ITAT Delhi Quashes Reassessment Against Lalit Modi Over Credit Card, Private Jet Expenses

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings initiated against former IPL commissioner Lalit Kumar Modi over alleged unexplained credit card expenditure and private jet costs. The tribunal held that reassessment cannot be initiated while regular scrutiny assessment proceedings are still pending.

A bench of Judicial Member Vikas Awasthy and Accountant Member Brajesh Kumar Singh held that the reassessment was without jurisdiction. It observed that initiating reassessment in such circumstances amounted to impermissible parallel proceedings.

The tribunal also held that the assessment order was liable to be quashed because the Assessing Officer (AO) completed the reassessment without disposing of the assessee's objections to reopening. This violated the procedure mandated by the Supreme Court in GKN Driveshafts (India) Ltd.

Modi had filed his income tax return for AY 2010–11 declaring income of Rs 54.81 lakh. The return was selected for scrutiny, and a notice was issued under Section 143(2) of the Income Tax Act. This provision deals with scrutiny of a return to determine the correct taxable income.

During the pendency of these proceedings, the AO issued a notice under Section 148 on March 29, 2012. This provision permits the reopening of an assessment where income is believed to have escaped taxation.

The reasons recorded for reopening referred to information from a survey report. The report mentioned foreign currency credit card transactions undertaken during the relevant period.

The AO later completed the reassessment on March 28, 2013. The total income was determined at ₹20.12 crore.

The additions included disallowance of alleged unexplained credit card expenditure. They also included lease rental and fuel expenses of a private jet, as well as liabilities relating to Golden Wings Pvt. Ltd.

Modi filed objections to the reopening on March 22, 2013. However, during appellate proceedings, the department acknowledged in a remand report that no record was available to show that the objections had been disposed of by the AO.

The tribunal noted that the reassessment order was based on the same material recorded in the reasons for reopening. This included the alleged credit card expenditures.

It rejected the department's argument that scrutiny and reassessment proceedings could run simultaneously and later merge.

The bench observed, “The legal position with regard to validity of two parallel assessment proceedings one u/s 143(3) and other u/s 147/148 of the Act is very clear. There cannot be two concurrent assessment proceedings. Reassessment proceedings u/s 147/148 of the Act cannot be initiated when regular assessment proceedings u/s 143(3) of the Act are still pending.”

Since the jurisdictional challenge succeeded, the tribunal did not examine the additions on merits.

For Appellants: Senior Advocate Sachit Jolly with Advocates Sherry Goyal, Viyusti Rawat and Sarthak Abral

For Respondents: M.S. Nethrapal, CIT-DR