The Assistant Director of Income Tax, CPC, Bangalore V. People Management Services, Mysuru

MA 51/BANG/2023

AI Insights

This case involves a miscellaneous petition filed by the Revenue seeking rectification of an earlier Tribunal order which had deleted the addition on account of disallowance on delayed payment of ESI/PF by the assessee, People Management Services. The Tribunal's initial decision was based on the payment being made before the due date of filing the return under section 139(1) of the Income Tax Act, 1961. However, following a Supreme Court judgment in Checkmate Services Pvt Ltd vs CIT, which clarified the legal position regarding the timing of deductions for employee's and employer's contributions to PF, the Revenue sought a review of the Tribunal's decision. The Tribunal, upon reviewing the Supreme Court's decision, rectified its earlier order and upheld the disallowance made by the Revenue.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124867 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-05-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-05-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 20-02-2023
• Other Referred Cases: Checkmate Services Pvt Ltd Vs CIT, CIT Vs. Saurashtra Kutch Stock Exchange, Honda Siel Power Products Ltd. v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: BHARGAVA; S.N.
• Keywords: Depreciation
• Section: 139(1); 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B’’ BENCH: BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER and SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER MP No.51/Bang/2023 (Arising out of ITA No.541/Bang/2022 Assessment Year : 2019-20 The Income Tax Officer, Ward 1(1), Mysuru. Vs. People Management Services, 1017, 8 th Main, 3 rd Stage, Near Doctors Corner, Gokulam, Mysuru – 570 002. PAN: AAPFP 0099N APPLICANT RESPONDENT Applicant by : Shri Pavan Kumar, Addl.CIT(DR) Respondent by : Shri Bhargava, S.N., CA Date of Hearing : 19.05.2023 Date of Pronouncement : 25.05.2023 O R D E R Per Laxmi Prasad Sahu, Accountant Member This is a miscellaneous petition filed by the Revenue u/s.254(2) of the Income Tax Act, 1961 (Act) praying for rectification of the order passed by this Tribunal in ITA No.541/Bang/2022 for AY 2019-20. 2. The ld. DR submitted that the Tribunal by the order dated 4.8.2022 deleted the addition on account of disallowance on delayed payment of ESI/PF by the assessee on the ground that the same was paid before the due date of filing of return u/s. 139(1) of the Income- tax Act, 1961 [the Act]. He submitted that the Hon’ble Supreme MA No.51/Bang/2023 Page 2 of 5 Court in a recent judgment dated 12 October 2022 Checkmate Services Pvt Ltd Vs CIT, Civil Appeal 2833/2016 [2022] 143 taxmann.com 178 (SC) had decided this issue in favour of the revenue and against the assessee. Therefore, the matter warrants revisit in the wake of Apex Court judgment (supra) and accordingly it was prayed that the order of the Tribunal may be rectified. 3. The ld. A.R. submitted that the addition made by the CPC while processing the return u/s 143(1)(a) of the Act on the issue of ESI & PF is not within the purview of law. 4. We heard the rival submissions and perused the material available on record. It is not disputed that as per the decision of the Hon’ble Supreme Court rendered in the case of Checkmate Services Pvt Ltd (supra) decided the issue on allowability/treatment of ‘delayed’ Employee PF Contribution payment in hands of assessee under provisions of Income Tax Act and held that Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) of Income Tax Act, 1961. The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B and is therefore not lost totally. Therefore, as per the above decision, the disallowance made by the Revenue authorities, were fully justified. MA No.51/Bang/2023 Page 3 of 5 5. The Hon’ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange case 219 CTR (SC) 90 has held that non- consideration of the decision of the jurisdictional high court/Supreme Court constitutes mistake apparent from record and is rectifiable within the meaning of section 254(2) of the Act. In Honda Siel Power Products Ltd. v. CIT 295 ITR 466, the Hon’ble Supreme Court explained the scope of rectification powers u/s/254(2) of the Act, as follows: “Scope of the Power of Rectification 12. As stated above, in this case we are concerned with the application under section 254(2) of the 1961 Act. As stated above, the expression "rectification of mistake from the record" occurs in section 154. It also finds place in section 254(2). The purpose behind enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its Order dated 10.9.2003 allowing the Rectification Application has given a finding that Samtel Color Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record. 13. "Rule of precedent" is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income-tax Act, 1961. When prejudice results from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, the Tribunal was justified in exercising its powers under section 254(2) when it was pointed out to the Tribunal that the judgment of the coordinate bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and MA No.51/Bang/2023 Page 4 of 5 which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case.” 6. Article 141 of the Constitution of India provides that the law declared by Supreme Court shall be binding on all courts within the territory of India. The law laid down by Supreme Court operates retrospectively and is deemed to be the law as it has always been, unless, the Supreme Court, says that its ruling will only operate prospectively. 7. In the light of the law as explained above, there is a mistake apparent on record in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) though rendered subsequent to the order passed by the Tribunal. Therefore, we hold that the disallowance made by the revenue authorities u/s.36(1)(va) of the Act was justified. Consequently, the appeal by the Assessee stands dismissed. 8. In the result, MP of the revenue stands allowed. Order pronounced in the open court on 25 th May, 2023. Sd/- ( Beena Pillai ) Judicial Member Sd/- (Laxmi Prasad Sahu) Accountant Member Bangalore, Dated 25 th May, 2023. /Desai S Murthy / MA No.51/Bang/2023 Page 5 of 5 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. By order Asst. Registrar, ITAT, Bangalore.