March 08, 2026 : The Income Tax Appellate Tribunal (ITAT) has set aside reassessment proceedings initiated against former IPL commissioner Lalit Modi in relation to his income for the assessment year 2010–11, holding that the action taken by the tax department was legally unsustainable.

The reassessment had dramatically increased Modi’s declared income from about ₹54.81 lakh to nearly ₹20.12 crore. The revised computation 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 of approximately ₹5.66 crore linked to a company named Golden Wings Pvt Ltd.

However, the Tribunal found that the reassessment proceedings were initiated in violation of the statutory scheme under the Income-tax Act, 1961. The Bench observed that the Assessing Officer invoked the reassessment provisions under Sections 147 and 148 even though the regular scrutiny assessment under Section 143(3) was still pending. According to the Tribunal, reopening an assessment during the pendency of an ongoing scrutiny proceeding is not legally permissible.

The Tribunal also noted a significant procedural lapse on the part of the tax authorities. It pointed out that the department failed to dispose of the objections filed by Modi against the reopening of the assessment before passing the reassessment order. Addressing such objections is a mandatory procedural step that must be completed before proceeding further.

In light of these deficiencies, the Tribunal held that the reassessment proceedings lacked legal validity. As a result, the reassessment order that had substantially enhanced Modi’s taxable income was quashed.

The dispute arose after Modi had originally declared an income of ₹54.81 lakh in his return for the relevant assessment year. The return had already been selected for scrutiny by the tax authorities when the reassessment proceedings were initiated.