The Deputy Commissioner Of Income Tax, CPC, Bangalore V. Sri Gajanana Enterprises, Shivamogga

MA 74/BANG/2023

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The case involves the Income Tax Officer, Ward-1, Shivamogga as the applicant and Sri Gajanana Enterprises and M/s. MRM Solutions as respondents. The core issue was the rectification of two separate orders by the Tribunal which had initially deleted the additions made on account of disallowance on delayed payment of ESI/PF by the assessees. The Revenue sought rectification following a Supreme Court judgment which clarified the treatment of delayed payments under the Income Tax Act. The Tribunal's decision to allow the Revenue's petitions was based on the Supreme Court's ruling, which established that the disallowance was justified as the payments were not made within the prescribed due dates.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124219 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-06-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 26-12-2022
• Other Referred Cases: Checkmate Services Pvt Ltd Vs CIT, DCIT v. C. Krishnaiah Chetty Jewellers Pvt. Ltd., 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: CUDDAPPAH RAMESH
• Keywords: Depreciation
• Section: 139(1); 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC “A” BENCH : BANGALORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER MP Nos.74 & 75/Bang/2023 [in ITA Nos.706 & 707/Bang/2021] Assessment year : 2018-19 The Income Tax Officer, Ward-1, Shivamogga. Vs. Sri Gajanana Enterprises, Kandan 4 th Cross, Sharavathi Nagar, Shivamogga – 577 201. PAN: AAQFS 6349J AND M/s. MRM Solutions, Industrial Estate, Sagar Road, Shivamogga – 577 201. PAN : AAUFM 3256G APPLICANT RESPONDENT Applicant by : Shri Ganesh R. Ghale, Standing Counsel Respondent by : Shri Cuddappah Ramesh, CA Date of hearing : 23.06.2023 Date of Pronouncement : .06.2023 O R D E R These miscellaneous petitions are filed by the Revenue u/s.254(2) of the Income Tax Act, 1961 (Act) praying for rectification of the two separate orders, both dated 23.05.2022 passed by this Tribunal in the respective appeals in respect of two different assessees relating to AY 2018-19. MP Nos.74 & 75/Bang/2023 Page 2 of 6 2. The ld. DR submitted that the Tribunal by the aforesaid orders 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 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. AR 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. The ld. AR of the assessee objected that the miscellaneous application filed by the revenue is not in the proper way and submitted that it was drafted on 31.10.2022 and MP was filed on 27.12.2022, whereas the approval was received from the Pr.CIT on 20.12.2022. Therefore the application filed by the Revenue is before the approval obtained from the Pr.CIT and hence the miscellaneous application should be rejected. 4. I have 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 MP Nos.74 & 75/Bang/2023 Page 3 of 6 Pvt Ltd (supra) it 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. Reliance is placed on the order of this Tribunal in the case of DCIT v. C. Krishnaiah Chetty Jewellers Pvt. Ltd. in MP No.135/Bang/2022 dated 03.01.2023 where the issue of disallowance u/s. 143(1)(a) has also been dealt. 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 MP Nos.74 & 75/Bang/2023 Page 4 of 6 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 MP Nos.74 & 75/Bang/2023 Page 5 of 6 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.” 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 respective appeals by the Assessees stand dismissed, accordingly the MPs filed by the revenue are allowed. 8. The ld. AR pointed out that the MP was filed on 27.12.2022 whereas the approval from the Pr.CIT was obtained on 20.12.2022. In this regard, the Registry of the ITAT Bangalore has not pointed out any defect in the MP and hence this objection is rejected. A query was also raised to the ld. AR if there is any specific format for filing MP and the ld. AR submitted there was no particular format, therefore, this objection is also rejected. MP Nos.74 & 75/Bang/2023 Page 6 of 6 8. In the result, the miscellaneous petitions by the revenue are allowed. A common order passed shall be kept in respective case file. Pronounced in the open court on this 28 th day of June, 2023. Sd/- (LAXMI PRASAD SAHU ) ACCOUNTANT MEMBER Bangalore, Dated, the 28 th June, 2023. /Desai S Murthy / Copy to: 1. Applicant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.