CIT APPEAL, MUMBAI V. SWASTIK TOTAL SERVICES PRIVATE LIMITED, MUMBAI SUBARBAN

MA 38/MUM/2023

AI Insights

The case involves the Income Tax Officer (ITO) and M/s Swastik Total Services Pvt. Ltd., where the ITO challenged the ITAT's earlier decision allowing deductions for employee contributions to PF/ESIC that were deposited after the due date but before the filing of the income tax return. The ITAT's initial decision was based on a precedent that was later overruled by the Supreme Court, which clarified that such contributions must be deposited by the due date to qualify for deductions. The revenue filed miscellaneous applications arguing that the ITAT's order was inconsistent with the Supreme Court's ruling, leading to the recall of the ITAT's earlier order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130316 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-05-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-03-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 16-01-2023
• Other Referred Cases: Checkmate Services Pvt. Ltd. Vs. CIT-1, Veritas Infratech Pvt. Ltd., Kalpesh Synthetic Pvt. Ltd. Vs. DCIT, Hindustan Organics Chemicals Ltd. Vs. CIT, Ghatge Patil Transport Ltd. Vs. CIT, Saurashtra Kutch Stock Exchange Ltd. Vs. ACIT, Paris Elys India Private Limited Vs. DCIT, Daryapur Shetkari Sahakari Ginning and Processing Factory V. ACIT, Pamwi Tissues Ltd., CIT Vs. Sun Engineering Works (P) Ltd., UOI & Ors. v/s. Dhanwanti Devi & Ors.
• Laws Referred To: Employees Provident Fund and Miscellaneous Provisions Act, 1952, Employees State Insurance Act, 1948, Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Period of limitation; Retrospective amendment
• Section: 43B; 143(1); 254(2); 43

Judgement Text

P a g e | 1 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M.A. Nos. 38 & 39/Mum/2023 (A.Ys.2018-19 & 2019-20) Income Tax Officer- 13(2)(1), Room No. 147, 1 st Floor, Aayakar Bhavan, M.K. Road, Mumbai Vs. M/s Swastik Total Services Pvt. Ltd. Shop No. G-63, Raghuleela Mega Mall, Off S. VG. Road, Kandivali (West) Mumbai – 400 067 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AARCS0359Q Appellant .. Respondent Appellant by : Richa Gulati Respondent by : Dinkle Haria Date of Hearing 31.03.2023 Date of Pronouncement 24.05.2023 आदेश / O R D E R Per Amarjit Singh (AM): These 2 miscellaneous applications 38 & 39/Mum/2023 are filed against the combined order of the ITAT in the case of the assessee adjudicated on 18.05.2022 for the assessment year 2018-19 and 2019- 20 in respect of allowing the claim of assessee for deduction towards employee’s contribution to provident fund deposited beyond the due date prescribed in the specified act but before the due date of filing of return of income. Since both the MA Nos. 38 & 39/Mum/2023 involves common issue on identical facts, therefore, for the sake of convenience both the miscellaneous applications are being adjudicated together by taking M.A No. 38/Mum/2023 as a lead case and its finding will be applicable as mutatis mutandis to other miscellaneous application. P a g e | 2 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. ITA No.38/Mum/2023 (Revenue’s Appeal) 2. The fact in brief is that the ITAT vide combined order vide ITA No. 371 & 372/Mum/2022 for A.Y. 2018-19 and 2019-20 on 18.05.2022 has allowed the claim of deduction towards employee’s contribution to PF/ESIC to the amount of Rs.10,88,951/- remitted to the government account beyond the due date for payment as specified in PF/ESIC Act but within the due date for filing the return of income after following the decision of the coordinate bench of the ITAT in the case of M/s Veritas Infratech Pvt. Ltd. i.e ITA No. 2450 & 2457/Mum/2021 dated 12.05.2022. 3. The revenue has filed miscellaneous application and submitted that Tribunal vide the aforesaid order has allowed the claim of the assesse with respect to deduction pertaining to amount deposited towards employee’s contribution to PF/ESIC beyond the due date for payment as specified in the PF/ESIC Act but paid before the due date of filing the return of income after following the decision of Veritas Infratech Pvt. Ltd. In this regard, it is submitted that Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT-1 in Civil Appeal No. 2833 of 2016 dated 12.10.2022 held that if the employer did not deposit the amount towards employee’s contribution on or before the due date as prescribed in the EPF/ESIC Act the assessee shall not be entitled to the deduction. 