The Bombay High Court (HC) has quashed an Income Tax order against ND’s Art World Private Limited, the company founded by late art director Nitin Desai. The court ruled that the order, issued by the Additional Commissioner of Income Tax (OSD), was invalid as it lacked proper authorisation from the Central Board of Direct Taxes (CBDT).
The case pertains to a 10-month delay in filing the company’s income tax return for the assessment year 2020-21. ND’s Art World had sought condonation of the delay, citing hardships caused by the Covid-19 pandemic. However, the tax authorities rejected the request, prompting the company to challenge the decision in the high court.
A bench of Justices MS Sonak and Jitendra Jain, on January 29, observed that the order was not issued by the CBDT, the competent authority under Section 119(2)(b) of the Income Tax Act, 1961. Petitioners advocate Priyanka Jain argued that the order lacked explicit approval from the CBDT or its members and pointed out that similar delays had been condoned in other cases due to pandemic-related difficulties.
Opposing the plea, the Income Tax Department’s counsel, PA Narayanan, contended that ND’s Art World was a habitual defaulter in filing tax returns and that the order followed established government procedures.
The court, however, found that the order was not properly authorised, citing previous rulings that invalidated similar decisions made without direct involvement from the CBDT. It noted that the impugned order merely mentioned approval from the “competent authority” without clarifying the nature or extent of such authorisation.
Hence, the HC set aside the order dated January 24, 2024, and directed the CBDT or a duly authorised member to reconsider the matter. The CBDT must issue a fresh, reasoned order within three months after granting the petitioner a fair hearing. The court clarified that all contentions on the merits of the case remain open for future determination.
Nitin Desai, a renowned art director, died by suicide in August 2023 at his ND Art World studio complex in Karjat. His company defaulted on Rs252 crore loan and insolvency proceedings were initiated against his company.
In 2016 and 2018, Desai’s company, ND’s Art World Pvt Ltd, had borrowed Rs 185 crore through two loans from ECL Finance in 2016 and 2018. Troubles over repayment reportedly started from January 2020. On July 25, 2023, the Mumbai bench of the National Company Law Tribunal (NCLT) admitted a petition filed by Edelweiss Asset Reconstruction Company to initiate a corporate insolvency resolution process.
