ADIT, CPC, BANGALORE V. FORCEPOINT SOFTWARE CONSULTING INDIA PVT. LTD, MUMBAI

MA 351/MUM/2022

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The case involves a miscellaneous application by the revenue against the order of the ITAT concerning the deduction claimed by M/s Forcepoint Software Consulting India Pvt. Ltd. for employee contributions to PF/ESIC, which were deposited beyond the due date but before the due date for filing the return of income. The revenue sought to recall the ITAT's order based on a Supreme Court decision, arguing that the earlier ITAT decision was incorrect. However, the Tribunal dismissed the application as it was filed beyond the statutory six-month period for rectification of mistakes under Section 254(2) of the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130292 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 29-12-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 24-11-2022
• Other Referred Cases: Checkmate Services Pvt. Ltd. Vs. CIT, BPCL Vs. ITAT, Khushalchand B. Daga vs. T.K. Surendran and others, S. Chenniappa Mudaliar vs. Saurtashtra Kutch Stock Exchange Limited
• Laws Referred To: PF/ESIC Act, Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Period of limitation; Time period of passing order; Set aside
• Section: 11; 254(2); 48; 13

Judgement Text

P a g e | 1 M.A. No.351/Mum/2022 The ACIT, CC-14(1)(2) vs. M/s Forcepoint Software Consulting India Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER M.A. No.351/Mum/2022 (Arising out of ITA No.06/Mum/2022) (A.Y. 2019-20) The ACI T, CC-14(1)(2) Room No. 455, Aayakar Bhavan, M.K. Road, Mumbai – 400 020 Vs. M/s Forcepoint Software Consulting India Pvt. Ltd. Level 2, Kalpataru Synergy Opp. Grand Hyatt, Santacruz (East), Mumbai स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACW6672P Appellant .. Respondent Appellant by : Tejinder Pal Singh Anand Respondent by : Renu Kapoor Date of Hearing 30.12.2022 Date of Pronouncement 30.01.2023 आदेश / O R D E R Per Amarjit Singh (AM): The Miscellaneous Application No. 351/Mum/2022 is directed against the order of the ITAT for assessment year 2019-20 passed on 27.04.2022 vide ITA No. 06/Mum/2022. Vide Miscellaneous Application dated 25.11.2022 the revenue submitted that the claim of assesse with respect to deduction pertaining to the amount deposited towards employee’s contribution to PF/ESIC beyond the due date for payment as specified in PF/ESIC Act was allowed after following the decision of Hon’ble jurisdictional High Court and various decision of ITAT as the same was deposited within the due date for filing the return of income. P a g e | 2 M.A. No.351/Mum/2022 The ACIT, CC-14(1)(2) vs. M/s Forcepoint Software Consulting India Pvt. Ltd. 2. Vide miscellaneous application the revenue submitted that the said disallowance made by the Assessing officer should have been upheld on the basis of recent decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC). 3. During the course of appellate proceedings before us the ld. D.R submitted that disallowance made by the AO be decided on the basis of the recent decision of the Hon’ble Supreme Court as referred supra. On the other hand, the ld. Counsel has vehemently opposed to the miscellaneous application and submitted that the miscellaneous application is not maintainable as same is time barred by limitation as per Sec. 254(2) of the Act. The ld. A.R has contended that after the amendment of Sec. 254(2), the mistake in the order of the Tribunal can be rectified within the period of 6 months and since the assesse has filed this miscellaneous application after the expiry of 6 months of limitation period, therefore the miscellaneous application is not maintainable and liable to be dismissed in limine. 4. Heard both the sides and perused the material on record. The revenue has filed this miscellaneous application on 25.11.2022 for recalling the order of the ITAT, dated 27.04.2022. The provision of rectification of mistake apparent as provided u/s 254(2) is reproduced as under: “(2) 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 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: P a g e | 3 M.A. No.351/Mum/2022 The ACIT, CC-14(1)(2) vs. M/s Forcepoint Software Consulting India Pvt. Ltd. [Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.]” 