DCIT 14(1)(1) , MUMBAI V. MASTER POLISHERS PRIVATE LIMITED, Mumbai

MA 332/MUM/2023

AI Insights

The case involves Masters Polishers Private Limited, which had previously won an appeal allowing deductions for employees' contributions to PF/ESI, which were deposited before the due date of filing the return of income. The Revenue filed a Miscellaneous Application seeking recall of this order, arguing that the Tribunal's decision was contrary to the Supreme Court's ruling in Checkmate Services Pvt Ltd v. CIT, which held that such contributions must be deposited by the due date specified under the relevant Act to be deductible. The Tribunal agreed with the Revenue, recalling its earlier decision and setting the stage for a new hearing on the merits of the case.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123544 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-08-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 24-04-2023
• Other Referred Cases: Checkmate Services (P.) Ltd. vs. Commissioner of Income Tax-1, Daryapur Shetkari Sahakari Ginning and Pressing Factory v. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Tax effect; Period of limitation; Time period of passing order
• Section: 43B; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F”, MUMBAI BEFORE SHRI VIKAS AWASTHY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER MA.No. 332/MUM/2023 [ARISING OUT OF ITA NO. 1762/MUM/2022 (A.Y: 2020-21)] DCIT – 14(1)(1) Room No. 432, Aayakar Bhavan M.K. Road, Mumbai - 400020 v. Masters Polishers Private Limited S-02, Suchita CHS Ltd., 60A Kallina Church Cross Road Santacruz (E), Mumbai - 400029 PAN: AABCM4627P Appellant Respondent Assessee Represented by : None Department Represented by : Shri Ashok Kumar Ambastha Date of conclusion of Hearing : 18.08.2023 Date of Pronouncement : 23.08.2023 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this Miscellaneous Application revenue is seeking for recall of the order passed by the Tribunal in ITA.No.1762/Mum/2022 dated 26.08.2022 for the A.Y. 2020-21. MA.No. 332/MUM/2023 Masters Polishers Private Limited Page No. 2 2. In the Miscellaneous Application revenue has submitted as under: - “In this case, the appeal against the order of the Ld. CIT (Appeals) dated 17.06.2022 were filed before the Hon'ble ITAT by the Assessee (in ITA No. 1762/Mum/2022). The Hon'ble Tribunal heard these appeal. 2. The appeal of the assessee was filed via ITA No. 1762/Mum/2022. The Hon'ble ITAT allowed the assessee appeal by stating that employer's contribution of ESIC and PF which have been deposited by the assessee before the due date of filing of the return of income is not covered by Provisions of section 2(24)(x) of the Act and therefore, it is allowable as deduction. Hon'ble ITAT uphold that disallowance of employee's contribution of Rs. 33,39,614/- are allowable to the assessee as those are deposited before the due date of filing of the return of income. Accordingly, Hon'ble ITAT allowed the assessee's appeal. 3. During the rectification proceedings, it was observed by the Assessing Officer CPC that the assessee had paid employees' contribution of Rs. 33,39,614/-to PF/ESIC beyond due dates specified in the relevant Act. Further, it is observed that as per explanation 1 of clause (va) of section 36(1) of the Act, employees' contribution to PF/ESI is allowable as deduction only if such sum is credited by the assessee to the employee's account in the relevant funds on or before the due date; "due date". On the other hand, as per section 43B of the Act, employer's contribution to PF is allowable as a deduction if it is paid on or before the due date for filing of return of income u/s. 139(1) of the Act. Accordingly, section 43B of the Act covers only employer's contribution and does not cover employee's contribution. Therefore, the decision of the Hon'ble ITAT is not acceptable on merit as per section 36(1)(va) of the Income Tax Act, 1961 which read as under. “...... (va) 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 1. -For the purposes of this clause, "due date" means 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 thereunder or under any standing order, award, contract of service or otherwise." MA.No. 332/MUM/2023 Masters Polishers Private Limited Page No. 3 Further, I find in support of the Revenue, the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P.) Ltd. vs. Commissioner of Income Tax-1 CIVIL APPEAL NO. 2833 OF 2016, wherein held the same. ........t is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction........ In view of the above, the decision of Hon'ble ITAT was not acceptable in principle as the employee's contribution of Rs. 33,39,614/- towards ESIC was deposited after the prescribed due date as specified in section 36(1) (va) of the Income Tax Act, 1961. In this case, tax effect was Rs. 11,35,134/- only which was lower than the prescribed limit for filing further appeal as per CBDT Instruction No. 03/2018 dated 11.07.2018 and the case does not fall under exception clauses mentioned in Para 3 of the said circular and para 10 of the Circular No. 3/2018 as amended vide F.No.279/Misc.142/2007-ITJ(Pt) dated 20.08.2018 & Circular No.23/2019 F.No. 279/Misc-/M- 93/2018-IT](Pt) dated 06.09.2019, further appeal was not recommended in this case. Furthermore, in view of the direction given by the Hon'ble CCIT-3, Mumbai vide letter No. Mum/CCIT-3/Judl./2022-23/1157 dated 17.10.2022 in pursuance to the Hon'ble Supreme Court decision in the case of Checkmate Services P. Ltd. v/s. Commissioner of Income Tax-1, CIVIL APPEAL NO. 2833 OF 2016, a Miscellaneous Application may be filed before the Hon'ble ITAT to safeguard the interest of Revenue on the issue of employees' contribution to PF and ESIC. In view of above mentioned fact, it is prayed (a) The Hon'ble Tribunal be pleased to recall the order dated 26.08.2022 passed in the assesses appeal being ITA No. 1762/Mum/2022 for AY 2020-21; and (b) The Hon'ble Tribunal be pleased to reinstitute the appeal ITA No. 1762/Mum/2022 for adjudication on merit; and The Hon'ble ITAT may decide the appeal on merits.” MA.No. 332/MUM/2023 Masters Polishers Private Limited Page No. 4 3. In spite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought. Ld.DR submitted details of service of notice to the assessee and the relevant service of notice is placed on record. Since none appeared on behalf of the assessee and the issue involved is coved by the decision of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT (supra), therefore, we proceed to dispose of this Miscellaneous Application with the assistance of Ld.DR. 4. At the time of hearing, Ld. DR submitted that the present Miscellaneous Application is filed by the revenue on 25.04.2023 whereas order of the Tribunal is passed on 26.08.2022. In this regard he relied on the decision of the Hon'ble Bombay High Court in the case of Daryapur Shetkari Sahakari Ginning and Pressing Factory v. ACIT [2021] 123 taxmann.com 301 (Bombay), as per which the limitation period commence from the date when affected party got knowledge of decision in question and it would not commence from date when the order was passed. Accordingly, he submitted that the Assessing Officer came to know of the order subsequently. He brought to our notice the order was received by Pr.CIT only on 23.11.2022. Accordingly, he prayed the Miscellaneous Application filed by the revenue is within the limitation period. MA.No. 332/MUM/2023 Masters Polishers Private Limited Page No. 5 5. Further, Ld. DR submitted that in this appeal, the Tribunal has deleted the addition made by the Assessing Officer on account of delayed deposit of employees’ contribution to PF/Employees’ State Insurance (ESI). He further submitted that in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd v. CIT dated 12.10.2022, no deduction is allowable for delayed deposit of employees’ contribution to PF/ESI u/s. 36(1)(va) of the Act. Since the Hon’ble Supreme Court has interpreted the provisions which were in existence from the date, the same have been introduced by the Parliament and, therefore, allowing the said deduction for late deposit of PF/ESI is a mistake apparent from record in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd v. CIT (supra). Accordingly, he submitted that order of the Tribunal need to be recalled. 6. Considered the submissions of Ld. DR and material placed on record, we observe that the present Miscellaneous Application is filed by the revenue within six months from the date of receipt of the order. The revenue has furnished documents to show that order was received in the office of the Pr.CIT on 11.10.2022. As per the decision of the Hon'ble Bombay High Court in the case of Daryapur Shetkari Sahakari Ginning and Pressing Factory v. ACIT (supra) the period of limitation would start from MA.No. 332/MUM/2023 Masters Polishers Private Limited Page No. 6 the date of knowledge of the order and not from the date of pronouncement of the order. Accordingly, present Miscellaneous Application filed by the revenue is within the period of limitation. 7. Further, we observe that in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd v. CIT (supra), the finding of the Tribunal amounts to mistake apparent from record and, therefore, the order of the Tribunal on this appeal is recalled. Thus, we recall the order passed by the Tribunal in ITA.No. 1762/Mum/2022 dated 26.08.2022. The Registry is directed to post the appeal for hearing in due course after issuing notice to both the parties. Accordingly, the Miscellaneous Application filed by the revenue is allowed. 8. In the result, Miscellaneous Application filed by the Revenue is allowed. Order pronounced in the open court on 23 rd August, 2023. Sd/- Sd/- (VIKAS AWASTHY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 23/08/2023 Giridhar, Sr.PS MA.No. 332/MUM/2023 Masters Polishers Private Limited Page No. 7 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum