The Bombay High Court on Friday quashed an Income Tax order against ND’s Art World Private Limited, the company of late art director Nitin Desai.
Directing the Central Board of Direct Taxes (CBDT) to reconsider the case, the court ruled that the order, issued by the Additional Commissioner of Income Tax (OSD), was invalid as it lacked proper authorisation from the CBDT.
The case is in connection with 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 plea, prompting the company to approach the court.
The bench of Justices MS Sonak and Jitendra Jain ruled that the order was not issued by the CBDT, the competent authority under Section 119(2)(b) of the Income Tax Act, 1961. The petitioner’s counsel, Priyanka Jain, argued that the order lacked clear approval from the CBDT or its members and that similar delays had been condoned in other cases due to pandemic-related challenges.
The Income Tax Department, represented by PA Narayanan, defended the decision, stating that the petitioner was a habitual defaulter and that the order followed standard government procedures. “The Petitioner was found to be a habitual defaulter when it comes to filing the return of income,” Narayanan stressed.
However, the court found that the order was not properly authorised and cited past rulings that invalidated similar decisions made without the CBDT’s direct involvement.
The court directed the CBDT or its duly authorised member to reconsider the case and issue a reasoned order within three months, after giving the petitioner an opportunity to present its case. All contentions on the merits of the case remain open for further consideration.
Nitin Desai, a renowned art director, died by suicide in August 2023 at his ND Art World studio complex in Karjat. His death revealed financial struggles, including a debt of around Rs 252 crore and insolvency proceedings initiated by the National Company Law Tribunal, Mumbai, in July 2023.
The court’s decision provides temporary relief to ND’s Art World, highlighting the importance of proper authorisation in tax-related decisions and the impact of pandemic-related challenges on businesses.