5. As per the aforesaid provision the time period within which the mistake apparent from record can be rectified has been reduced from 4 years to 6 months by the amendment vide Finance Act, 2016 w.e.f 01.06.2016. The appellant Tribunal at any time within six months from the date of the order, with a view the 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 notice by the assesse or the A.O. In the case of assesse the impugned order was passed by the ITAT on 27.04.2022, the limitation period for rectification of mistake apparent from record as provided only for 6 months from the end of the month in which the order was passed, therefore, the miscellaneous application was required to be filed before the 31.10.2022. However, the revenue has filed the miscellaneous application beyond the period of 6 months, therefore, the same is barred by limitation. The Hon’ble jurisdictional Bombay High Court in the case of BPCL Vs. ITAT on the identical issue as held in para 14 to 20 as under: “(14) The next issue that arises for consideration is whether an application to set right the above error in the order dated 6 December 2007 would be an application to correct the same under ASN 18/25 WP-1740-13.doc Section 254(1) of the Act as contended by the petitioner or under Section 254(2) of the Act as contended by the revenue. It was submitted by the petitioner that Section 254(2) of the Act is not applicable in the present facts as there is no mistake apparent on record in the order dated 6 December 2007. Therefore, such an application to recall the order dated 6 December 2007 would not fall under Section 254(2) of the Act. We find that the order dated 6 December 2007 does suffer from an error apparent on the face of the record namely dismissing the appeal on account of non prosecution in breach of Rule 24 of the Tribunal Rules. The Tribunal has no power to dismiss the application on the ground of non prosecution (as urged by the petitioner and accepted by us) keeping in view Rule-24 of the Tribunal Rules. Therefore, dismissing an appeal for non prosecution in the face of Rule 24 of the Tribunal Rules is an error apparent on the face of the record leading to an irregular order which can be rectified under Section 254(2) of the Act. In fact during the course of hearing the petitioner placed reliance on the Bombay High Court decision in Khushalchand B. Daga vs. T.K. Surendran and others (1972) 85 ITR 48 to support its view that P a g e | 4 M.A. No.351/Mum/2022 The ACIT, CC-14(1)(2) vs. M/s Forcepoint Software Consulting India Pvt. Ltd. the Tribunal cannot dismiss an appeal for default. In the case of Khushalchand B. Daga (supra) this Court held that in view of Rule 24 of the Tribunal Rules 1946 as then existing the Tribunal cannot dismiss an appeal for non prosecution in view of the decision of the Supreme Court in the matter of S. Chenniappa Mudaliar (supra). However, it further also ASN 19/25 WP-1740-13.doc held that such an order dismissing an appeal for default of appearance by the Tribunal was an order which suffered from an error apparent on the face of the record. We are of the view that in the above circumstances if there is an error apparent on the face of the record, Section 254(2) of the Act alone is applicable. Where Parliament has provided a specific provision in the Act to deal with a particular situation, it is not open to ignore the same and apply some other provision. Section 254(2) of the Act empowers the Tribunal to correct/rectify its order only within four years from the date of the order which is sought to be rectified. In this case it is an admitted position that the miscellaneous application is filed on 6 August 2012 i.e. beyond four years of the order dated 6 December 2007 which is sought to be rectified. (15). It was next contended that in any event Section 254(2) of the Act would have no application on the ground that Miscellaneous Application made in August 2012 is under the proviso to Rule 24 of the Tribunal Rules which does not have any period of limitation. Moreover in such cases, it is contended that the application is not to rectify an error in the order but is an application to set aside an order. We find that the miscellaneous application made by the petitioner on 6 August 2012 could not have been made under the proviso to Rule 24 of the Tribunal Rules. This is for the reason that the proviso would be applicable only when the Tribunal has exercised its power on the basis of the ASN 20/25 WP-1740-13.doc main part of Rule 24 of the Tribunal Rules i.e. deciding the appeal on merits after hearing the respondents. This