The Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings initiated against businessman Lalit Kumar Modi for Assessment Year 2010–11, holding that reassessment under Sections 147/148 of the Income Tax Act cannot be initiated while regular scrutiny proceedings under Section 143(3) are still pending.
The Tribunal, comprising Judicial Member Vikas Awasthy and Member Brajesh Kumar Singh, observed that the Assessing Officer had issued a notice under Section 148 during the pendency of scrutiny proceedings that had already been initiated through a notice under Section 143(2). The Bench held that such parallel proceedings are impermissible under the scheme of the Act and therefore the reassessment lacked jurisdiction.
According to the record, the assessee had filed his return declaring an income of ₹54.81 lakh, which was selected for scrutiny. During the pendency of the scrutiny assessment, the Assessing Officer issued a notice under Section 148 and later completed the assessment determining the income at ₹20.12 crore. The reassessment involved additions including alleged unexplained credit card expenditure, lease rental and fuel expenses relating to a private jet, and liabilities connected with a company.
The Tribunal noted that the reassessment proceedings were initiated despite the ongoing scrutiny assessment, and further observed that the Assessing Officer completed the reassessment without deciding the objections filed by the assessee against the reopening of the assessment.
Relying on the Supreme Court’s ruling in GKN Driveshafts (India) Ltd. v. ITO, 259 ITR 19 (SC), the Tribunal held that the Assessing Officer is required to dispose of objections raised by the assessee against reopening before proceeding with reassessment. The Bench also referred to the Delhi High Court’s decision in KLM Royal Dutch Airlines v. Assistant DIT, 292 ITR 49 (Del.), which clarified that reassessment proceedings cannot be initiated when regular assessment proceedings are already pending.
In view of these jurisdictional defects, the Tribunal concluded that the reassessment order was without authority of law and therefore liable to be quashed. Since the assessee succeeded on the jurisdictional issue, the Tribunal held that the grounds on the merits of additions had become academic and did not require adjudication.
Accordingly, the appeal filed by the assessee was allowed and the reassessment order set aside.
Appearances:
For the Appellant: Shri Sachit Jolly, Sr. Advocate with Ms. Sherry Goyal, S/Shri Viyusti Rawat & Sarthak Abral, Advocates
For the Respondent: Shri M.S Nethrapal, CIT-DR
