Tribunal Rules Reassessment Invalid Due to Concurrent Scrutiny and Failure to Address Assessee's Objections
The Income Tax Appellate Tribunal (ITAT) Delhi Bench "D" has quashed the reassessment proceedings initiated against Lalit Kumar Modi for the Assessment Year 2010-11. The bench, comprising Judicial Member Shri Vikas Awasthy and Accountant Member Shri Brajesh Kumar Singh, ruled that the reassessment proceedings under Section 147/148 of the Income Tax Act, 1961, were invalid as they were initiated during the pendency of regular scrutiny assessment proceedings under Section 143(3).
The tribunal also found that the Deputy Commissioner of Income Tax failed to address the objections raised by the assessee against the reopening of the assessment, which is a violation of the principles laid down by the Supreme Court in the GKN Driveshafts (India) Ltd. case. This failure rendered the reassessment proceedings null and void.
The case, ITA No.1636/DEL of 2023, involved significant additions to Modi's income, including unexplained expenditures by credit cards, disallowance of lease rental and fuel expenses for a private jet, and liabilities of Golden Wings Pvt. Ltd. totaling over Rs. 20 crore. However, with the quashing of the reassessment proceedings, these additions have become academic.
In its order dated March 6, 2026, the tribunal emphasized that reassessment proceedings cannot run concurrently with regular scrutiny assessments, citing the Delhi High Court's ruling in KLM Royal Dutch Airlines v. Asst. DIT, which prohibits parallel assessment proceedings under the Act.
The decision marks a significant win for Lalit Kumar Modi, represented by Senior Advocate Shri Sachit Jolly and his team, who argued against the jurisdictional validity of the reassessment and the procedural lapses by the tax department.
The tribunal's ruling underscores the necessity for tax authorities to adhere strictly to procedural requirements, especially when initiating reassessment proceedings, ensuring that all objections by the assessee are duly considered and resolved.
Bottom Line:
Reassessment proceedings under Section 147/148 of the Income Tax Act cannot be initiated during the pendency of regular scrutiny assessment proceedings under Section 143(3). Additionally, failure to decide objections raised by the assessee against reopening of assessment renders such reassessment proceedings invalid.
Statutory provision(s): Section 143(3), Section 147, Section 148, Income Tax Act, 1961