would be evident from the fact that the proviso to Rule 24 of the Tribunal Rules clearly states:- "Provided that where an appeal has been disposed of as provided above and the appellant appears afterwards....." Thus the application of the proviso can only take place where the main part of Rule 24 of the Tribunal Rules has been applied for dismissing the appeal i. e. appeal has been disposed of on merits after hearing the respondents, in the absence of the appellant. In this case admittedly the main part of Rule 24 of the Tribunal Rules has not been applied and therefore, no occasion to invoke the proviso thereto can arise. The proviso to Rule 24 of the Tribunal Rules has no application where there is an error apparent on record. The invocation of the proviso takes place when the Tribunal has correctly disposed of the appeal before it in terms of the main part of Rule 24 of Tribunal Rules. Consequently, in the present facts the issue of application of either Rule 254(1) or (2) of the Act to an application made under the proviso to Rule 24 of the Tribunal Rules does not arise. (16) It was next contended on behalf of the petitioner that the power of the Tribunal under Section 254(2) of the Act is only ASN 21/25 WP-1740-13.doc to rectify an error apparent from the record. It does not empower the Tribunal to recall its earlier order dated 6 December 2007 for which the miscellaneous application was filed on 6 August 2012. It was submitted on behalf of the petitioner that the application under Section 254(1) of the Act would be the only provision under which an application could be made for recall of an order, as P a g e | 5 M.A. No.351/Mum/2022 The ACIT, CC-14(1)(2) vs. M/s Forcepoint Software Consulting India Pvt. Ltd. under Section 254(2) of the Act only the order can be rectified but cannot be recalled. We find that there is an error apparent on record and the miscellaneous application is to correct the error apparent from the record. The consequence of such rectification application being allowed may lead to a fresh hearing in the matter after having recalled the original order. However, the recall, if any, is only as a consequence of rectifying the original order. It is pertinent to note that Section 254(2) of the Act does not prohibit the recall of an order. In fact the power/jurisdiction of the Tribunal to recall an order on rectification application made under Section 254(2) of the Act is no longer res-integra. The issue stands covered by the decision of the Apex Court in Assistant Commissioner of Income Tax vs. Saurtashtra Kutch Stock Exchange Limited (2008) 305 ITR 227 which held that though the Tribunal has no power to review its own order, yet it has jurisdiction to rectify any mistake apparent on the face of the record and as a consequence therefore, Tribunal can even recall its order. In the above case before the Apex Court on 27 October 2000 the Tribunal dismissed the appeal of Stock Exchange holding ASN 22/25 WP-1740-13.doc that it was not entitled to exemption under Section 11 read with Section-12 of the Act. On 13 November 2000 the Stock Exchange filed a rectification application under Section 254(2) of the Act before the Tribunal. The Tribunal by its order dated 5 September 2001 allowed the application and held that there was mistake apparent on the record which required rectification. Accordingly, the Tribunal recalled its order dated 27 October 2000 for the purpose of entertaining the appeal afresh. The revenue filed a writ petition in the Gujarat High Court challenging the order dated 5 September 2001. The above challenge by the revenue was turned down by the Gujarat High Court. The revenue carried the matter in appeal to the Apex Court which also dismissed the appeal of the revenue. The Apex Court observed that the Tribunal in its original order while dismissing the Stock Exchange (assessee's) appeal overlooked binding decisions of the jurisdictional High Court. This mistake was corrected by the Tribunal under Section 254(2) of the Act. The Supreme Court held that the rectification of an order stands on the fundamental principle that justice is above all and upheld the exercise of power under Section 254(2) of the Act by the Tribunal in recalling its earlier order dated 27 October 2000. Thus recall of an order is not barred on rectification application being made by one of the parties. In these circumstances, the application would be an application for rectification of the