ADIT CPC , BANGALLURU V. MACK SPRINGS PVT. LTD, MUMBAI

MA 375/MUM/2022

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The case involves the Revenue's application for recall of an earlier Tribunal order that had allowed the assessee's appeal regarding disallowance on account of alleged delay in payment of Provident Fund/Employees State Insurance Corporation contributions. The Tribunal's earlier decision was based on a precedent that was later overruled by the Supreme Court in Checkmate Services Pvt. Ltd. v/s CIT. The Revenue argued that the Tribunal's earlier decision did not consider this crucial Supreme Court judgment, which constituted a 'mistake apparent from record' under section 254(2) of the Income Tax Act, 1961. The Tribunal agreed with the Revenue, citing the Supreme Court's retrospective application of judicial decisions and the principle that judges discover or find the correct law rather than make it.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125809 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-04-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-01-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 06-12-2022
• Other Referred Cases: Kalpesh Synthetics Pvt. Ltd. v/s DCIT, Checkmate Services Pvt. Ltd. v/s CIT, ACIT v/s Saurashtra Kutch Stock Exchange, Lakshmi Sugar Mills Co. Ltd. v/s CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 254(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER, AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER M.A. no.375/Mum./2022 IN ITA no.1884/Mum./2021 (Assessment Year : 2019–20) Dy. Commissioner of Income Tax Circle–7(1)(1), Mumbai ................ Appellant (Original Respondent) v/s Mack Springs Pvt. Ltd. 18, Khandelwal Mansion Barrister Nath Pai Marg Cotton Green, Mumbai 400 033 PAN – AABCM8652J ................ Respondent (Original Appellant) Assessee by : Shri Nishil Jain Revenue by : Ms. Mahita Nair Date of Hearing – 27/01/2023 Date of Order – 13/04/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present Miscellaneous Application (“M.A.”) has been filed by the Revenue seeking recall of the order dated 09/05/2022, passed under section 254(1) of the Income Tax Act,1961 (“the Act”) by the Co–ordinate Bench of the Tribunal in assessee’s appeal being ITA no.1884/Mum./2021, for the assessment year 2019–20. Mack Springs Pvt. Ltd. M.A. no.375/Mum./2022 Page | 2 2. During the hearing, the learned Departmental Representative (“learned D.R.”) submitted that the Co–ordinate Bench of the Tribunal allowed the appeal filed by the assessee following its earlier decision rendered in Kalpesh Synthetics Pvt. Ltd. v/s DCIT, in ITA no.1785/Mum./2021, order dated 27/04/2022. The learned D.R. further submitted that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. v/s CIT, [2022] 448 ITR 518 (SC) upheld the disallowance made under section 36(1)(va) of the Act due to delayed payment towards employee’s contribution to Provident Fund (P.F) / Employees State Insurance Corporation (E.S.I.C.). Since the said decision of the Hon'ble Supreme Court was not considered by the Co–ordinate Bench of the Tribunal, therefore, there is a mistake apparent from record which could be rectified under section 254(2) of the Act. 3. On the contrary, the learned Authorised Representative for the assessee (“learned A.R.”) vehemently opposed the prayer for recalling the order. 4. We have considered the rival submissions and perused the material available on record. We find that the issue on merit before the Co–ordinate Bench of the Tribunal in assessee’s appeal was regarding the disallowance on account of alleged delay in payment of P.F. / E.S.I.C. under section 36(1)(va) r/w section 2(24) of the Act. While deciding the aforesaid issue, the Co–ordinate Bench of the Tribunal following its earlier decision rendered in Kalpesh Synthetics Pvt. Ltd. (supra) allowed the appeal filed by the assessee. Subsequently, the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra) held that payment towards employee’s contribution to P.F. / E.S.I.C. Mack Springs Pvt. Ltd. M.A. no.375/Mum./2022 Page | 3 after the due date prescribed under the relevant statute is not allowable as a deduction under section 36(1)(va) of the Act. On the basis of this decision rendered by the Hon'ble Supreme Court, the Revenue has preferred the present M.A. under section 254(2) of the Act. 5. We find that the Hon'ble Supreme Court in ACIT v/s Saurashtra Kutch Stock Exchange, [2008] 305 ITR 227 (SC) held that non–consideration of the decision of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court can be said to be a “mistake apparent from record” which can be rectified under section 254(2) of the Act. We further find that the Hon'ble Supreme Court in Saurashtra Kutch Stock Exchange (supra) also held that the judicial decision acts retrospectively and it is not the function of the Court to pronounce a “new rule”, but to maintain and expound the “old one”. Thus, it was held that the Judges do not make a law, they only discover or find the correct law. The relevant findings of the Hon'ble Supreme Court, in this regard, are as under:– “42. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. 43. Salmond in his well-known work states: “. . . (T)he theory of case law is that a judge does not make law; he merely declares it, and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the Mack Springs Pvt. Ltd. M.A. no.375/Mum./2022 Page | 4 overruling decision. The overruling is retrospective, except as regards matters that are res judicataor accounts that have been settled in the meantime." [Emphasis supplied] 44. It is no doubt true that after a historic decision in Golak Nath v. State of Punjab AIR 1967 SC 1643, this Court has accepted the doctrine of 'prospective overruling'. It is based on the philosophy: "The past cannot always be erased by a new judicial declaration”. It may, however, be stated that this is an exception to the general rule of the doctrine of precedent.” 6. The facts before the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange (supra) were that the decision of the Hon'ble Jurisdictional High Court was available, however, the attention of the Tribunal was not invited to the said decision at the time of the disposal of the appeal. Thus, in these circumstances, the aforesaid findings were rendered by the Hon'ble Supreme Court. 7. The issue now arises whether even a subsequent decision of the Hon'ble Supreme Court, which is binding as per Article 141 of the Constitution of India, can be a basis for rectifying the order under section 254(2) of the Act. We are of the considered opinion that in view of the aforesaid findings of the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange (supra), as noted in para 42-44 of the judgment, the answer to this issue is affirmative. We find that the Hon’ble Delhi High Court in Lakshmi Sugar Mills Co. Ltd. v/s CIT, [2012] 22 taxmann.com 300 (Del.) held that where the Larger Bench of the Hon'ble Supreme Court overrules its earlier decision on which the Tribunal relied on, the said decision of the Tribunal can be rectified under section 254(2) of the Act since the decision of the Hon'ble Supreme Court operates retrospectively. Mack Springs Pvt. Ltd. M.A. no.375/Mum./2022 Page | 5 8. Therefore, respectfully following the aforesaid judicial pronouncements, we find merit in the present M.A. filed by the Revenue seeking recall of the Tribunal’s order on the basis of the subsequent decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra). Accordingly, the order dated 09/05/2022, passed in assessee’s appeal being ITA no.1884/Mum./2021, is recalled for a fresh hearing of the appeal on merits. Needless to mention that both parties shall be at liberty to raise any plea on merits of the appeal at the time of hearing. The Registry is directed to fix the appeal for hearing in due course before the regular Bench, after notice to the parties. 9. In the result, present M.A. by the Revenue is allowed. Order pronounced in the open Court on 13/04/2023 Sd/- SB.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 13/04/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai