ITAT invalidates Tax Reopening against Lalit Modi over Credit Card and Private Jet Expenditure

On Friday, in a sharp intervention concerning the limits of tax reassessment powers, the Income Tax Appellate Tribunal (ITAT) stepped in to examine the legality of proceedings initiated against former IPL commissioner Lalit Kumar Modi over alleged undisclosed spending on credit cards, private jet expenses, and corporate liabilities. The dispute centered on whether the Income Tax Department could reopen Modi’s assessment for the 2010–11 assessment year even while regular scrutiny proceedings were still underway, raising a critical question about the permissibility of parallel tax assessments.

The controversy began when Lalit Modi filed his income tax return for the assessment year 2010–11, declaring an income of Rs 54.81 lakh, following which the return was selected for scrutiny and a notice under Section 143(2) of the Income Tax Act was issued. However, before the scrutiny process reached its conclusion, the Assessing Officer issued a separate notice under Section 148 of the Income Tax Act seeking to reopen the assessment on the premise that certain income had escaped taxation.

The reassessment later expanded Modi’s taxable income dramatically to Rs. 20.12 crore, primarily on the basis of alleged unexplained credit card transactions, lease and fuel expenses linked to a private jet, and liabilities tied to Golden Wings Pvt. Ltd. Modi challenged the move before the Tribunal, arguing that the reopening itself was legally flawed since the scrutiny assessment had not yet concluded and that the tax authorities had also failed to decide his objections to the reassessment.

The Bench, comprising Judicial Member Vikas Awasthy and Accountant Member Brajesh Kumar Singh, found serious procedural defects in the department’s approach. The Tribunal held that the Assessing Officer had initiated reassessment proceedings even though scrutiny assessment proceedings were still pending, an action it found legally impermissible.

The Bench observed that “reassessment proceedings… cannot be initiated during pendency of regular scrutiny assessment proceedings,” noting that the officer must first complete the ongoing scrutiny process. The Tribunal also recorded that the reassessment order had been passed without disposing of the taxpayer’s objections, contrary to the Supreme Court’s mandate in GKN Driveshafts (India) Ltd. vs Income Tax Officer and Ors.

As a result, the Bench concluded that the reassessment lacked jurisdiction and declared the order “null and void,” ultimately quashing the assessment.

Case Title: Lalit Kumar Modi, Vs. Deputy Commissioner of Income Tax,

Case No.: ITA No.1636/DEL/2023

Coram: Judicial Member Vikas Awasthy, Accountant Member Brajesh Kumar Singh,

Advocate for the Petitioner: Sr. Adv. Sachit Jolly, Adv. Sherry Goyal, Adv. Viyusti Rawat, Adv. Sarthak Abral, 

Advocate for the Respondent: CIT-DR. M.S Nethrapal,

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