order dated 6 December 2007 and would stand governed by Section 254(2) of the Act. (17) In the facts of the present case there can be no denial that the order dated 6 December 2007 suffers from an error apparent from the record. The error is in having ignored the mandate of Rule 24 of the Tribunal Rules which required the Tribunal to dispose of the matter on merits after hearing the respondents. In these circumstances, an application for rectification would lie under Section 254(2) of the Act. The recall of an order would well be a consequence of rectifying an order under Section 254(2) of the Act. In these circumstances, we find no reason to interfere with the order of the Tribunal holding that Miscellaneous Application filed by the appellant is barred by limitation under Section 254(2) of the Act as it was filed beyond a period of four years from the order sought to be rectified. (18) Before concluding, we would like to make it clear that an order passed in breach of Rule 24 of the Tribunal Rules, is an irregular order and not a void order. However, even if it is assumed that the order in breach of Rule 24 of the Tribunal Rules is an void order, yet the same would continue to be binding till it P a g e | 6 M.A. No.351/Mum/2022 The ACIT, CC-14(1)(2) vs. M/s Forcepoint Software Consulting India Pvt. Ltd. is set aside by a competent Tribunal. In fact, the Apex Court in the Sultan Sadik v/s. Sanjay Raj Subba reported in 2004(2) SCC 277 has observed as under:- “Patent and latent invalidity In a well-known passage Lord Radcliffe said : “An order, even if not made in good faith, is still an act capable of legal consequences. It bears no brand of invalidity upon its forehead. Unless the necessary proceedings are taken at law to establish the cause of invalidity and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders.” This must be equally true even where the brand of invalidity is plainly visible, for there also the order can effectively be resisted in law only by obtaining a decision of Court.’ Further the Supreme Court in Sneh Gupta v/s. Dev Sarup (2009) 6 SCC 194 has observed: “We are concerned herein with the question of limitation. The compromise decree, as indicated herein before, even if void was required to be set aside. A consent decree as is well known, is as good as a contested decree. Such a decree must be set aside if it has been passed in violation of law. For the said purpose, the provisions contained in Limitation Act 1963 would be applicable. It is not the law that where the decree is void, no period of limitation shall be attracted at all.” Therefore, in this case also the period of four years from the date of order sought to be rectified/recalled will apply as provided in Section 254(2) of the Act. This is so even if it is assumed that the order dated 6 December 2006 is a void order. (19) We shall now answer the questions arising in this case as raised by us in Paragraph 4 above as under:- Question(a): No. The Tribunal has no power in terms of Rule 24 of the Tribunal Rules to dismiss an appeal before it for non prosecution. Question(b): The Miscellaneous application for recall of an order falls under Section 254(2) of the Act and not under Section 254(1) of the Act. Question(c): Does not arise in view of our response to query (b) above. (20) In view of the reasons given herein above, we find the Tribunal was correct in dismissing the Miscellaneous Application by its order dated 10 April 2013 as being beyond the period of four years as provided under Section 254(2) of the Act.” 6. In view of the above facts and after considering the decision of Hon’ble Bombay High Court in the case of BPCL as supra, we consider that miscellaneous application filed by the revenue is beyond the P a g e | 7 M.A. No.351/Mum/2022 The ACIT, CC-14(1)(2) vs. M/s Forcepoint Software Consulting India Pvt. Ltd. limitation as provided u/s 254(2) and the same is not maintainable, therefore, the same is dismissed being barred by limitation. 7. We have adjudicated the identical issue in M.A. No. 349/Mum/2022 i.e ACIT, CC-14(1)(2) Vs. The Gia India Laboratory Pvt. Ltd. therefore, the same is dismissed being barred by limitation. 8. In the result, the miscellaneous application filed by the revenue is dismissed. Order pronounced in the open court on 30.01.2023 Sd/- Sd/- (Sandeep Singh Karhail) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 30.01.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.