The income tax appellate tribunal (ITAT) has set aside a reassessment
order passed against former Indian Premier League (IPL) commissioner Lalit Kumar Modi pertaining to his taxable income for FY10-11, ruling that the reassessment proceedings were fundamentally flawed on jurisdictional grounds.
The reassessment in question had sought to substantially revise Mr Modi's declared taxable income upward — from ₹0.55 crore to ₹20.12 crore — on account of alleged unexplained expenditure amounting to ₹4.24 crore incurred through credit card transactions, lease rental and fuel costs of ₹9.65 crore associated with a private jet, and liabilities worth ₹5.66 crore traced to an entity called Golden Wings Pvt Ltd.
ITAT, constituted by a bench of judicial member Vikas Awasthy and accountant member Brajesh Kumar Singh, held that the income-tax (I-T) department had acted beyond its jurisdiction in initiating the reassessment proceedings. The tribunal's primary finding was that the reassessment notice under Section 148 of the Income Tax Act had been issued in March 2012 while regular scrutiny assessment proceedings under Section 143(3) were still actively pending — a course of action the tribunal deemed entirely impermissible under the law.
Mr Modi had originally filed his I-T return for FY10-11 declaring an income of ₹0.55 crore. The return was subsequently selected for scrutiny and a notice under Section 143(2) was duly served in July 2011. However, even as those scrutiny proceedings remained ongoing and unresolved, the assessing officer chose to simultaneously invoke reassessment provisions by issuing a fresh notice under Section 148 in March 2012, alleging that certain income had escaped assessment. This parallel proceeding ultimately culminated in an assessment order dated 28 March 2013, fixing Modi's total income at ₹20.12 crore.
Before ITAT, Mr Modi challenged the very foundation of the reassessment, contending that the tax authorities could not legally initiate reassessment proceedings while a regular scrutiny was still underway. The tribunal upheld this contention, reaffirming the established legal position that once scrutiny assessment proceedings have been set in motion, the assessing officer is duty-bound to bring them to conclusion before having any recourse to reassessment provisions. Conducting both proceedings simultaneously, the Tribunal ruled, renders the reassessment order null and void ab initio.
A second and equally significant procedural infirmity also weighed heavily on the tribunal's decision. Modi had filed detailed objections against the reopening of his assessment, as he was entitled to do under law. However, the assessing officer proceeded to finalise the reassessment order without addressing or disposing of those objections whatsoever. Notably, during the course of appellate proceedings, the revenue department itself conceded that there was no record to demonstrate that these objections had ever been considered. ITAT held this to be a direct violation of the procedure mandated by the Supreme Court in the landmark case of GKN Driveshafts (India) Ltd vs ITO, which unequivocally requires tax authorities to first adjudicate upon an assessee's objections to reassessment before proceeding any further.
Having found two independent and fatal jurisdictional defects in the reassessment — the impermissibility of parallel proceedings and the failure to decide objections — the tribunal quashed the reassessment order in its entirety. As Mr Modi prevailed on these threshold jurisdictional grounds, the ITAT did not find it necessary to examine the substantive merits of the additions made in respect of the credit card expenditure, private jet expenses, and the liabilities connected to Golden Wings Pvt Ltd.
Mr Modi was represented before the tribunal by senior advocate Sachit Jolly, accompanied by advocates Sherry Goyal, Viyusti Rawat, and Sarthak Abral. The revenue was represented by commissioner of income tax (departmental representative) MS Nethrapal.
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