4. During the course of appellate proceedings before us the ld. Counsel submitted that decision of the Hon’ble Supreme Court in the case of M/s Checkmate Services Pvt. Ltd. Vs. CIT-1 in Civil Appeal No. 2833 of 2016 dated 12.10.2022 was rendered much after the order passed by the Tribunal and this matter had attained finality. The ld. Counsel also referred the decision of the coordinate bench of the Tribunal in the case of Kalpesh Synthetic Pvt. Ltd. Vs. DCIT (2022) 96 P a g e | 3 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. ITR (T) 690 (Mum) that in any case no such adjustment could have been made u/s 143(1)(a) of the Act. The ld. Counsel further submitted that even on merit the decision of Hon’ble jurisdictional High Court in the case of CIT(A) Vs. Hindustan Organics Chemicals Ltd. (2014) 366 ITR 1 (Bom) and CIT Vs. Ghatge Patil Transport Ltd. (2014) 368 ITR 749 (Bom) were in favour of the assessee and were not reversed by the Supreme Court. The relevant part of the ld. Counsel submission is as under: “It is also submitted that the decision of the Apex Court in the case of Checkmate Services Private Limited (supra), was rendered purely in the context of merits of section 36(1)(va) of the Act, the issue still arose whether, in any case, disallowance of such payments was within the power u/s 143 (1)(a) of the Act The Hon'ble Jaipur Bench of the Tribunal in the case of Paris Élysées India Private Limited v. DCIT [ITA No. 357/Jpr/22, Order dated 20.02.2023] has allowed the appeal of the assessee on merits, after this Apex Court decision. (v) As such, in any case, the issue is otherwise also debatable, which is very much evident from the range and extent of the controversy that is spread and still going on. (vi) Apart from that, the issue is such that, in a given case, it may become necessary to travel beyond the records. For example, difference between the date of debit of the salary in the profit and loss account and the date of payment of the salary, involvement of grace period, if any, etc. 4. The Appellant most respectfully submits that for interpretation of the phrase mistake apparent from record' useful reference can be drawn from the parent general enactment, Code of Civil Procedure, 1908. The relevant provision of Order XI. VII, Rule 1 of Code of Civil Procedure Code is reproduced as under: (1) Any person considering himself aggrieved-- (a) by a decree or order from which an appeal is allowed but from which no appeal has been preferred. (b) by a decree or order from which no appeal is allowed, or (c) by a decision on a reference from a Court of Small Causes, and who, from the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the decree was passed or order made, 6r on account of some mistake or error apparent on the face of the record, or for any other sufficient reason desires to obtain a review of the decree passed or order made against him, may apply for a review of judgment to the Court which passed the decree or made the order P a g e | 4 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. (2) A party who is not appealing from a decree or order may apply for a review of judgment notwithstanding the pendency of an appeal by some other party except where the ground of such appeal is common to the applicant and the appellant, or when, being respondent, he can present to the Appellate Court the case on which he applies for the review. It is interesting to note that Explanation was added to this provision in 1977, which is as under: "Explanation- The fact that the decision on a question of law on which the judgement of the Court is based has been reversed or modified by the subsequent decision of a superior Court in any other case, shall not be a ground for review of such judgement.' A copy of the relevant pg. 457 of the book published on 'Code of Civil Procedure by Professional Book Publishers (2013 Edition) is enclosed herewith as Annexure- 'A', which also incorporates the legislative intention behind introduction of Explanation. 5. In support of this submission that the Miscellaneous Application filed by the Revenue is not maintainable, reference is made to the following judicial precedents: (i) Jagan Nath Syal v. ITAT [(2002) 123 Taxman 314 (Del) [A subsequent decision rendered by the Supreme Court cannot be a ground for review of the earlier judgements] (ii) CIT v. Reliance Telecom Ltd. [(2022) 440 ITR 1 (SC)] [The powers under section 254(2) of the Act are only to correct and / or rectify the mistake apparent from record and not beyond that. If the order passed by the Tribunal was erroneous on merits, in that case, the remedy available to the aggrieved party is to prefer an appeal before the High Court] 6. With respect to the decision of the Apex Court in the case of ACIT v. Saurashtra Kutch Stock Exchange Ltd. [(2008) 305 ITR 227 (SC)), the issue as to what is the effect of a subsequent decision rendered by the Apex Court was neither a subject matter of the appeal before the Supreme Court, nor this aspect was argued by either of the parties and nor this aspect was specifically adjudicated. In the said case, the issue was regarding non- following of the decision of the Jurisdictional High Court that was already existing at the time of pronouncement of the original order of the Tribunal. What is being relied upon is merely an extract from the judgment of Gujarat High Court that the Apex Court referred at para 41, without the Court giving its adjudication on the aspect. 7. However, in the case of the Appellant, the decision of the Apex Court was not a part of the 'record' before the Hon'ble Tribunal while passing the order dated 18.05.2022 8. It is a well-settled legal position that a judgement rendered by the Apex Court has the highest precedent value and is binding on all subordinate courts, under Article 141 of Constitution of India. However, and at the same time, it is equally a well-settled position on the law of precedent that a ruling of a court is to be P a g e | 5 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. read, understood and interpreted in the context of not only the issue that was under adjudication but also in the context of the points of arguments canvassed by both the sides. Though there is plethora of judicial precedents on this aspect, suffice will be here to refer the judgment of the Apex Court in the case of CIT v. Sun Engineering Works (P) Ltd.