ADIT, CPC, Bengaluru V. Sunila Sahu, Angul

MA 23/CTK/2022

AI Insights

This case involves a miscellaneous application by the revenue seeking rectification of an earlier ITAT order which allowed deductions for employees' contributions to PF and ESI. The revenue's application was based on a subsequent Supreme Court decision in Checkmate Services Pvt. Ltd. vs. CIT, which held that such contributions are not deductible if not paid within the statutory due dates. The ITAT initially allowed the application, recalling its earlier order. However, upon re-examination in light of the Supreme Court's decision, the ITAT found that the contributions were indeed not allowable under the specified sections of the Income Tax Act, leading to the dismissal of the assessee's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127024 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-01-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-01-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 06-12-2022
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT, CIT vs. Suman Tea & Plywood Industries, CIT vs. ITAT, P.T. Manuel and Sons vs. Commissioner of Income-Tax, Honda Siel Power Products Ltd. vs. CIT, Asst. CIT vs. Saurashtra Kutch Stock Exchange Ltd., Lachman Dass Bhatia Hingwala (P.) Ltd. vs. Asst. CIT, Nirakar Security & Consultancy Services Pvt. Ltd vs ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Rectification of order
• Section: 43B; 37(1); 254(2)

Judgement Text

आयकर अऩीऱीय अधधकरण, कटक न्यायऩीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER Miscellaneous Application No.23/CT K/2 022 (Ar i s i n g o u t o f I T A N o .07/ C T K / 2 0 22) (ननधाारण वषा / Asses s m ent Year :2019-2020) ACIT, Circle-1(1), Bhubaneswar Vs Sunila Sahu, Gotamara, Banarpal, Angul-759128 PAN No. :AOVPS 2242 B (अऩीऱाथी /Appellant) .. (प्रत्यथी / Respondent) ननधााररती की ओर से /Assessee by : None राजस्व की ओर से /Revenue by : Shri S.C.Mohanty, Sr.DR स ु नवाई की तारीख / Date of Hearing : 13/01/2023 घोषणा की तारीख/Date of Pronouncement : 13/01/2023 आदेश / O R D E R Per Bench : This miscellaneous application filed by the revenue is arising out of the order dated 20.09.2022, passed by this Tribunal in ITA No.07/CTK/2022 for the assessment year 2019-2020. 2. None appeared on behalf of the assessee. However, a written submission has been filed on behalf of the assessee, which reads as under :- 1. Honble ITAT, Cuttack Bench has allowed Employees' contributions to PF & ESI in ITA No. 07/CTK/2022. The appellant has now sought rectification of the order in ITA No. 07/CTK/2022 passed on 20.09.2022 on the strength of the Apex Court decision in the civil Appeal no. 2833 of 2016 dated 12.10.2022 wherein Employees' contribution to PF and ESI are to be disallowed under section 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act. If M.A. No. 23/CTK/2022 is allowed it will tantamount to recalling the original order and making fresh order which is not permitted on the strength of judgments cited below and provisions of law. MA No.25/CTK/2022 2 2. Section 254(2) provides that, The Appellate Tribunal may, at any time within six 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 any record passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer. From the above it is transparent that The Appellate Tribunal can rectify its own order within six months from the end of the month in which the order was passed. Further, it can rectify any mistake apparent from the record. These issues are explained below on the basis of judgments cited here under. 3.1 Mistake which can be rectified must be clerical, grammatical, arithmetical, or like nature, which could be detected without re- argument or reappraisal of facts. The expression 'mistake apparent on the record', it is well-settled, means a mistake either clerical or grammatical or arithmetical or of like nature, which can be detected without there being any necessity to re- argue the matter or to re-appraise the facts as appearing from the records. If the document is not taken into consideration by the lower authorities and is not produced before the Tribunal, when it considered the matter and passed the order, it cannot be said that the order of the Tribunal contains a mistake since it does not discuss such document. The following case citations decide the issue of mistake apparent from the record. Similarly, if a plea founded on a document is not at all raised before the Tribunal, it cannot be said that the order of the Tribunal contains an error apparent on the record - CIT v. Suman tea & plywood Industries (p.) Ltd. [1997] 94 Taxman 305 (Cal). It has been held that the word mistake is an ordinary term but in taxation law, it has special significance or contextual connotation. "Mistake" means to understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault. "Apparent" means visible; capable of being seen; easily seen, plain. A mistake which can be rectified under section 254(2) of the Act is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration as held in CIT v. ITAT [1992] 196 ITR 590 (Orissa). The Bombay High Court had held in CIT v. Ramesh Electric and Trading Co. [1993] 203 ITR 497 (Born) held that the failure of the Tribunal to consider an argument advanced by either party for arriving at a decision is not an error apparent on the face of the record, although it may be an error of judgment. An error of judgment is not the same as mistake apparent from the MA No.25/CTK/2022 3 record and cannot be rectified by the Tribunal under section 254(2) as held in CIT v. ITAT (supra). Appeal to Appellate Tribunal - rectification of mistakes - power of Tribunal of rectify mistake - error must be apparent from record - Tribunal allowing rectification application filed by Department on sole ground of contradiction in its earlier orders and assessee had not filed rectification petition in subsequent case - no error apparent on face of record - Tribunal wrongly allowed rectification application filed by department - Income- Tax Act, 1961, s. 254(2) - P.T. Manuel and Sons v. Commissioner of Income-Tax [2021] 434 ITR 416 (Ker). 