ASSISTANT DIRECTOR OF INCOME-TAX, CPC, BENGALURU V. M/S GOLDY PRECISION STAMPINGS P LTD, NASHIK

MA 194/PUN/2023

AI Insights

The case revolves around a Miscellaneous Application filed by the Revenue seeking rectification of a Tribunal order that had allowed deductions under section 36(1)(va) of the IT Act for the assessment year 2019-20. The original Tribunal decision was based on a High Court judgment that was later overruled by the Supreme Court. The Revenue argued that the Tribunal's reliance on the now-overruled judgment constituted a mistake apparent from the record, warranting rectification. The Tribunal agreed, acknowledging that the legal position had changed due to the Supreme Court's decision, and thus recalled its earlier order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24556 (ITAT-PUNE)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2019-2020
• Other Referred Cases: Checkmate Services P. Ltd. & Ors. vs. CIT & Ors., CIT vs. Nipso Polyfabrics Ltd., ACIT vs. Saurashtra Kutch Stock Exchange Ltd., DCIT vs. ANI Integrated Services Ltd., DCIT vs. Viabhav Maruti Dombale, CIT vs. Khemchand Ramdas, MK Venkatachalam vs. Bombay Dyeing & Mfg. Co. Ltd., BV Sehavataram vs. CIT, Lakshmi Sugar Mills Co. Ltd. vs. CIT, Har Narain vs. Vinod Kumar
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARVIND DESAI
• Assessee Lawyers: DEVENDRA JAIN
• Keywords: Retrospective amendment
• Section: 154; 254(2); 139(1); 43; 22; 43B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER M.A. No.194/PUN/2023 (Arising out of ITA No.464/PUN/2021) िनधाᭅरण वषᭅ / Assessment Year : 2019-20 ADIT, CPC, Bengaluru Vs. M/s. Goldy Precision Stampings P. Ltd., F-84/85, MIDC, Satpur, Nashik- 422007. PAN : AABCG1087B Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This Miscellaneous Application u/s 254(2) of the IT Act is filed on 22.07.2023 by the Revenue seeking rectification of the order dated 20.09.2022 passed by this Tribunal in ITA No.464/PUN/2021 (filed by the assessee) for the assessment year 2019-20. 2. It is seen that the impugned order of the Tribunal was passed on 20.09.2022 and the present MA is filed by the Revenue on 22.07.2023. Therefore, the present MA filed by the Department Revenue by : Shri Arvind Desai Assessee by : Shri Devendra Jain MA No.194/PUN/2023 2 appears to be time barred being filed beyond the prescribed time limit. In this regard, ld. DR submitted before us that the limitation to file Miscellaneous Application starts from receipt of the Tribunal’s order and not from the date of the order. In this regard, it was submitted that although the Tribunal’s order was passed on 20.09.2022 but copy of the order was received by PCIT-1, Nashik on 02.06.2023. Accordingly, the present MA was required to be filed on or before 31.12.2023, and in the instant case the present MA is filed by the Department on 22.07.2023 which is within the prescribed time limit. 3. After hearing Ld. Counsels from both the sides, we are of the considered opinion that the limitation to file MA starts not from the date of order of the Tribunal but from the date of receipt of the order of the Tribunal. Therefore, in our considered view, the present MA filed by the Department is within the prescribed time limit and is maintainable. Thus, we admit the present MA and proceed to adjudicate the grievance of the Department. 4. At the outset, Ld. DR submitted that the addition made u/s 36(1)(va) of the IT Act in respect of employee’s contribution to PF and ESI deposited beyond the stipulated period under the MA No.194/PUN/2023 3 respective Acts was required to be disallowed by virtue of judgment of Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. & Ors. vs. CIT & Ors. (2022) 448 ITR 518 (SC) order dated 12-10-2022, as against, the same having been allowed by this Tribunal in the impugned order, therefore the same needs to be rectified. 5. LD AR appearing virtually from the side of the assessee relied on decision passed by Mumbai Bench of the Tribunal in the case of DCIT vs. ANI Integrated Services Ltd., 162 taxmann.com 889 (Mumbai - Trib.) wherein under identical facts it has been held that there was no mistake in the order passed by the Tribunal since the Judgement of Hon’ble Supreme Court was delivered subsequent to the impugned order of the Tribunal. Therefore, it was submitted that the claim of the department that there is mistake in the order of the Tribunal is not correct since on the date of passing of the order by the Tribunal no such order of Hon’ble Apex Court was there but it was delivered subsequently. It was therefore submitted that there was no mistake in the impugned order of the Tribunal & accordingly it was prayed to dismiss the MA filed by the Revenue. MA No.194/PUN/2023 4 6. We have heard Ld. Counsels from both the sides and perused the impugned order of the Tribunal dated 20.09.2022 as well as perused the material available on record. The Tribunal in the impugned order had allowed the deduction u/s 36(1)(va) of the IT Act, following the judgement of Hon’ble Himachal Pradesh High Court in the case of CIT vs. Nipso Polyfabrics Ltd. (2013) 350 ITR 327 (HP) on the premise that the deposits were made prior to the due date u/s 139(1) of the IT Act. However, the issue of making disallowance u/s 36(1)(va) in respect of Employees’ share of PF and ESI deposited beyond the due date under the respective Acts, but before the time limit for filing the return of income u/s 139(1) is no more res integra in view of the later judgment of Hon’ble Supreme Court in Checkmate Services P. Ltd. & Ors. vs. CIT & Ors. (supra). The Hon’ble Apex Court has held that the deduction u/s 36(1)(va) can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts & accordingly has overruled the judgement passed by Hon’ble Himachal Pradesh High Court in the case of CIT vs. Nipso Polyfabrics Ltd. (2013) 350 ITR 327 (HP) which was followed by the Tribunal while allowing the appeal of MA No.194/PUN/2023 5 the assessee. In this regard we further observe that the judgement which was the basis of Tribunal’s order was specifically overruled by Hon’ble Apex court & therefore the Tribunal is said to fell in an error while relying on a judgement which was held to be incorrect by Hon’ble Apex Court, may be subsequently. One cannot deny the truth that the overruled judgement was the basis of Tribunal’s order, therefore in our opinion the Tribunal ought to recall the order if limitation permits. The above enunciation of law by the Hon’ble Supreme Court (supra) denying the benefit of deduction, has rendered the order u/s 254(1) erroneous necessitating its rectification in terms of section 254(2) of the Act. In this context, we refer to the observation made by Hon’ble Supreme Court in the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd., 305 ITR 227 (SC) vide paras 40 to 43, as under :- “40. The core issue, therefore, is whether non-consideration of a decision of Jurisdictional Court (in this case a decision of the High Court of Gujarat) or of the Supreme Court can be said to be a \"mistake apparent from the record\"? In our opinion, both - the Tribunal and the High Court - were right in holding that such a mistake can be said to be a \"mistake apparent from the record\" which could be rectified under Section 254(2). 41. A similar question came up for consideration before the High Court of Gujarat in Suhrid Geigy Limited v. Commissioner of Surtax, Gujarat, (1999) 237 ITR 834 (Guj). It was held by the Division Bench of the High Court that if the point is covered by a decision of the Jurisdictional Court rendered prior or even subsequent to the order of MA No.194/PUN/2023 6 rectification, it could be said to be \"mistake apparent from the record\" under Section 254 (2) of the Act and could be corrected by the Tribunal. 42. In our judgment, it is also well- settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a `new rule' but to maintain and expound the `old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. 43. Salmond in his well-known work states; \"The theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicatae or accounts that have been settled in the meantime\". (emphasis supplied).” 7. Accordingly, in light of above observation made by Hon’ble Supreme Court in para 41 & 42 in the case of Saurashtra Kutch Stock Exchange Ltd. (supra) and in the light of judgment of Hon’ble Supreme Court in Checkmate Services P. Ltd. (supra), we are of the opinion that the Tribunal in its order dated 20.09.2022 committed mistake in allowing the benefit of deduction u/s 36(1)(va) of the IT Act which needs to be rectified. MA No.194/PUN/2023 7 8. The above view of ours is fortified by the decision of the Co- ordinate Bench of this Tribunal in the case of DCIT vs. Viabhav Maruti Dombale in MA No.225/PUN/2023 (Arising out of ITA No.299/PUN/2021) order dated 17.09.2024, wherein, under identical facts and similar circumstances, the Tribunal has allowed the MA filed by the Revenue by observing as under :- “2. We have heard the rival parties submission; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short ‘ITAT, Rules’] perused the material placed on records and considered the facts of the case in the light of Hon’ble Apex Court binding decision in ‘Checkmate Services Pvt Ltd. Vs CIT’ [2022, 448 ITR 518] and the Ld. Co-ordinate Bench decision in ‘DCIT Vs Ani Integrated Services Ltd.’ [2024, 162 taxmann.com 889] 3. Rival parties have no dispute over nature of amount/expenditure debited & claimed in the return of income and their allowability u/s 36(1)(va) of the Act. Further both the parties do also not negate that deductibility of such amount/expense is not subject to the riders/provisions of section 43B of the Act. Both the parties also agrees that the ratio laid down by Hon’ble Apex Court in ‘Checkmate Services’ (supra) has settled the issue with respect to deductibility of such amount/expense only when it is paid within the due date prescribed under the respective PF/ESI Act and not otherwise. 4. Relying on ‘Checkmate Services’ the Revenue seeks to reverse the Tribunal’s order thus pursues this MA to confirm the disallowance of amount/expenses of ₹57,92,151/- deposited by the assessee to respective PF/ESI fund after the expiry of due date specified under the respective PF/ESI Act. The Revenue claims that the order of the Tribunal passed deleting the disallowance made u/s 36(1)(va) of the Act is suffered from ‘apparent mistake’ owning to incorrect application of law as rightly & finally interpreted by Hon’ble Apex Court in ‘Checkmate Service’ (supra). Per contra assessee without disputing the former settled law denies existence of any such law as on the date when the order of this Tribunal was passed. Thus, assessee claims contrary to the Revenue to the effect that, law MA No.194/PUN/2023 8 interpreted by Hon’ble Apex Court is prospective and not retrospective. 5. In view of much celebrated judgement rendered in ‘CIT Vs Saurashtra Kutch Stock Exchange Ltd.’ [2008 173 Taxman 322 (SC)] there is no dispute between the present rival parties that a decision rendered without considering the binding precedents per se sufficient to constitute ‘mistake apparent on record’ and deserves to be rectified. However, in the present case the acceptance or rejection of Revenue’s plea for reversal of Tribunal’s order hinges around the effective date of ‘Checkmate Services’ (supra) judgment which is rendered subsequent to the passing of Tribunal’s Order sought to be rectified. The dispute is put to rest if effective date of subsequent binding judgement of Hon’ble Apex Court falls anterior to the date of Tribunal’s orders i.e. dt. 05/09/2022 then for this MA it tantamount to ‘mistake apparent on record’ and thus dictates the rectification as must. 6. On the subject matter of rectification we first note that in ‘CIT V India Cements Ltd.’ [2000, 241 ITR 62 (Mad)] their Hon’ble Lordship have categorically laid that, ‘the power to rectify is restricted only with reference to the law prevailing at the time of the original order sought to be rectified, the fact that subsequent decisions may lead to a different inference cannot justify rectification’. This abundantly implies that; law lay down by the Hon’ble Jurisdictional High Court and Hon’ble Supreme Court by its subsequent judgement on respective issue shall come into effect from the date of its pronouncement and not from inception i.e., law laid down by Hon’ble Jurisdictional High Court & Hon’ble Apex Court shall be prospective in operation, thus would give no right or entitlement to prejudiced party to seek rectification arising on there account. 7. On the other hand, subsequent to aforestated decision the Hon’ble Gujarat High Court in the case of ‘CIT Vs Subodhchandra Patel’ [2004, 265 ITR 445 (Guj)] vide para 8 have held otherwise that; 'non-consideration of a judgment of the jurisdictional High Court or the Supreme Court would always constitute a mistake apparent from the record, regardless of the judgment being rendered prior to or subsequent to the order proposed to be rectified'. This contrary to former ‘CIT V India Cements Ltd.’(supra) hint sights the ratio that; the law laid down by Hon’ble jurisdictional High Court & Hon’ble Supreme Court in subsequent judgements would come into effect from the date of insertion of respective provisions and thus entitles the prejudiced party to seek rectification therefore. That is to state, the law declared by the Hon’ble Apex Court would apply MA No.194/PUN/2023 9 retrospectively unless it is expressly stated to have prospective operation. 