DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(2), MUMBAI V. M/S. KALYANIWALLA & MISTRY LLP, MUMBAI

MA 251/MUM/2023

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The case involves the Deputy Commissioner of Income Tax-16(2) as the appellant and M/s Kalyaniwalla & Mistry LLP as the respondent. The Revenue filed a Miscellaneous Application seeking recall/rectification of the ITAT's order dated 10.08.2022, which was initially in favor of the respondent concerning the disallowance of employee's contributions to PF/ESI. The Revenue argued that the ITAT had not considered the Supreme Court's decision in Checkmate Services Pvt. Ltd., which clarified that such contributions are disallowable if paid after the due date. The ITAT initially found the application to be time-barred but later accepted the Revenue's argument that the limitation period should start from the date the order was received by the PCIT, leading to the recall of the original order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299495 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-06-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 15-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 22-03-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. v. CIT, ACIT v. Saurashtra Kutch Stock Exchange Ltd., Daryapur Shetkari Sahakari Ginning and Pressing Factory v. ACIT, Golden Times Service (P.) Ltd. v. DCIT, Sree Ayyankar Spinning & Weaving Mills Ltd. v. Commissioner of Income Tax
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANISH AJUDIA
• Assessee Lawyers: AMEY WAGLE
• Keywords: Period of limitation; Time period of passing order
• Section: 143(1); 254(2); 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JM & SHRI GAGAN GOYAL, AM M . A. No. 2 51/ M u m / 2023 ( Ar i s i n g o u t o f I . T . A. No . 2 87/ M u m / 2022) ( As s e s s m e n t Y e a r : 2018-19) Dy. Commissioner of Income Tax- 16(2), Room No. 625, 6 th floor, Aayakar Bhavan, Mumbai-400020. बनाम/ V s . M/s Kalyaniwalla & Mistry LLP, Esplande House, 2 nd floor, 29, Hazarimal Somani Marg, Fort, Mumbai-400 001. स्थायीलेखासं./जीआइआरसं./P A N N o . A A A F K 7 5 5 4 R (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अऩीराथी की ओय से / Appellant by : Shri Manish Ajudia, DR प्रत्मथी की ओय से/Respondent by : Shri Amey Wagle, AR स ु नवाई की तायीख / D a t e o f He a r i n g : 16/06/2023 घोषणा की तायीख / D a t e o f P r o n o u n c em e n t : 26/06/2023 आदेश / O R D E R Per Gagan Goyal, Accountant Member: By way of this Miscellaneous Application filed on 16.06.2023, the Revenue is seeking recall/rectification of the order of the Tribunal dated 10.08.2022 passed in ITA No. 287/Mum/2022 for assessment year 2018-19. 2. The Ld. Departmental Representative (DR) referred to the Miscellaneous Application and submitted that in view of the decision of Hon’ble Supreme 2 M . A . N o . 2 5 1 / M u m / 2 0 2 3 M/s Kalyaniwalla & Mistry LLP Court in the case of Checkmate Services Pvt. Ltd. v. CIT reported in 143 taxmann.com 178, the employee’s contribution to ESI/PF deposited after the due date of the deposit under the relevant acts, is disallowable in terms of section 36(1) (va) of the Act. He submitted that non-consideration of decision of the Hon’ble Supreme Court has rendered the mistake apparent from record as held by the Hon’ble Supreme Court in the case of ACIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 173 Taxman 322 (SC), therefore, the impugned order of the Tribunal need to be recalled and decided afresh. 3. On the contrary, registry finds that this Miscellaneous Application filed by the Revenue is barred by the limitation (22 Days). It is found that the impugned order was passed on 10.08.2022 and therefore, limitation for filing Miscellaneous Application as provided in section 254(2) of the Act expires on six months from the end of the month in which the order was passed, which falls on 28.03.2023. Whereas, this Miscellaneous Application has been filed on 23.03.2023, therefore, it is beyond the period prescribed for filing of the Miscellaneous Application and hence, the miscellaneous application of the revenue needs to be rejected. 4. In our considered view, limitation for filing miscellaneous application should be reckoned from the date of receipt of the order of the ITAT by the PCIT. It is observe d from record that the order of the ITAT was received in the office of the Ld. PCIT on 23.11.2022 and therefore, limitation for filing miscellaneous application would expire from the end of six months from the date of the receipt of the order of the ITAT, which happen to be 31.05.2023, therefore, the Miscellaneous Application filed on 23.03.2023 by the Revenue is within the limitation period. In support of contention that period of six month for filing the Miscellaneous Application has to be reckoned from the date on 3 M . A . N o . 2 5 1 / M u m / 2 0 2 3 M/s Kalyaniwalla & Mistry LLP which the affected parties got knowledge of the order in question, relied on the decision of the jurisdictional High Court in the case of Daryapur Shetkari Sahakari Ginning and Pressing Factory v. ACIT [2021] 123 taxmann.com 301 (Bombay). 5. We have heard rival submission of the parties on the issue-in-dispute and perused the relevant material on record. As far as the issue of limitation is concerned, the section 254(2) of the Income-tax Act, 1961 (in short ‘the Act’) read as under: “(2) The Appellate Tribunal may, at any time within six months from the month in which the order was passed, with a view to rectifying 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 notice by the assessee or the [ Assessing] Officer: Provided, that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub- section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard.” 5.1 With reference to the provision of section 254(2) of the Act, the Hon’ble Bombay High Court in the case of Daryapur Shetkari Sahakari Ginning and Pressing Factory (supra) has considered the issue of limitation as to from which date the period of six month has to be reckoned. The Hon’ble High Court following the decision of the Hon’ble Delhi High Court in the case of Golden Times Service (P.) Ltd. v. DCIT [2020] 113 taxmann.com 524(Delhi), held that period of limitation for filing the Miscellaneous Application in terms of section 254(2) of the Act should be reckoned from the date of obtaining knowledge of the order by the affected parties. The relevant finding of the Hon’ble Bombay High Court is reproduced as under: 4 M . A . N o . 