3.2 Hon'ble jurisdictional High Court has decided the issue of recalling/rectifying the order of Appellant Tribunal in the following cases. The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. Recalling the entire order would mean passing of fresh order. That does not appear to be the legislative intent - CIT v. ITAT [1992] 196 ITR 640 (Ori). What the Tribunal is entitled to do in exercise of power under section 254(2) is to rectify an apparent mistake available from the record and not to review its own decision or to rewrite a fresh judgment. Substitution of two paragraphs in the original order of the Tribunal by a fresh paragraph amount to rewriting of its judgment and it is not permissible - CIT v. ITAT [1994] 2010 ITR 397 (Ori). 3.3 Hon'ble High Courts and Supreme Court have decided the scope of rectification in the following cases: - When prejudice results from an order attributable to Tribunal's mistake, error or omission, then it is the duty of Tribunal to set it right; Tribunal was justified in exercising its powers under section 254(2) when it was pointed out to Tribunal that judgment of co-ordinate Bench was placed before Tribunal was original order came to be passed but it had committed a mistake in not considering material, which was already on record - Honda Siel Power Products Ltd. V. CIT [2007] 165 Taxman 307{SC). While exercising power of rectification under section 254(2), Tribunal can recall its order in entirety if it is satisfied that prejudice has resulted to party which is attributable to Tribunal's mistake, error, omission and which error is a manifest error and it has nothing to do with doctrine or concept of inherent power of review. When justification of an order passed by Tribunal recalling its own order is assailed in a writ petition, it is required to be tested on anvil of law laid down by Apex Court in Honda Siel Power Products Ltd. v. CIT [2007] 165 Taxman 307 and Asst. CIT v. Saurashtra Kutch Stock MA No.25/CTK/2022 4 Exchange Ltd. [2008] 173 Taxman 322 (SC). Decision rendered in Honda Siel Power Products Ltd.'s case{supra) by Apex Court is an authority for proposition that Tribunal, under certain circumstances, can recall its own order and there is no absolute prohibition - Lachman Dass Bhatia Hingwala (P.) Ltd. v. Asst. CIT [2011] 196 Taxman 563/ [2010] 8 taxman.com 301 (Delhi){FB). Conclusion in a judgment may be inappropriate. Conclusions may even be erroneous. Such inappropriate or erroneous conclusions per se do not constitute mistakes apparent from the record. However, non-consideration of a being decision of jurisdictional High Court or Supreme Court can be said to be a mistake apparent from the record as held in Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 (SC); [2008 14 SCC 171. Appeal to Appellate Tribunal - power of Tribunal - power to rectify mistakes - scope of - no power to recall order and re- hear entire appeal on merits - that department went into merits and parties filed detailed submissions will not enable Tribunal to pass order dehors scope of provision - where Tribunal decides merits erroneously remedy of aggrieved party is to appeal before High Court - Income-Tax Act, 1961, s. 254(2) - Commissioner of Income-Tax v. Reliance Telecom Limited [2022] 440 ITR 1 (SC). 3.4 From the above it can be inferred that rectification under section 254(2) can be made by Hon'ble ITAT in case the documents, judgments of jurisdictional High Court and Supreme Court are not considered while passing the order as decided in Saurashtra Kutch Stock Exchange Ltd. case. In this case Hon'ble Supreme Court has decided that judgments of Jurisdictional High Court and Supreme Court are to be considered when they are available. If the judgment of jurisdictional High Court and Supreme Court are passed subsequent to the order of ITAT it cannot be concluded that the order was erroneous. The aggrieved party can move the High Court to address his grievances. In this case judgment of Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. came after Hon'ble ITAT, Cuttack Bench passed the order. 4. Further, even if the employees' contributions to PF & ESI are disallowed u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act they are to be allowed under section 37(1) of I.T. Act as business expenses. Genuine expenses cannot be disallowed for ever. Section 36(1)(va) and 2(24)(x) disallows for one year's claim for that year, but this disallowance should not continue for all years. It means these liabilities should be allowed in the year of payment. In this case the original order was passed on 20.09.2022 whereas the Apex Court in the Civil Appeal No. 2833 of 2016 in the case of Checkmate Services Pvt. Ltd. has MA No.25/CTK/2022 5 passed the order on 12.10.2022. So, on 20.09.2022 Hon'ble ITAT, Cuttack Bench was not obviously aware of this judgment which was not passed by that date. So, on 20.09.2022 Hon'ble ITAT, Cuttack Bench has not passed erroneous order. Hence, there is no ground to rectify the order. PRAYER It is therefore prayed before your honour not to recall/rectify the order made on 20.09.2022 in the case of ITA No. 07/CTK/2022. And for which act of your kindness the respondent as in duty bound shall ever pray. 3. It was submitted by the ld.Sr. DR that the issue was squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd Vs. CIT rendered in Civil Appeal No.2833 of 2016 dated 12.10.2022, reported in [2022] 143 taxmann.com 178 (SC),, wherein it has been held that PF & ESI which has not been paid before the due date under the respective Acts cannot be allowed in view of the provisions of Section 36(1)(va) r.w.s.2(24)(x) of the Act. It is submitted that once the Hon’ble Supreme Court decides an issue, it is a law as is to be understood and as the Tribunal’s order was not in conformity with the order of the Hon’ble Supreme court in the case of Checkmate Services (P.) Ltd. (supra), the same is liable to be recalled. 