Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 124323 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
25-05-2023
Appeal Filed By
Department
Order Result
AllowedAllowed
Bench Allotted
A
Next Hearing Date
25-05-2023
Assessment Year
2019-2020
Appeal Filed On
29-03-2023
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER M.P. Nos. 65 & 66/Bang/2023 (in ITA Nos. 770 & 771/Bang/2022) Assessment Years : 2018-19 & 2019-20 The Income Tax Officer, Ward – 1(2)(1), Bangalore. Vs. Shri Muthyala Suryababu, No. 2, 2 nd Cross, Cambridge Road, Halasuru, Bangalore – 560 008. PAN: AGAPS5455P APPELLANT RESPONDENT Assessee by : Shri H. Guruswamy, I.T.P Revenue by : Shri Bipin C N, Addl. CIT (DR) Date of Hearing : 26-05-2023 Date of Pronouncement : 26-05-2023 ORDER PER BEENA PILLAI, JUDICIAL MEMBER These miscellaneous petitions filed by the revenue u/s 254(2) of the Income-tax Act,1961 ['the Act' for short] seeking rectification of order of the Tribunal in ITA Nos. 770 & 771/Bang/2022 dated 06.10.2022. 2. In the aforesaid order dated 06.10.2022, the Tribunal held that the Revenue authorities were not justified in making a disallowance on delayed payment of employee’s contribution to ESI and PF made Page 2 of 5 M.P. Nos. 65 & 66/Bang/2023 (in ITA Nos. 770 & 771/Bang/2022) by the assessee beyond the due date by invoking the provisions of section 36(1)(va) of the Act, but within the due date for filing return of income u/s.139(1) of the Act. The Tribunal followed the decision of Hon'ble Karnataka High Court in case of Essae Taroka (P.) Ltd. reported in (2014) 266 CTR 246. Subsequently on the same issue, Hon’ble Supreme Court in the case of CHECKMATE SERVICES PVT LTD VS CIT-1 in CIVIL APPEAL 2833/2016 vide its judgment dated 12 October 2022 held that allowablity/treatment of ‘delayed’ Employee PF Contribution payment to be taxable in hands of assessee under provisions of Income Tax Act. Hon’ble Supreme Court 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 the Act. It was held that result of any failure to pay within the prescribed dates also leads to different results. Hon’ble Supreme Court was of the opinion that 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) of the Act. On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B of the Act and is therefore not lost totally. Therefore, as per the above decision, the disallowance made by the Revenue authorities, were fully justified. Page 3 of 5 M.P. Nos. 65 & 66/Bang/2023 (in ITA Nos. 770 & 771/Bang/2022) 2.1. Through these miscellaneous petitions, the revenue seeks an order to reverse the order of the Tribunal dated 06.10.2022 and hold that the disallowance of deduction by the revenue authorities u/s.36(1)(va) of the Act is fully justified. 2.2 We note that the issues raised by the revenue in its miscellaneous petitions have been decided by the Hon’ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange case 219 CTR (SC) 90 wherein it is 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. Page 4 of 5 M.P. Nos. 65 & 66/Bang/2023 (in ITA Nos. 770 & 771/Bang/2022) 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 which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case.” 2.3. Article 141 of the Constitution of India provides that the law declared by Hon’ble 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 the law as it has always been unless, the Supreme Court, says that its ruling will only operate prospectively. 2.4 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 and has to be rectified by holding that the disallowance made by the revenue authorities u/s.36(1)(va) of the Act was justified. Consequently, the appeals by the Assessee will stand dismissed. Page 5 of 5 M.P. Nos. 65 & 66/Bang/2023 (in ITA Nos. 770 & 771/Bang/2022) The order of the Tribunal will stand modified /rectified accordingly. In the result, both the miscellaneous petition filed by the revenue stands allowed. Order pronounced in the open court on 26 th May, 2023. Sd/- Sd/- (LAXMI PRASAD SAHU) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 26 th May, 2023. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore
AI Insights
The case involves the Income Tax Officer, Ward \\u2013 1(2)(1), Bangalore as the appellant and Shri Muthyala Suryababu as the respondent. Initially, the Tribunal had ruled in favor of the assessee, stating that the revenue authorities were not justified in making a disallowance on delayed payment of employee's contribution to ESI and PF. However, following a Supreme Court decision that clarified the treatment of delayed employee PF contribution payments, the revenue filed miscellaneous petitions seeking rectification of the Tribunal's earlier order. The Tribunal, acknowledging the Supreme Court's precedent, rectified its order to uphold the disallowance made by the revenue.
