ACIT/DCIT CIRCLE -6, Jaipur V. Rajasthan State Ganganagar Sugar Mills Limited, Jaipur

MA 16/JPR/2023

AI Insights

The case involves the Department of Income Tax, Circle-6, Jaipur, and Rajasthan State Ganganagar Sugar Mills Ltd., concerning a dispute over the late deposit of employees' contributions towards ESI and PF. The Department filed a Miscellaneous Application seeking rectification of the ITAT's order which had allowed the assessee's appeal, deleting the addition made under section 36(1)(va) of the Income Tax Act. The Tribunal had previously ruled in favor of the assessee, citing various High Court judgments and a Supreme Court decision that supported the assessee's position. The Department's application was based on a Supreme Court judgment that it interpreted as a change in law, which it argued should lead to a rectification of the Tribunal's earlier decision. However, the Tribunal dismissed the Department's application, finding no mistake in its earlier ruling and noting that the Department's interpretation did not constitute a mistake apparent from the record.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112932 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-07-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 15-02-2023
• Other Referred Cases: CIT vs. Aimi Ltd. (321 ITR 508) (Delhi HC), CIT VS. P. M. Electronics (313 ITR 161)(Delhi HC), CIT VS. ANZ Information Technology Pvt Ltd (318 ITR 123)(Karnataka HC), CIT VS. SBBJ (2014) (363 ITR 70) (Rajasthan HC), CIT Vs. JVVNL (2014) (363 ITR 70) (Rajasthan HC), CIT Vs. JVVNL (2014) (363 ITR 307) (Rajasthan HC), CIT Vs. Rajasthan State Beverages Corporation Ltd. (2017) 84 taxmann.com 185 (SC)/(2017)/250 Taxmann 0016, M/s. Checkmate Services P Ltd. vs. Commissioner of Income Tax (Civil Appeal No. 2833 of 2016)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARJUN SINGH
• Keywords: Rectification of order
• Section: 43B; 143(1); 139(1); 254(2)

Judgement Text

1 MA NO. 16/JP/2023 DCIT, CIRCLE -6, JAIPUR VS RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD vk;djvihyh; vf/kdj.k] t;iqjU;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh]U;kf;dlnL; ,oaJh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM Miscellaneous Application No. 16/JP/2023 fu/kZkj.ko"kZ@AssessmentYears : 2019-20 DCIT Circle-6 Jaipur cuke Vs. Rajasthan State Ganganagar Sugar Mills Ltd. 4 th Floor, Nehru Sahkar Bhawan, Bhawani Singh Road, Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACR 8906 R vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksjls@Revenue by: Shri A.S. Nehra (Addl. CIT) fu/kZkfjrh dh vksjls@Assesseeby :Shri Arjun Singh (Adv.) lquokbZ dh rkjh[k@Date of Hearing :01/08/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25 /09/2023 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The Revenue has filed a Miscellaneous Application against ITAT, Jaipur Bench order dated 30-06-2022 for rectification of mistake u/s 254(2) of the I.T.Act by praying therein as under:- ‘’The Hon'ble ITAT vide order dated 30/06/2022 in ITA No. 37/JP/2022 in the case of M/s. Rajasthan State Ganganagar Sugar Mills Limited, PAN: AAACR8906R for AY- 2019-20 has allowed the appeal of the assessee. The ADIT (CPC) while passing an order u/s 143(1) of the Act made an addition of 1,54,32,185/- u/s 2(24)(x) read with section 36(1)(va) of the Act on account of late deposit of the "Employees contribution towards ESI and PF' after the expiry of due date as specified in the relevant statutes. Aggrieved with the same the assessee filed appeal 2 MA NO. 16/JP/2023 DCIT, CIRCLE -6, JAIPUR VS RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD before the Id. CIT(A) confirmed the addition of 1,54,32,185/- made by the AO u/s 36(1)(va) of the Act. Further, aggrieved with the decision of the Id. CIT(A) the assessee preferred appeal before Hon'ble ITAT. The Hon'ble ITAT vide appellate order dated 30/06/2022 received in this office on 18/10/2022, in the appeal No.37/JP/2022 has allowed the appeal of the assessee by deleting the addition of 1,54,32,185/- made by the AO u/s 36(1)(va) of the Act holding that the assessee paid the same before filing of return of Income u/s 139(1) of the Act. The Hon'ble ITAT has placed reliance upon the following judgements: CIT vs. Aimi Ltd. (321 ITR 508) (Delhi HC) CIT VS. P. M. Electronics (313 ITR 161)(Delhi HC) CIT VS. ANZ Information Technology Pvt Ltd (318 ITR 123)(Karnataka HC) CIT VS. SBBJ (2014) (363 ITR 70) (Rajasthan HC) CIT Vs. JVVNL (2014) (363 ITR 70) (Rajasthan HC) CIT Vs. JVVNL (2014) (363 ITR 307) (Rajasthan HC) Further, the Hon'ble ITAT placed reliance upon the case of CIT Vs. Rajasthan Stat Beverages Corporation Ltd. (2017) 84 taxmann.com 185 (SC)/(2017)/250 Taxmann 0016 wherein the Hon'ble Supreme Court dismissed SLP filed by the Department to appeal against the judgement of Hon'ble Rajasthan High Court in CIT Vs. Rajasthan State Beverages Corporation Ltd. (ITA No.150 of 2016 dated 08/06/2016) whereby the Hon'ble High Court held that no part of PF/ESI contribution, if payment was remitted beyond due date prescribed under the relevant Act but before due date of filing of return, could be disallowed under section 43B or under section 36(1)(va) of the Act, whether it was employees contribution or employers contribution and applied the provision of section 36(1)(va) read with section 438 as amended by the Finance Act, 2021 by inserting explanation 2 is prospective and not retrospective which is applicable w.e.f AY-2021- 2022 and the instant case pertains to the AY-2019-20. The decision of the Hon'ble ITAT is found not acceptable as the Hon'ble Supreme Court vide Civil appeal No. 2833 of 2016 dated 12.10.2022 in the case of M/s. Checkmate Services P Ltd. vs. Commissioner of Income Tax, has decided that it is essential condition for the deduction that such amount is deposited on or before the due date and incompliance to the CBDT circular No.68 [F.No.245/17/71-A&PAC], dated 17.11.1971 which states that a mistake arising as a result of a subsequent interpretation of law by Supreme Court would constitute a mistake apparent from record and the same may kindly be rectified under section 254(2) of the Act by recalling the appeal order and deciding the same on merits.’’ 2.1 During the course of hearing, the Bench noted that there is delay of 46 days in filing the Misc. Application by the Department for which the 3 MA NO. 16/JP/2023 DCIT, CIRCLE -6, JAIPUR VS RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD Department has filed an application dated 14/15-02-2023 for condonation of delay in filing of Misc. application with following narration. ‘’In this connection, I am directed to request you to condone the delay in filing of appeal in the case of M/s.Rajasthan State Ganganagar Sugar Mills Ltd., Jaipur for A.Y. 2019-20’’ 2.2 On the other hand, the ld. AR of the assessee objected to such delay of 46 days in filing the Misc. Application by the Department and submitted that as per the provisions of Section 254(2) of the I.T. Act, the Hon’ble Bench may amend the order within a period of six months from the end of the month in which the order is passed and the time limit to file the M.A. is expired. Thus the M.A. filed by the department is time barred. 2.3 After hearing both the parties and perusing the materials available on record, the Bench noted that there is force in the submissions of the ld. AR of the assessee. Hence, the Bench does not find sufficient cause whereby the Department was prevented in late filing the Misc. Application. Thus the application for condonation of delay made by the Department is dismissed. 3.1 For the sake of convenience and brevity of the case, we now keep into consideration the appeal of the assessee in ITA No. 37/JP/2022 which was disposed off by the this Bench of ITAT vide its order dated 30-06-2022 by observing as under:- 4 MA NO. 16/JP/2023 DCIT, CIRCLE -6, JAIPUR VS RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD ‘’6. The ld. AR of the assessee submitted that there is an error in tax audit report while mentioning the date. In this regard the ld. AR of the assessee filed a letter from the tax auditor wherein it was clarified there is inadvertent error while mentioning the date. For this ld. AR of the assessee filed the related challan and ledger account from the records of the assessee. Summarily the ld. AR of the assessee submitted that out of the total disallowance of Rs. 1,54,32,185/-, Rs. 1,22,41,554/- is disallowed by CPC which is in fact at all not disallowable on account of error in mentioning the date and the balance amount of Rs. 31,90,631/- is not disallowable considering the decision of the jurisdictional high court decision in the assessee’s own case and the SLP of the department is dismissed by the supreme court. In addition to the above ld. AR of the assessee submitted that there was an amendment w.e.f assessment year 2021-2022 in Section in Section 36(1)(va) of the Income Tax act,1961. The relevant Assessment Year under appeal is 2019-2020 and this amendment in Section 36(1)(va) of the Income Tax act,1961 is applicable w.e.f Assessment Year 2021-2022. Since, the ld AR and DR both quoted the amendment made in Finance Act, 2021, it is worthwhile to record the extract here in below the memorandum explaining the change made in the relevant provisions of the Act. Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Subclause (x) to the said clause provide that income to include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees. Section 36 of the Act pertains to the other deductions. Sub-section (1) of the said section provides for various deductions allowed while computing the income under the head =Profits and gains of business or profession‘.Clause (va) of the said subsection provides for deduction of any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that, for the purposes of this clause, "due date" to mean the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there-under or under any standing order, award, contract of service or otherwise. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. Though section 43B of the Act covers only employer‘s contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer contribution and employee‘s contribution towards welfare fund. It may be noted that employee‘s 5 MA NO. 16/JP/2023 DCIT, CIRCLE -6, JAIPUR VS RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer‘s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee‘s contribution towards welfare funds. Employee‘s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee‘s contributions. Accordingly, in order to provide certainty, it is proposed to – (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the "due date" under this clause; and (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies. These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years. 7. On this issue of disallowance ld. AR of the assessee also relied upon the judgment of this co ordinate bench in the case of Harish Clays in ITA No. 154/JP/2021 dated 01.12.22021 where in the disallowance was deleted not only that the jurisdiction High Court in the case of the assessee the amount is not disallowable. 8. Since, the CPC disallowed the figure based on the Tax Auditor’s Report and ld. AR filed clarification that there is an error in the report. Since this contention requires verification, with the date of payment. 9. Per contra ld. DR in all fairness accepted the legal decision in the assessee’s own case but requested that the figure of payment needs verification as this has been clarified by the assessee now and therefore, requested to remand back the issue for verification of payment date to the file of the AO. 10. The ld. AR accepted the plea of the DR that for this limited issue of correction in date agreed that let it be verified by the AO but the substantiate question that is decided if the assessee has paid the amount, which is outstanding at the year end, paid before the due date of filling the return of income the disallowance is not required to be made by the AO in this set-a-side proceeding, which the DR has also agreed. With these observations the Ground no. 1 raised by the assessee is allowed. Ground no. 2 is general in nature does not require any adjudication. 11. In the result the appeal of the assessee is allowed.’’ 6 MA NO. 16/JP/2023 DCIT, CIRCLE -6, JAIPUR VS RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD 3.2 During the course of hearing, the of the ld. AR of the assessee enunciated that there is no apparent mistake in the order of the Tribunal and the Department wants to get reviewed this Tribunal order under the garb of Misc. Application. 3.3 We have heard both the parties and perused the materials available on record including the judgement passed by Hon’ble Supreme Court dated 22-10-2022 in the case of M/s. Checkmate Services Pvt. Ltd. vs CIT-1 in Civil Appeal No. 2833/2016. The question arises as to whether there is an apparent mistake in the order of the Tribunal passed by it in the case of the assessee vide its order dated 30-06-2022. Section 254(2) empowers the Tribunal to rectify any mistake apparent from the record, amend any order passed by it under sub-section (1) and shall make such amendment, if the mistake is brought to its notices by the assessee or the Assessing Officer. The Bench also noted that the Department has simply relied upon the Judgement of Hon’ble Supreme Court in Civil Appeal No. 2833/2016 in the case of M/s. Checkmate Services Pvt. Ltd. (supra) but it has not mentioned that there is apparent mistake in the order of the ITAT passed in the case of Rajasthan State Ganganagar Sugar Mills Ltd. (ITA No.37/JP/2022, A.Y. 2019-20) dated 30- 06-2022 wherein some amendment/ rectification is required. The order was passed by the Bench in the case of the assessee on 30-06-2022 in accordance with that time, situation and prevailing interpretation of law by various Hon’ble High 7 MA NO. 16/JP/2023 DCIT, CIRCLE -6, JAIPUR VS RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD Courts [ including binding judgment of jurisdictional High Court ]. In such a situation, the Bench feels hesitation to concur with the submission of the Department to amend its order. Hence, the Misc. Application filed by the Department is dismissed. 4.0 In the result, the Misc. Application filed by the Department is dismissed. Order pronounced in the open court on 25 /09/2023. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh½ (jkBksM deys'k t;UrHkkbZ) (Dr. S. Seethalakshmi) (RATHOD KAMLESH JAYANTBHAI) U;kf;dlnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 25 /09/2023 *Mishra vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- The DCIT, Circle-6, Jaipur. 2. izR;FkhZ@ The Respondent- Rajasthan State Ganganagar Sugar Mills Ltd.,Jaipur. 3. vk;djvk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZQkbZy@ Guard File MA No.16/JPR/2023) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar