DCIT Vs Mirha Exports Pvt. Ltd. (ITAT Delhi)
Ad-hoc Disallowances Rejected, 40A(3) Relief Upheld & Mechanical 153D Approval Knocks Out Search Assessments
Delhi ITAT, Delhi Bench ‘E’, in a batch of cross-appeals involving M/s Mirha Exports Pvt. Ltd. Vs DCIT (ITA Nos. 873, 655, 1233, 656, 1234, 657, 874, 658 & 875/Del/2022; AYs 2012-13 to 2017-18; order dated 19-12-2025), delivered a comprehensive ruling covering reassessment, cash purchases, ad-hoc disallowances, TDS defaults and validity of approval u/s 153D.
For AYs 2012-13 & 2013-14, the Tribunal upheld reassessment u/s 147, rejecting assessee’s challenges on change of opinion, borrowed satisfaction, section 127 transfer & sanction u/s 151, but restricted disallowance u/s 40(a)(ia) by directing adjustment of amounts already disallowed in original scrutiny, sustaining only the balance. The Tribunal also confirmed that the 30% restriction in section 40(a)(ia) is prospective and not applicable prior to AY 2015-16.
On Revenue appeals, the Tribunal affirmed deletion of massive ad-hoc disallowances made on cash purchases, business promotion and travelling expenses, holding that once section 40A(3) was not violated and Rule 6DD conditions were satisfied, no percentage-based or ad-hoc disallowance could be sustained without pinpointing specific defects. It reiterated that in the case of a company, personal-use disallowance is impermissible, and business expediency cannot be second-guessed by the AO.
Crucially, for AYs 2015-16 & 2016-17 (search assessments), the Tribunal quashed the assessments in entirety on the ground of mechanical and omnibus approval u/s 153D, where a single common approval was granted for multiple years on the same day without demonstrable application of mind. Relying on PCIT vs Sapna Gupta, PCIT vs Shiv Kumar Nayyar, PCIT vs Anuj Bansal, ACIT vs Serajuddin & Co. (SLP dismissed) and the Third-Member decision in Dheeraj Chaudhary, the Tribunal held that approval must be year-specific, reasoned & non-ritualistic, failing which the entire assessment collapses.
For AY 2017-18, Revenue’s appeal was dismissed by following earlier years. Ultimately, all Revenue appeals were dismissed, reassessment years partly sustained with relief, and search assessments for AYs 2015-16 & 2016-17 were quashed in toto, reinforcing that ad-hoc additions and mechanical statutory approvals have no place in tax jurisprudence.
FULL TEXT OF THE ORDER OF ITAT DELHI