4. We have considered the submissions of the ld. Sr. DR along with the written submission of the assessee. Admittedly, in respect of the issue of payment of PF & ESI under the respective Acts, the issue is now squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. (supra). Admittedly, once the Hon’ble Surpeme Court decides on the legality of a particular section and the interpretation thereof, such interpretation has the effect from the date MA No.25/CTK/2022 6 of incorporation of the said proviso. This being so, admittedly, there is a mistake apparent from the record in the order of the Tribunal. Consequently, the order dated 20.09.2022 passed by the Tribunal in ITA No.07/CTK/2022 stands recalled and restored to its original number. 5. Thus, the miscellaneous application filed by the revenue is allowed. 6. Simultaneously, the appeal being ITA No.07/CTK/2022 is heard on the recalling order passed as above today i.e. on 13.01.2023. 7. Ld Sr. DR submitted that the issue is now squarely covered by the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd Vs. CIT rendered in Civil Appeal No.2833 of 2016 dated 12.10.2022, reported in [2022] 143 taxmann.com 178 (SC), wherein, the Hon’ble Supreme Court has categorically held that if the employees contribution to PF and ESI has been paid beyond the time prescribed under the relevant PF Act, then same is not allowable under section 43B of the Act even after the payment has been made before the due date of filing of return under the Income tax Act. It was the submission that the amount of employees contribution to PF and ESI, which has not been paid within the due date as prescribed under the relevant Act, has been held by Hon’ble Supreme Court to be not allowable u/s.36(1)(va) of the Act. It was the submission that the Hon’ble Supreme Court in paras 52 & 53 has also categorically held that the provisions of section 43B would not apply to the employees’ contribution to PF and ESI. 8. We have considered the submissions of ld. Sr. DR and the facts of the case. Admittedly, the Hon’ble Supreme Court in the case of MA No.25/CTK/2022 7 Checkmate Services Pvt Ltd(supra) has categorically held that the employees contribution to PF and ESI to the extent it is not paid within due date prescribed under the PF Act, is not allowable u/s.36(1)(va) of the Act. The Hon’ble Supreme Court has also admittedly held that the provisions of section 43B of the Act would not apply to the provisions of section 36(1)(va) of the Act in respect of employees contribution. Respectfully following the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd (supra), we are of the view that the delayed payment in respect of employees contribution to PF and ESI is not allowable. 9. In the case of Nirakar Security & Consultancy Services Pvt Ltd vs ITO in ITA No.98/CTK/2022 for Assessment Year 2016-17, order dated 17.10.2022, the Co-ordinate Bench of this Tribunal after considering the arguments of ld AR, has restored the issue to the file of the Assessing officer with the following directions: “6. Liberty is granted to the ld AR to make all submissions in respect of allowability of disallowed contribution of the employees to PF and ESI under other relevant provisions in the interest of justice. This direction is being given because ld AR has submitted that as the amount is not allowable under section 36(1)(va) of the Act and same is also not covered under section 43B of the Act, the amount of delayed contribution to PF and ESI in respect of employees contribution would be treated as income in the hands of the assessee u/.s.2(24)(x) and on subsequent payment of the same, it would be a business expenditure, which can be claimed u/s.37(1) of the Act. We are not expressing any opinion in regard to his arguments as it has not been examined by the lower authorities. Liberty is also granted to the assessee to raise all arguments as are found necessary by him before the lower authorities.” MA No.25/CTK/2022 8 10. As the issue in the present appeal is also identical to the issue in the case of Nirakar Security & Consultancy Services Pvt Ltd.,(supra), on identical findings the issue in this appeal is restored to the file of the AO for re-adjudication after granting the assessee adequate opportunity of being heard. 11. Thus, appeal of the assessee stands partly allowed for statistical purposes. 12. In the result, miscellaneous application filed by the revenue is allowed and the appeal of the assessee is partly allowed for statistical purposes. Order dictated and pronounced in the open court on 13/01/2023. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 13/01/2023 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : आदेशान ु सार/ BY ORDER, (Assistant Registrar) आयकर अऩीऱीय अधधकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पवभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//