-[(1992) 198 ITR 297 (SC)]. rendered in the context of Income-tax Act, 1961 The following extract of the judgment is self- explanatory and illuminating: "It is neither desirable nor permissible to pick out a word or sentence from the judgment of this court, divorced from the context the question under consideration and treat it to be the complete law declared by this court." 9. In the case of UOI & Ors. v/s. Dhanwanti Devi & Ors.-[(1996) 6 SCC 44]. the Apex Court, while dealing with this aspect, observed as under: "9. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in the judgement Every judgment must be read as applicable to the particular facts proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found 10 Therefore, in order to understand and appreciate the binding force of a decision is always necessary to see what were the facts in the case in which the decision was given and what was the point which had to be decided No judgment can be read as if it is a statute. A word or a clause or a sentence in the judgment cannot be regarded as a full exposition of law Law cannot afford to be static and therefore, Judges are to employ an intelligent in the use of precedents (Emphasis supplied) 10. Under the circumstances, the Appellant most respectfully submits that this decision of the Apex Court may not apply to the facts of the case of the Appellant. 11. In fact, at Para 37, 43 & 44 of the decision, the Apex Court has observed as under: 37. In our judgment, therefore, a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari Jurisdiction. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long drawn-out process of reasoning on points where there may conceivably be two opinions Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the record. 43. Salmond in his well-known work states P a g e | 6 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. "(The theory of case law is that a judge does not make law; he merely declares u 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 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...” On the other hand, the ld. Departmental Representative (for short ‘D.R’) submitted as under: “In this regard, on the issue of delayed payment of employees' contribution to PF, ESIC and labour welfare, the Hon'ble Supreme Court vide its order dated October 12, 2022 in the case of M/s. Checkmate Services Private Limited vs CIT in 143 taxmann.com 178 (SC) (2022) in CA No.2833 OF 2016 held that w.c.f. 01.04 1988 the same is not deductible if not paid by 'due date' under Employees Provided fund and Miscellaneous Provident Act, 1952, the Employees Provident Fund Scheme 1952, the Employees State Insurance Act, 1948, the Employees State Insurance (Central), 1950 or any other provident and Superannuation Fund clarifying and overruling contrary decision by the various Hon ble HCs including that of Bombay High Court in M/s. Pamwi Tissues Ltd., [2009] 313 ITR 137, M/s. Ghatge Patil Transports Ltd. In ITA No. 1002 OF 2012 dated 14TH OCTOBER, 2014 and M/s HOCL 366 ITR-1. The relevant part of the judgment is as under: 54. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it 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 deposits the employee's contribution on or before the due date as a condition for deduction. 55.... In the light of the above reasoning, this court is of the opinion that there is no infirmity I the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, don not lay down the correct law. For these reasons, this court does not find any P a g e | 7 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. reason to interfere with the impugned judgment. The appeals are accordingly dismissed. In view of the judgment of Hon'ble Supreme Court in the case of M/s. Checkmate Services Private Limited (Supra), the order of the Hon'ble ITAT to allowing the relief of Rs. 10,88,951/- towards delayed payment of employee's contribution to PF and ESIC needs to be rectified. In view of the above the undersigned herein prays that Hon'ble ITAT may kindly recall its order in ITA No.371/Mum/2022 for A.Y. 2018-19 (Assessee's Appeal) dated 18.05.2022 in its entirely in view of the above facts and consider matter afresh, as there was a mistake apparent in the order of the Hon'ble ITAT. It is also prayed that out of turn hearing may kindly be granted in the aforesaid appeal” 5. Heard both the sides and perused the material on record. Vide the miscellaneous application as referred above the revenue submitted that ITAT vide ITA No. 371/Mum/2022 dated 18.05.2022 has allowed the claim of deduction in respect of late deposit of employee’s contribution towards PF and ESIC u/s 36(1)(va) r.w.s 2 (24)(x) of the Act to the government account beyond the due date as prescribed in the PF/ESIC Act but within the due date for filing the