Assistant Director of Income Tax, CPC Bangalore V. A G Enviro Infra Projects Pvt Ltd, Thane

MA 348/MUM/2022

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The case revolves around a Miscellaneous Application (MA No.348/Mum/2022) filed by the Revenue under section 254(2) of the Income Tax Act, seeking rectification or recall of a Tribunal order that had favored the assessee, M/s. AG Enviro Infra Projects Pvt. Ltd. The original dispute concerned the disallowance of employee's contributions to provident fund and ESIC under section 36(1)(va) of the Act, which the Tribunal had initially decided in favor of the assessee based on a Supreme Court judgment. However, following a recent Supreme Court decision in Checkmate Services Pvt. Ltd. vs. CIT, which reversed the legal position regarding the timing of such contributions for deduction eligibility, the Revenue sought to rectify the Tribunal's earlier decision. The Tribunal, acknowledging the change in legal precedent, allowed the Revenue's application, leading to the recall of the previous order and restoration of the appeal for re-hearing.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124850 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-02-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-01-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 24-11-2022
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. CIT, Kalpesh Synthetics (P) LTD vs Deputy Commissioner of Income Tax, PR Packaging Service vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: GURUDAS SAWANT
• Section: 143(3); 143(1); 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A”, BENCH MUMBAI BEFORE: SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER MA No.348/Mum/2022 (Arising out of ITA No.110/Mum/2022 (Assessment Year : 2019-20) Asst. Commissioner of Income Tax, Central Circle-2 Thane Room No.13, A-Wing 6 th Floor, Ashar I.T.Park Road No.16-Z, Wagle Industrial Estate Thane (W)-400 604 Vs. M/s.AG Enviro Infra Projects Pvt. Ltd., 1403/04, Dev Corpora Near Cadbury Junction Kopat, Thane-400 601 PAN/GIR No.AAFCA1820L (Applicant) .. (Respondent) Assessee by Shri Gurudas Sawant Revenue by Shri Manoj Kumar Sinha Date of Hearing 20/01/2023 Date of Pronouncement /02/2023 आदेश / O R D E R PER VIKAS AWASTHY (JM): This Miscellaneous Application has been filed by the Revenue u/s.254(2) seeking rectification / recall of the Tribunal order in ITA No.110/Mum/2022 dated 18/05/2022. 2. Shri Manoj Kumar Sinha, representing the Department submits that the assessee in appeal had assailed the addition in respect of disallowance of employee’s contribution to provident fund and ESIC u/s.36(1)(va) of the Act. MA No.348/Mum/2022 M/s. A.G. Enviro Infra Projects Pvt. Ltd. 2 3. Shri Manoj Kumar Sinha, representing the Department pointed that in the light of the recent decision by the Hon’ble Supreme Court of India in the case of Checkmate Services Pvt. Ltd. vs. CIT 143 taxmann.com 178, the order of Tribunal is erroneous and hence, needs to be rectified / recalled. 4. Per contra, Shri Gurudas Sawant appearing on behalf of assessee vehemently defended the Tribunal order and opposed the Miscellaneous Application. The AR of the assessee has filed written submissions. The relevant extract of the same are reproduced hereunder:- “We are in the receipt of Miscellaneous Application u/s 254(2) of the Income Tax Act 1961, filed before Income Tax Appellate Tribunal, Mumbai by Assistant Commissioner of Income Tax, Central Circle 2, Thane for rectifying ITAT order which was issued in our/Assessees favor by relying upon the Judgment of Supreme Court, given in case of Checkmate Services P Ltd & Ors vs. CIT. 448 ITR 518. In this regard we would like to bring to your attention the facts in our case, which are noted below We received a notice u/s 143(1)(a) of Income Tax Act, 1951, dated 14-01- 2020 regarding adjustment to income by disallowing the employee's contribution to Provident Fund & ESIC amounting to Rs 1,24,65,909/- for non-payment of the same before the due dates mentioned under the relevant Acts, to which we objected by quoting Jurisdictional High Court judgments, on time & disagreed for the proposed adjustment. Irrespective of this, disallowance was made in Intimation u/s 143(1) of Income Tax Act, 1961 issued by CPC Bengaluru without giving proper reasons for rejecting the objections raised for notice received u/s 143(1)(a) Only a casually assigned reason was given i.e., "response given is not acceptable", which are purely on a standard template, and cannot be said to be sufficient justification for making an addition to total income or rejecting our stand The CPC Bengaluru had taken up this data from the Clause 20 of Tax Audit report and disallowed the amount of delayed payments while processing the return u/s 143(1) of Income Tax Act, 1961 apparently, by applying the provisions of section 143(1)(a)(iv), which is not correct, as this clause will only come into operation, when the Tax Auditor suggests a disallowance of expenses, and such disallowance is not made by the assesse, in the Return MA No.348/Mum/2022 M/s. A.G. Enviro Infra Projects Pvt. Ltd. 3 of Income. As in Tax Audit report, Tax Auditor merely mentions the due dates of payments and actual date of payments under the provisions of PF and ESIC Acts, made by the assessee Similar view was taken in the recent Mumbai ITAT judgments of 1) Kalpesh Synthetics (P) LTD vs Deputy Commissioner of Income Tax, ITAT, Mumbai H Bench ITA No. 1785/Mum/2021 Source (2022) 36 NYPTTJ 500 (Mumbai). 2) PR Packaging Service vs ACIT, TS-961 ITAT 2022(MUM) (ITA No 2376/Mum/2022 dated 07 th December, 2022) We would also like to point out the fact as noted in the recent judgment of Mumbai ITAT in case of P R Packaging Service vs. ACIT that, Tribunal was conscious of the recent Supreme Court decision in Checkmate Services Private Ltd & Ors vs CIT, where the issue had been decided on merits. However, the Tribunal observed that such a decision was rendered in the context where the assessment was framed under section 143(3) and not under section 143(1)(a) Hence, requesting your good self to kindly consider the above facts and dismiss the Miscellaneous Application u/s 254(2) of the Income Tax Act 1961 filled by Assistant Commissioner of Income Tax, Central, Circle-2, Thane. 5. Both sides heard and written submissions filed by the assessee perused. The Hon’ble Supreme Court of India in the case of Checkmate Services Pvt. Ltd. (supra) has held that the employee’s contribution which was deducted from employees income and was held in trust by assessee-employer as per section 2(24)(x), the said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. The aforesaid decision by Hon’ble Apex Court has reversed the legal position as was followed by the Tribunal at the time of passing the order dated 18/05/2022. Thus, in the light of aforesaid decision by Hon’ble Apex Court, the Tribunal order dated 18/05/2022 needs to be recalled. MA No.348/Mum/2022 M/s. A.G. Enviro Infra Projects Pvt. Ltd. 4 4. In the result, Miscellaneous Application is allowed, Tribunal order dated 18/05/2022 is recalled and ITA No.110/Mum/2022 is restored to its original number. The Registry is directed to list the appeal for hearing in due course after notice to both sides. Order pronounced in the open Court on 3 rd day of February, 2023. Sd/- (S RIFAUR RAHMAN) Sd/- (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 03/02/2023 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//