The Delhi Bench “D” of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings against Lalit Kumar Modi for Assessment Year 2010-11. The Tribunal held that the Assessing Officer could not invoke Sections 147/148 of the Income Tax Act, 1961 while scrutiny proceedings under Section 143(3) were still pending. It also held that the assessment order could not survive because the officer failed to decide the assessee’s objections to reopening before passing the order.
The order was passed on March 6, 2026 by a Bench of Judicial Member Vikas Awasthy and Accountant Member Brajesh Kumar Singh in Lalit Kumar Modi v. Deputy Commissioner of Income Tax, ITA No.1636/DEL/2023 (A.Y. 2010-11).
Senior Advocate Sachit Jolly appeared for Lalit Kumar Modi along with Sherry Goyal, Viyusti Rawat and Sarthak Abral, Advocates. M.S. Nethrapal, CIT-DR, represented the Revenue.
Background
The appeal arose from an order dated March 29, 2023 passed by the Commissioner of Income Tax (Appeals)-28, New Delhi. Before the Tribunal, the assessee challenged the validity of assessment proceedings initiated under Section 143 read with Section 147 of the Act.
The Tribunal noted that the assessee filed his return of income on July 28, 2010. He declared an income of Rs.54,81,699. The Department selected the return for scrutiny and issued notice under Section 143(2) on July 27, 2011.
While the scrutiny proceedings were still pending, the Assessing Officer issued a notice under Section 148 on March 29, 2012. The officer later furnished reasons for reopening on January 21, 2013. A show cause notice followed on February 25, 2013.
The assessee filed objections to reopening on March 22, 2013. However, the officer completed the assessment on March 28, 2013. He determined the total income at Rs.20,12,27,840 without first deciding those objections.
Assessee’s Case
Senior Advocate Sachit Jolly raised a two-fold challenge.
First, he argued that the Assessing Officer wrongly invoked Section 147 while regular proceedings under Section 143(3) were already pending. He relied on KLM Royal Dutch Airlines v. Asst. DIT, 292 ITR 49 (Delhi).
Second, he argued that the officer completed reassessment without disposing of the assessee’s objections. According to him, this violated the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd., 259 ITR 19 (SC).
The assessee also pointed out that during remand proceedings the Assessing Officer admitted that no record showed whether the objections had been disposed of. The assessee further relied on the Tribunal decision in Anita Jha v. DCIT, ITA No. 2344/Del/2024, decided on June 27, 2025.
Additions On Merits
On merits, the assessee stated that the Assessing Officer made three additions.
The first related to unexplained expenditure through credit cards amounting to Rs.4,24,83,676. The second involved disallowance of lease rental and fuel expenses of a private jet amounting to Rs.9,65,61,352. The third concerned liability of Golden Wings Pvt. Ltd. amounting to Rs.5,66,91,370.
The assessee submitted that the credit card issue had already been decided against him in his own case for AY 2008-09 in ITA No. 8466/Del/2019 by order dated November 6, 2024.
He also stated that the other two issues had been decided in his favour by the Mumbai Bench in cross appeals concerning Golden Wings Pvt. Ltd. in ITA Nos. 5979/Mum/2014 and 6228/Mum/2014 decided on December 7, 2017.
Revenue’s Stand
The Revenue defended the assessment order. It argued that the notice issued under Section 148 was valid in law.
The Department contended that the Act allows multiple streams of assessment proceedings to run simultaneously. According to it, those proceedings may later merge into a single order under Section 143(3).
For this proposition, the Department relied on DCIT v. C. Gangadhara Murthy [2022] 141 taxmann.com 330 (Bengaluru-Trib.).
The Revenue argued that the pendency of proceedings under Section 143(2) does not restrict the Assessing Officer’s power to invoke Sections 147/148 if material shows escapement of income.
Tribunal’s Findings
After hearing both sides, the Tribunal examined the assessment order dated March 28, 2013.
It noted that the cause title referred to Section 143(3). However, paragraph 2 of the same order recorded that notice under Section 147 had been issued and served on March 29, 2012.
The Tribunal observed that if the order had truly been passed under Section 143(3) alone, the officer had no reason to refer to notice under Section 148 in the order itself.
It also noted that the additions, particularly those relating to credit card expenditure, matched the reasons recorded for reopening. According to the Tribunal, this indicated that the assessment order had “roots in the reasons recorded for reopening the assessment.”
The Tribunal also examined the remand report placed before the CIT(A). In that report, the Department stated:
“there is no documents available with this office which could establish whether objection was disposed off or not by the then Assessing Officer.”
After examining the record, the Tribunal concluded that the assessment order had in fact been passed in reassessment proceedings under Section 147. It also held that the assessee’s objections were never decided before completion of the assessment.
No Parallel Proceedings
On the central issue, the Tribunal held that the law was well settled.
It ruled that the Assessing Officer cannot initiate reassessment proceedings under Section 147 while scrutiny proceedings under Section 143(3) remain pending.
The Tribunal observed that:
“parallel assessment proceedings are impermissible under the provisions of Act.”
It added that the Assessing Officer must first conclude the pending scrutiny assessment before initiating reassessment proceedings.
The Tribunal relied on KLM Royal Dutch Airlines v. Asst. DIT. It held that once inquiry proceedings have already begun, Section 147 has no role at that stage.
The Bench also referred to the Supreme Court judgment in Trustees of H.E.H. the Nizam’s Supplemental Family Trust v. CIT [2000] 242 ITR 381. The Court had held that the Department cannot issue notice under Section 148 until the return already filed is disposed of.
Final Relief
The Tribunal held that the Assessing Officer acted without jurisdiction in initiating reassessment proceedings during the pendency of scrutiny assessment under Section 143(3).
It therefore declared the assessment order “null and void.”
The Tribunal also held that the assessment was independently liable to be quashed because the officer failed to decide the assessee’s objections. This violated the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd.
Since the jurisdictional issue was decided in favour of the assessee, the Tribunal treated the remaining grounds on merits as academic.
The appeal was accordingly allowed.
