The Income Tax Appellate Tribunal has quashed reassessment proceedings initiated against Lalit Modi concerning his income for the assessment year 2010–11.
The reassessment conducted by the tax authorities had increased Modi’s reported income from about ₹54.81 lakh to nearly ₹20.12 crore. This revision was based on alleged unexplained expenditures, including credit card payments of around ₹4.24 crore, private jet lease and fuel expenses estimated at ₹9.65 crore, and liabilities worth approximately ₹5.66 crore related to a company named Golden Wings Pvt Ltd.
However, the Tribunal found that the reassessment proceedings were initiated improperly. According to the Bench, the Assessing Officer had invoked reassessment provisions under Sections 147 and 148 of the Income-tax Act, 1961 even though the regular scrutiny assessment under Section 143(3) was still underway. The Tribunal noted that reopening an assessment in such circumstances is not legally permissible.
The Bench also pointed out a procedural lapse by the tax department. It observed that the authorities had failed to dispose of the objections filed by Modi against the reopening of the assessment before passing the reassessment order, which is a mandatory procedural requirement.
Considering these deficiencies, the Tribunal held that the reassessment lacked legal validity and was therefore unsustainable. Consequently, the reassessment order that had significantly increased Modi’s taxable income was set aside.
The dispute arose after Modi had originally declared an income of ₹54.81 lakh in his tax return for the relevant year, which had already been selected for scrutiny by the tax authorities before the reassessment proceedings were initiated.