ITAT quashes reassessment of Lalit Modi’s income over credit card spending

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. The reassessment had increased his taxable income from Rs 54.81 lakh to Rs 20.12 crore over unexplained credit card spending of Rs 4.24 crore, private jet lease rental and fuel expenses of `9.65 crore and liabilities of Rs 5.66 crore linked to the entity Golden Wings Pvt Ltd.

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 the pendency of scrutiny assessment u/s. 143(3) of the Act is without jurisdiction.

“Hence, such an 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 the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd,” said the ITAT order.

The 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 Rs 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.