The Income Tax Appellate Tribunal annulled a reassessment order against Lalit Kumar Modi for AY 2010–11 that had raised his taxable income from Rs 54.81 lakh to Rs 20.12 crore, citing unexplained credit card spending, private jet lease and fuel costs, and Golden Wings liabilities.
The Income Tax Appellate Tribunal (ITAT) has annulled a reassessment order concerning former IPL commissioner Lalit Kumar Modi‘s taxable income for the assessment year 2010–11.
The reassessment had escalated his taxable income from Rs 54.81 lakh to Rs 20.12 crore, citing unexplained credit card expenditures of Rs 4.24 crore, private jet lease rentals and fuel costs amounting to Rs 9.65 crore, along with liabilities of Rs 5.66 crore tied to Golden Wings Pvt Ltd.
However, the ITAT determined that the reassessment proceedings initiated by the Income Tax Department lacked jurisdiction as they were undertaken while regular scrutiny assessment proceedings were still active.
The ITAT declared,
“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,”
A Bench composed of Judicial Member Vikas Awasthy and Accountant Member Brajesh Kumar Singh also observed that the Assessing Officer had finalized the reassessment without addressing the taxpayer’s objections to the reopening, contravening the procedural guidelines set by the Supreme Court.
Modi had submitted his income tax return for the 2010–11 assessment year, declaring an income of Rs 54.81 lakh, which was selected for scrutiny, prompting a notice under Section 143(2) of the Income Tax Act in July 2011.
However, during the ongoing scrutiny proceedings, the assessing officer issued a notice under Section 148 in March 2012, aiming to reopen the assessment due to allegations that certain income had escaped assessment.
The reassessment process concluded with an order dated March 28, 2013, which revised Modi’s total income to ₹20.12 crore. The increases were largely based on claims of unexplained credit card expenditures, costs associated with a private jet lease, and liabilities related to Golden Wings Pvt Ltd.
Modi appealed to the ITAT, challenging the legitimacy of the reassessment. He contended that the tax department commenced reopening procedures while regular scrutiny assessments were still in progress.
The Tribunal concurred with Modi’s assertion, stating that simultaneous assessment proceedings are not permissible under the Income Tax Act. Once a scrutiny assessment has commenced, the assessing officer must first complete it before invoking reassessment provisions.
The ITAT also noted that Modi submitted comprehensive objections regarding the reassessment. Yet, the assessing officer proceeded with the reassessment without addressing these objections.
ALSO READ: Income Tax Dept Can’t Compel Lender PAN Disclosure: Madras High Court
The department later acknowledged during the appellate proceedings that there was no documentation indicating whether the objections had been resolved. The Tribunal maintained that this approach contradicted the Supreme Court’s ruling in GKN Driveshafts (India) Ltd. v. ITO, which mandates that tax authorities must first resolve objections to reassessment before advancing further.
Due to these procedural inconsistencies, the ITAT ruled that the reassessment order lacked jurisdiction and subsequently annulled it.
Since Modi prevailed on the jurisdictional grounds, the ITAT chose not to delve into the merits of the tax increases linked to credit card spending, private jet expenditures, and liabilities of Golden Wings Pvt Ltd.
Modi was represented by Senior Advocate Sachit Jolly, along with advocates Sherry Goyal, Viyusti Rawat, and Sarthak Abral, while Commissioner of Income Tax (Departmental Representative), MS Nethrapal, represented the Revenue.
Case Title: Lalit Modi Vs DCIT
FOR MORE LEGAL UPDATES FOLLOW US ON YOUTUBE