ITAT Rejects ₹14 Crore Protective Income Tax Addition Against Lalit Modi [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Delhi recently rejected the applicability of Protective Addition of Rs.14 Crore attributed towards Income Tax of arraigned business personality, Lalit Kumar Modi, alleging unexplained investments in Ananda Heritage Hotels P. Ltd.

The ITAT rendered the decision while jointly disposing of two Income Tax Appeals - one filed by Lalit Kumar Modi against the Deputy Commissioner of Income Tax, Circle 11 (1), New Delhi (DCIT) and vice versa.

Commercial Contracts by R Kumar, Click here

The background of the case follows the Assessee’s filing of their Income Tax Returns for the Assessment Year (A.Y.) 2008-09 on 11.08.2008 declaring total income of Rs.33,99,804/-. The Assessee was subject to survey action under Section 133A of the Income Tax Act, 1961 for the financials of the relevant A.Y., and issued notices under Section 148 and 143(2) of the Income Tax Act, 1961 therein.

The crux of the matter stems from the Protective Tax addition of Rs.14.14 crore made by the Assessing Officer (AO) under Section 69 of the Income Tax Act, 1961 during the reassessment proceedings of the Assessee. The Revenue alleged that the amount represented unexplained investments made by Modi in Ananda Heritage Hotels Pvt. Ltd. (Ananda Hotels), which was owned by him.

The Revenue, represented by Vijay B Vasanta, purported such addition on the basis of Information received from the Foreign Tax and Research Division  (FT & TR) under the Ministry of Finance. The information claimed that the investments in Ananda Hotels were made by way of share application money through investment entities based in Mauritius. While the primary tax liability was placed on the company, a protective addition was made on Modi due to his alleged control over the investment.

Commercial Contracts by R Kumar, Click here

Sachit Jolly and Devansh Jain, appearing for Lalit Kumar Modi, relied on the decision of the Delhi High Court in PCIT vs. Meenakshi Overseas Pvt. Ltd. (2017) where the High Court queried the Assessing Officer as to what information was relied on by him to deduce that income had escaped assessment and noted the inability of the AO to adduce the same.

The two-member Bench of the ITAT, Delhi constituted by Saktijit Dey, Vice President and S. Rifaur Rahman, Accountant Member observed that the AO had received information from the Directorate of Income Tax (Investigation) that investment was made in Ananda Heritage Hotels P. Ltd. through M/s. Wilton Investment Ltd. through share application money. The AO made substantive additions in the hands of Ananda Heritage Hotels P. Ltd. and made other tax additions protectively in the hands of the assessee without compelling evidence and substantive merit.

In light of the same, the ITAT observed the veracity of the prior decision by the Commissioner of Income Taxes (Appeals) and upheld the deletion of Protective Tax Addition of Rs.14 Crore Against Lalit Modi.

To Read the full text of the Order CLICK HERE

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