return of income after following the decision of Veritas Infratech Pvt. Ltd. In this regard, the ld. Counsel submitted that date of order passed by the ITAT was 18.05.2022 and the period of 6 months expired on 30.11.2022 therefore, the miscellaneous application filed by the revenue is time barred. We don’t find any merit in the contention of the ld. Counsel that miscellaneous application filed by the revenue is time barred after taking into consideration a decision of Hon’ble High Court of Bombay in the case of Daryapur Shetkari Sahakari Ginning and Processing Factory V. ACIT (2021) 123 taxmann.com 301 (Bombay) wherein it is held that the period of limitation prescribed in Section 254(2) would commence from date when affected party get knowledge of the decision in question and it would not commence from date when order was passed. 6. The other contention of the ld. Counsel that the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. was P a g e | 8 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. rendered much after the order passed by the Tribunal. In this regard, we consider that law laid down by the Hon’ble Supreme Court operates retrospectively and is deemed to be the law as it has always been unless, the Hon’ble Supreme Court says that its ruling will only operate prospectively. 7. The other contention of the ld. Counsel referring to the decision of jurisdictional High Court in the case of CIT vs. Hindustan Organics Ltd. & CIT Vs. Ghatge Patil Transport Ltd., we consider that once the decision of the Hon’ble High Court’s & ITAT overruled by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. with retrospective effect then the very basis of the decision rendered in the referred cases no longer survives. 8. The ld. Counsel submitted that in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC) the issue was regarding non-following of the decision of jurisdictional High Court that was already existing at that time of pronouncement of the original order of the Tribunal. However, in this regard we consider that the ratio laid down in the decision of Hon’ble Supreme Court in the case of CIT Vs. Saurashtra Stock Exchange case 2019 CTR/SC-90 is applicable as per which held that non consideration of the decision of jurisdictional High Court/Supreme Court constitute mistake apparent from record. We consider that it is rectifiable within the meaning of Sec. 254(2) of the Act if the application is made within the period of limitation prescribed in Section 254(2) where the ruling operates retrospectively. 9. We do not find any merit in the contention of the ld. Counsel about the applicability of decision of the coordinate bench in the case of Kalpesh Synthetics (P) Ltd. Vs. DCIT (2022) 96 ITR (T) 690 (Mum) as this decision was rendered prior to the decision of the Hon’bel Supreme Court in the case of Checkmate Services P.Ltd. As per the decision of P a g e | 9 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. the coordinate bench in the case of M/s Salasar Bulaji Ship Breakers Pvt. Ltd. Vs. ACIT vide ITA No. 1947/Mum/2021 dated 12.04.2023 the incorrect claim of PF/ESI is fall within the scope of prima facie adjustment u/s 143(1) 10. We are of the view that Article 141 of the Constitution of India provides that the law declared by Hon’ble Supreme Court shall be bindings on all the court’s within the territory of India. Therefore, we are of the view that though the decision of Hon’ble Supreme Court rendered subsequent to the order passed by the Tribunal and therefore, the order of the Tribunal is to be rectified as per law settled by the Hon’ble Supreme Court. 11. The Hon’ble Supreme Court vide the decision referred as supra set at rest the entire controversy wherein it is held that employer have to deposit the employee’s contribution towards PF/ESIC on or before the due date prescribed in the respective law for availing deduction. 12. In the light of the above facts and findings we do not find any merit in the other submission of the ld. Counsel as referred supra in this order. We find, the law is well settled that the subsequent decision of the Hon’ble Supreme Court would pave the way for the rectification of the Tribunal order u/s 254(2) of the Act. We find that there are merits in the miscellaneous application filed by the revenue, therefore, we recall the impugned order of the Tribunal for adjudicating afresh in accordance with the decision of Hon’ble Supreme Court. Accordingly, the registry is directed to list the appeal in regular course afresh and inform both the sides. The miscellaneous application filed by the revenue is allowed. MA No. 39/Mum/2023 13. The facts and the issue involves in this application is same as we have adjudicated vide MA No.38/Mum/2023 supra therefore applying P a g e | 10 MA Nos.38 & 39/Mum/2023 ITO-13(2)(1) Vs. M/s Swastik Total Services Pvt. Ltd. the finding of ITA No. 38/Mum/2023 as mutatis mutandis this miscellaneous application is also allowed. 14. In the result, both the miscellaneous application filed by the revenue are allowed. Order pronounced in the open court on 24.05.2023 Sd/- Sd/- (Amit Shukla) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 24.05.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.