8. It is a trite law that, the Hon’ble Supreme Court does not enact the law, it only interprets it and its interpretation of a provision of law becomes the law of the land which comes into effect retrospectively from the date of its insertion & not from the date of its pronouncement. The Hon’ble Supreme Court being the Apex Constitutional Court of the Country declares the law not as on the date of pronouncement of the judgment but from the date of its enactment and binds all persons within the territory of India, whether or not party to the case in which the decision was rendered and whether or not it was brought to its notice. By virtue of article 141 of Indian Constitution, the judgement rendered by Hon’ble Supreme Court binds all the High Courts, Tribunals & Quasi-Judicial Authorities within the territory of India. 9. On the subject matter of operation we find that, the Hon'ble Supreme Court in ‘ACIT Vs Saurashtra Kutch Stock Exchange Ltd.’ (supra) have held that non- consideration of decision of Jurisdictional High Court or Supreme Court can be said to be a \"mistake apparent from record\" which can be rectified u/s 254(2) of the Act. Their Hon’ble lordships have further held that; the judicial decision rendered by the Apex Court acts retrospectively and it is not the function of the Court to pronounce a \"new rule\", but to maintain and expound the \"old one\". Thus, explicitly their Hon’ble lordships have held in former decision that the Judges do not make a law, they only discover or find the correct law. The relevant findings of the Hon'ble Supreme Court, in this regard can be traced in the paragraph 42 & 43 of the judgement which is reproduced hereunder for the sake of readiness; \"42. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite a sometime, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. 43. Salmond in his well-known work states: MA No.194/PUN/2023 10 \". . . The theory of case law is that a judge does not make law; he merely declares it, and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicator accounts that have been settled in the meantime.\" (Emphasis supplied) 10. Though the facts before the Hon'ble Supreme Court in ‘Saurashtra Kutch Stock Exchange Ltd.’ (supra) were that, decision of Jurisdictional High Court was available, however, the attention of the Tribunal was not invited to it at the time of hearing/adjudication. Thus, in these circumstances, the aforesaid findings were rendered by the Hon'ble Supreme Court and the decision of the Tribunal in recalling its earlier order u/s 254(2) of the Act was affirmed. However, the moot issue in the present MA arises for our consideration ‘as to whether a subsequent decision of the Hon'ble Supreme Court [which is binding as per Article 141 of the Constitution of India] forms a basis for rectification u/s 254(2) where the original order u/s 254(1) of the Act was passed prior thereto? The prospective operation of law laid down by Hon’ble Apex Court would answer the question negatively and retrospective operation answers it positively. 11. Let us quote here that, the Hon’ble Apex Court following its earlier decision rendered in ‘East End Dwellings Co. Ltd. Vs Finsbury Borough Council’ [1952, A.C. 109] & ‘CIT Vs Khemchand Ramdas’ [1938, 6 ITR 414] while deciding the effect of subsequent retrospective amendment of law in ‘MK Venkatachalam Vs Bombay Dyeing & Mfg. Co. Ltd.’ [1958, 34 ITR 143] have categorically held that; prima-facie it may appear somewhat strange that an order which was good & valid when it was made should be treated as patently invalid & wrong by virtue of retrospective operation of the amendment Act. In view of their Hon’ble lordship’s the conclusion from retrospective amendment is inescapable that the order of quasi- judicial authority in question was inconsistent with the retrospective amendment of law and therefore must be deemed to suffer from a mistake apparent from the record, hence very much qualify for rectification. That is why the quasi- judicial authorities empowered to rectify the same following due process of law. Any order passed by the Tribunal placing reliance on the decision of Hon’ble jurisdictional/non-jurisdictional high court which in substance overruled at a later stage/date by the Hon’ble Apex Court becomes a law not from the pronouncement of such judgement but from the first day when the provision came into effect [i.e. right from the insertion], MA No.194/PUN/2023 11 in consequence the order of the Tribunal renders itself inconsistence with law so and thus forms as ‘apparent mistake’ in turn entitles prejudiced party to seek rectification. This view also finds reiterated in context of rectification sought by prejudiced party u/s 154 of the Act by the Hon’ble Andhra Pradesh High Court in ‘BV Sehavataram Vs CIT’ [1994, 210 ITR 633 (AP)]. 12. In view of the aforesaid findings of the Hon'ble Supreme Court in ‘Saurashtra Kutch Stock Exchange Ltd.’ (supra), as noted in para 42-43 of the judgment, the answer to the issue/question formed in present MA is positive thus affirmative. In dealing with similar circumstances, the Hon'ble Delhi High Court in the case of ‘Lakshmi Sugar Mills Co. Ltd. Vs CIT’ [2012, 22 taxmann.com 300] held that where the Larger Bench of the Hon'ble Apex Court overrules its earlier decision on which the Tribunal relied on, then Tribunal is duty bound to rectify its earlier order u/s 254(2) of the Act since the later decision of the Hon'ble Supreme Court operates retrospectively as if a law laid down by it u/a 141 of the COI. 13. Insofar as date of operation of judgment of ‘Checkmate Services’ is concerned; we are mindful to state that the Law declared by Hon’ble Supreme Court u/a 141 of the Constitution is normally to be assumed to be the law from inception. The prospective overruling is only an exception to this normal rule. Any decision rendered by Hon’ble Supreme Court, unless expressly indicated therein to be operative only prospectively, cannot be treated to be so, more so when it was a judgment overruling the judgments of various High Courts. The judgment thus erases all previous judgments rendered by various High Courts and operates as the law from inception of provision. This finds strength in the decision of ‘M.A. Murthy Vs State of Karnataka’ [2003, 7 SCC 517] 14. In view of the ratio laid in ‘A Srimannarayana Vs Dasari Santakumri & Anr.’ [2013, 9 SCC 496 (SC)] a decisions of co- ordinate bench rendered contrary to law laid down in ‘checkmate services’ cannot be followed as they do not state the law correctly. In view therefore we find much less force Ld. AR’s contention to follow decision of ‘Ani Integrated Services Ltd.’ (supra). 15. The duty of judicial/quasi-judicial officer when binding precedents are placed before it by the prejudiced party against the contrary order passed by it has been elaborately dealt in ‘Har Narain Vs Vinod Kumar’ [1987, AIR 1987 All 319 (SC)] wherein their Hon’ble lordships have held that in view of Art. 141 of the Constitution, the law declared by the Supreme Court shall be binding on all courts within the territory of India. This Article 141 of the COI cannot be read to mean that the binding duty of the court to follow the law, declared by the Supreme Court in India, is there when the law MA No.194/PUN/2023 12 already declared by the Supreme Court was shown to it before delivery of decision/judgment and that if the law declared by the Supreme Court subsequently, is brought to the notice of the court after the pronouncement of the its decision/judgment, then there is no duty of the tribunal/court to correct the judgment so as to follow the law declared by the Supreme Court. It is a trite law that the Supreme Court does not make the law but it simply pronounces what the law is. So the law remains the same what it was before the pronouncement of the judgment and what the Supreme Court does is that it simply interprets the correct nature of the law. It means the decision contrary to the law, declared by the Supreme Court, would be a decision contrary to law and comes into operation from the very first date of birth of law/provision. To prevent abuse of process of law, it is duty of all the tribunals/courts to correct its earlier order which runs counter to the law, declared by the Supreme Court either subsequently or otherwise and it is to be corrected as a mistake of the type. 16. Thus, without further multiplying judicial precedents on the subject matter we find the present MA of the Revenue seeking recall of the Tribunal's order on the basis of the subsequent decision of the Hon'ble Supreme Court in ‘Checkmate Services’ (supra) is in order. In consequence thereof, the order dt 05/09/2022 of this Tribunal passed in assessee’s appeal vide ITA No. 299/PUN/2021 for assessment year 2019-20 is hereby recalled.” 9. In view of the above discussion and following the decision of the Co-ordinate Benches of Pune Tribunal (cited supra), we hold that the present MA of the Revenue seeking recall of the Tribunal’s order on the issue of belated payment of employees’ contribution to PF & ESI in the light of the subsequent decision of Hon’ble Supreme Court in Checkmate Services (supra) is in order. In consequence thereof, the order dated 20.09.2022 of the Tribunal passed in assessee’s appeal vide ITA No.464/PUN/2021 for assessment year 2019-20 is hereby recalled. MA No.194/PUN/2023 13 10. In the result, the Miscellaneous Application filed by the Revenue stands allowed in above terms. Order pronounced on this 07th day of March, 2025. Sd/- Sd/- (R. K. PANDA) (VINAY BHAMORE) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 07th March, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "