Deputy Commissioner of Income Tax , CPC, Bangalore V. M/s BBR (India) Pvt Ltd , Bangalore

MA 116/BANG/2022

AI Insights

The case revolves around a miscellaneous petition filed by the Deputy Commissioner of Income-tax, CPC Bangalore, seeking rectification of the Tribunal's earlier order which had allowed the claim of M/s. BBR (India) Pvt. Ltd. regarding the disallowance of Rs.14,56,995/- for employees' contribution to PF & ESI. The Tribunal initially allowed the claim on the grounds that the payment was made within the due date of filing the return of income under section 139(1) of the Income-tax Act, 1961, despite being beyond the statutory due date. The revenue's petition argued that the Tribunal's decision did not consider the jurisdictional high court's decision, which constitutes a mistake apparent from the record. The Tribunal, upon reviewing the precedents and the Supreme Court's directives, admitted the revenue's petition as it was filed within the correct time frame and rectified its earlier order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129972 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-04-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 30-10-2022
• Other Referred Cases: CIT Vs. Saurashtra Kutch Stock Exchange, Honda Siel Power Products Ltd. v. CIT, Checkmate Services Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Recovery proceedings; Depreciation; Rectification of order; Period of limitation
• Section: 139(1); 254(2)

Judgement Text

MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER MP No.116/Bang/2022 (Arising out of ITA No.92/Bang/2022) Assessment Year: 2017-18 Deputy Commissioner of Income-tax CPC Bangalore Vs. M/s. BBR (India) Pvt. Ltd. 318, 15 th Cross, 6 th Main Sadashivanagar Bangalore 560 080 PAN No.AAACB7375G APPELLANT RESPONDENT Appellant by : Shri Srinivas Rao, D.R. Respondent by : Shri Sundeep Chalapathy, A.R. Date of Hearing : 21.04.2023 Date of Pronouncement : 24.04.2023 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This miscellaneous petition filed by the revenue seeking rectification of order of the Tribunal in ITA No.92/Bang/2022 dated 24.3.2022. 2. The assessee came in appeal before us with regard to disallowance of Rs.14,56,995/- being employees contribution to PF & ESI which has been deposited beyond the due date prescribed under relevant Act for filing the return of income u/s 139(1) of the Income-tax Act,1961 ['the Act' for short]. The Tribunal while MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore Page 2 of 8 disposing the appeal of the assessee allowed the claim of the assessee by observing that that it has been paid within due date of filing return of income u/s 139(1), though it was beyond the date mentioned in the respective Act. At the time of hearing, ld. A.R. put a primary objection that in this case, Tribunal passed the order in ITA No.92/Bang/2022 on 24.3.2022. It has been served on the department on 25.4.2022, which has been duly acknowledged by the department and the present miscellaneous petition has been filed by the department on 31.10.2022, which is totally time barred and same cannot be entertained by this Tribunal. He placed reliance on the order of the Tribunal in MP No.115/Bang/2022 dated 30.11.2022 arising out of ITA No.636/Bang/2021 dated 30.3.2022. 3. We have heard the rival submissions and perused the materials available on record. Admittedly, the order in this case has been passed on 24.3.2022 and it was served to the revenue by hand on 25.4.2022 on PCIT, Bengaluru. Now the question is whether the time limit to file application u/s 254(2) of the Act is to be reckoned from the date of passing of the order or from the date of communication of order to the revenue authorities. For this purpose, we go through the provisions of section 254(2) of the Act, which reads as under:- “The appellate may, at any time within 6 months from the end of the month in which the order was passed, with a view to rectifying any mistake apparent from the record, amend in order passed by it under sub section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or AO.” 3.1 A bare perusal of the above provisions shows that either parties can file application for rectification of order passed u/s 254(1) of the Act within a period of 6 months from the end of the month in which the order was passed. In the present case, the order was passed on 24.3.2022 and according to the ld. A.R., the time limit to file MA u/s MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore Page 3 of 8 254(2) of the Act expires on 30.9.2022 and there was delay in filing this miscellaneous petition and hence, it is to be dismissed. 3.2 In context of the provisions of section 254(2) of the Act (as prior to its amendment by Finance Act, 2016 w.e.f. 1.6.2016) the Mumbai Tribunal has in Powan Kumar Jain vs. Dy. CIT (2013) 155 TTJ 14 (Mum-Tribunal), held that for purposes of filing application u/s 254(2) of the Act, the period of limitation would start from the point of time when order u/s 254(1) is “communication to the assessee” and not from the “date of the passing of the order”. In coming to this decision, the Mumbai Tribunal has noted as: "From the principles and maxims laid down by the Hon 'ble Supreme Court in catena of cases as referred to above, it is amply clear that the "date of order" should be construed and reckoned with the date of knowledge of the order i.e., when the order has been communicated to the pacify. The legal maxim behind this is, how a person concerned or a person aggrieved is expected to exercise the right of remedy conferred by the Statute, unless the order is communicated or known to him either actual or constructively. The underlying principles is of fair play and recognition of legal rights of remedy in a constructive manner and not to give any construction or interpretation so as to defeat the purpose for which the legal remedy has been enacted in the provisions relating to limitations. It iso fundamental principle of justice and fair play that parties, whose rights are affected by an order must have a knowledge or notice of it, otherwise, the legal rights to remedy is lost to the party, even when he is not at fault." 3.3 However, in a recent decision, the Hyderabad Tribunal in miscellaneous application proceedings u/s 254 (2) in the case of Srinivas Sashidhar Chaganty vs. ITO ( Hyd. ITAT — "A" Bench — M.A. no. 05/Hyd/2017 arising in ITA no. 1420/Mum/2015 dated 12-7-2017 for Assessment Year 2007-08 — reported in www.itatonline.org) in context of the subsequently amended provisions of section 254 (2) by Finance Act. 2016 w.e.f. 1-6-2016 has held diametrically the opposite of what the Mumbai Tribunal held in the case of Pawan Kumar Jain (supra). In the case before it, MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore Page 4 of 8 order u/s 254 (1) was passed / pronounced on 21-06-2016 and from the end of this month (June 2016), the period of six months ended on 31-12-2016. The case of the assessee was that order u/s 254 (1) was served on him on 05-07-2016 and if this date is considered. the miscellaneous application filed on 20-01-2017 was within time and maintainable. 3.4 However, the Hon’ble Allahabad High Court in the case of Vijay Kumar Ruia Vs. CIT (2011) 334 ITR 38 (Allahabad) in the decision concerned in an appeal preferred by the assessee under Rule 86 of recovery proceedings in Schedule II of the Act. The rule prescribed that the appeal must be preferred by the assessee within 30 days of the order passed by the Tax Recovery Officer. The question before the High Court was whether words "date of the order" in Rule 86 should be construed as "date of service or communication of the order" to the assessee? The Allahabad High Court held as under — "The second point of determination is as to whether the limitation for filing the appeal would run from the actual date of the order or from the date of service of the order and, consequently as to whether the appeal is barred by limitation. There is no dispute to the fact that the order confirming the sale was passed on 25-4-1988 and the sale certificate was also issued on the same day. The appeal was presented under rule 86 on 19-9-1988. The limitation for filing the appeal under rule 86(2) is 30 days from the date of the order'. Thus, the appeal apparently appears to be beyond time by 117 days. However, the argument is that the limitation for filing the appeal would start running from the date when the order was served and the date of service of the order would be recognised as the date of the order. Generally speaking, judicial and quasi-judicial orders are required to be passed in the presence of the parties or their representatives and where parties or their representatives are not present, normally the orders are communicated, especially where the order is appealable or revisable so as to enable the party to avail of the remedy so provided. Therefore, communication and knowledge of the order passed is necessary and in consonance with the principles of fair play. If MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore Page 5 of 8 the party aggrieved is not made aware of the order it cannot be expected to take recourse to the remedy available against it. Therefore, the fundamental principle is that the party whose rights are affected by any order must have the knowledge of the order. • Thus, it can be said that for the purposes of calculating limitation the expression ‘from the date of the order’, is to be construed to mean ‘the date of communication or knowledge of the order’. In the instant case, the date of knowledge of the order, according to the petitioner is 18-8-1988 and the date of actual service and communication undisputedly happens to 29-2-1988. The appeal was preferred on 19-9- 988. On 18-9-1988 there was a holiday. Thus, the appeal was within limitation both from the date of knowledge of the order and its service. In this view of the matter, the appellate authority manifestly erred in law in dismissing the appeal as barred by time." 3.5 In view of the above precedents, in our opinion, the time limit to file a miscellaneous petition u/s 254(2) of the Act to rectify the order of the Tribunal passed u/s 254(1) of the Act is to be considered is within 6 months from the end of the month in which the order was communicated so as to rectify the mistake passed u/s 254(1) of the Act. Accordingly, we admit the miscellaneous petition filed by the revenue as the miscellaneous petition has been filed on 31.10.2022 as it was received only on 25.4.2022 by the revenue authorities and in our opinion, miscellaneous petition filed in this case is within time limit allowed u/s 254(2) of the Act and the same is admitted for adjudication. 3.6 Coming to the merit of the issues raised by the revenue in its miscellaneous petition, we not that Hon’ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange case 219 CTR (SC) 90 has held that non-consideration of the decision of the jurisdictional high court/Supreme Court constitutes mistake apparent from record and is rectifiable within the meaning of section 254(2) of the Act. In Honda Siel Power Products Ltd. v. CIT 295 ITR 466, the Hon’ble Supreme Court explained the scope of rectification powers u/s/254(2) of the Act, as follows: MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore Page 6 of 8 “Scope of the Power of Rectification 12. As stated above, in this case we are concerned with the application under section 254(2) of the 1961 Act. As stated above, the expression "rectification of mistake from the record" occurs in section 154. It also finds place in section 254(2). The purpose behind enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its Order dated 10.9.2003 allowing the Rectification Application has given a finding that Samtel Color Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record. 13. "Rule of precedent" is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income-tax Act, 1961. When prejudice results from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, the Tribunal was justified in exercising its powers under section 254(2) when it was pointed out to the Tribunal that the judgment of the coordinate bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case.” 3.7. Article 141 of the Constitution of India provides that the law declared by Hon’ble Supreme Court shall be binding on all courts within the territory of India. The law laid down by Supreme Court operates retrospectively and is deemed to the law as it has always MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore Page 7 of 8 been unless, the Supreme Court, says that its ruling will only operate prospectively. 3.8 In the light of the law as explained above, there is a mistake apparent on record in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) though rendered subsequent to the order passed by the Tribunal and has to be rectified by holding that the disallowance made by the revenue authorities u/s.36(1)(va) of the Act was justified. Consequently, the appeal by the Assessee will stand dismissed. The order of the Tribunal will stand modified /rectified accordingly. 4. In the result, the miscellaneous petition filed by the revenue stands allowed. Order pronounced in the open court on 24 th Apr, 2023 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 24 th Apr, 2023. VG/SPS MP No.116/Bang/2022 M/s. BBR (India) Pvt. Ltd., Bangalore Page 8 of 8 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(Judicial) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.