scrutiny and a notice under Section 143(2) of the Income Tax Act was issued in July 2011.
However, during the pendency of the scrutiny proceedings, the assessing officer issued a notice under Section 148 in March 2012 to reopen the assessment on the ground that certain income had escaped assessment.
The reassessment proceedings culminated in an order dated March 28, 2013 determining Modi’s total income at ₹20.12 crore. The additions were primarily based on alleged unexplained expenditure through credit cards, expenses relating to lease rental and fuel for a private jet, and liabilities connected to Golden Wings Pvt Ltd.
Modi moved ITAT challenging the validity of the reassessment. He argued that the tax department had initiated reopening proceedings while regular scrutiny assessment proceedings were still underway.
The Tribunal agreed with Modi's argument. It held that parallel assessment proceedings are impermissible under the Income Tax Act. Once scrutiny assessment proceedings have begun, the assessing officer must first conclude them before resorting to reassessment provisions.
The ITAT also noted that Modi had filed detailed objections to reopening of the assessment. However, the assessing officer completed the reassessment without disposing of those objections.
The department itself later acknowledged during appellate proceedings that there was no record indicating whether the objections had been decided.The Tribunal held that this was contrary to the law laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO, which requires tax authorities to first decide objections to reassessment before proceeding further.
In light of these procedural lapses, theITAT ruled that the reassessment order lacked jurisdiction and was quashed the same.
Since Modi succeeded on the jurisdictional issue, the ITAT did not examine the merits of the tax additions relating to credit card expenditure, private jet expenses and liabilities of Golden Wings Pvt Ltd.
Modi was represented by Senior Advocate Sachit Jolly with advocates Sherry Goyal, Viyusti Rawat and Sarthak Abral
Revenue was represented by Commissioner of Income Tax (Departmental Representative), MS Nethrapal.
[Read Judgment]