2 5 1 / M u m / 2 0 2 3 M/s Kalyaniwalla & Mistry LLP “11. The Supreme Court in the case of Sree Ayyankar Spinning & Weaving Mills Ltd. v. Commissioner of Income Tax (2008) 301 ITR 434 (SC),while analysing Section 254 of the Act, prior to the amendment of 2016, while considering a different question, has observed that Section 254 (2) of the Act is divided in two parts. In the first part, the ITAT may, at any time, within four years [as stipulated in the erstwhile provision], from the date of order rectify any mistake apparent from the record and amend an order passed by it under sub-section (1). Under the second part of Section 254 (2) of the Act, provision has been made for the amendment of the order passed by the Tribunal under sub-section (1), when the mistake is brought to its notice by the assessee or the assessing officer through an application. The first part of Section 254 (2) of the Act refers to Suo Moto exercise of the power of rectification by the ITAT whereas the second part refers to rectification and amendment on an application being made by the assessing officer or the assessee pointing out the mistake apparent from the record. 12. As noted above, Section 254(2) of the Act has undergone certain amendments. However, there is no dispute that the provision still retains the distinctive two parts as observed by the Supreme Court in the above noted case. We are presently concerned with a scenario under Section 254 (2) of the Act where the assessee has invoked its jurisdiction seeking rectification / amendment of the order passed by the ITAT. In this situation, the assessee has claimed that it did not have the knowledge of the earlier order passed by the ITAT on 18.10.2016 and the period of limitation of six months should commence from the date of the receipt of the order. In our opinion, the limitation would begin to run when the affected person has the knowledge of the decision. The date when the order was passed cannot be solely determined by referring to the date when the same was signed by the ITAT. We further find that under Section 254 (3) of the Act, the law stipulates that the ITAT shall send a copy of the order passed by it to the assessee and the Principal Commissioner. Further, Rule 35 of the ITAT Rules also requires that the orders are required to be communicated to the parties. For ready reference, Section 254 (3) of the Act and the relevant rule are reproduced herein under: "254. Orders of Appellate Tribunal. xxxxxxxxxxxx (3) The Appellate Tribunal shall send a copy of any orders passed under this section to the assessee and to the Principal Commissioner or Commissioner. 35. Order to be communicated to parties. 5 M . A . N o . 2 5 1 / M u m / 2 0 2 3 M/s Kalyaniwalla & Mistry LLP The Tribunal shall, after the order is signed, cause it to be communicated to the assessee and to the Commissioner." 13. From the above noted provisions, it emerges that the Section and the Rule mandates the communication of the order to the parties. Thus, the date of communication or knowledge, actual or constructive, of the orders sought to be rectified or amended under Section 254(2) of the Act becomes critical and determinative for the commencement of the period of limitation. The ITAT has not applied its mind on this aspect and has been swayed by the literal and mechanical construction of the words "six months from the end of the month in which the order was passed". The ITAT failed to even delve into the question whether the affected party, either actually or constructively, was in knowledge of the order passed by the ITAT.” 5.2 In view of the decision of the Hon’ble Jurisdictional High Court, the decision of the Tribunal in the case of ITO v. Vishwanathan Pudugraman Neelkantan ITA No. 339 & 340/Mum/2020, wherein the limitation period of six month has been reckoned from the date of the passing of the order, is hereby ignored. 5.3 As far as issue on merit is concerned, we find that Tribunal held that issue of employee’s contribution to PF/ESI after due date under the relevant enactment was not subject matter of adjustment u/s 143(1) of the Act as same was issue of debatable nature. But in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra), any payment for PF/ESI paid after the due date under the relevant enactment, is disallowable in terms of section 36(1)(va) of the Act. Since, the interpretation of the law by the Hon’ble Supreme Court is effective since the date of inception of provisions of the Act; therefore, the issue is no longer the debatable. Further, under the provisions of section 143(1) (a) (ii) of the Act, any incorrect claim which is apparent from the information on the return, is liable for adjustment u/s 143(1) of the Act. Therefore, the Impugned order of the ITAT is hereby recalled. Accordingly, the Miscellaneous Application filed by 6 M . A . N o . 2 5 1 / M u m / 2 0 2 3 M/s Kalyaniwalla & Mistry LLP the Revenue is allowed. As both the parties agreed to argue/hear the matter on the same date itself, therefore, both parties were also heard on the ITA also. 6. In the result, the Miscellaneous Application filed by the Revenue is allowed. Order pronounced in the open court on 26.06.2023. Sd/- Sd/- (Aby T Vakey) (Gagan Goyal) (Judicial Member) Accountant Member Mumbai; ददनाांक Dated: 26.06.2023 Rahul Sharma. आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : 1. अऩीराथी / The Appellant 2. प्रत्मथी / The Respondent 3. आमकय आम ु क्त(अऩीर) / The CIT(A) 4. आमकय आम ु क्त / CIT – concerned 5. ववबागीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भ ु ांफई / DR, ITAT, Mumbai 6. गार्ड पाईर / Guard File आदेशान ु सार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीऱीय अधिकरण, भ ु ांफई / ITAT, Mumbai