Deputy Commissioner Of Income Tax, CPC, Bangalore V. M/s. Sycone CPMC Private Limited, Bangalore

MA 95/BANG/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6387 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-11-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-11-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 14-02-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Period of limitation; Retrospective amendment; TDS
• Section: 15; 143(1); 195; 139(1); 254(2); 113; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC “B” BENCH : BANGALORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER MP No.95/Bang/2023 (in ITA No.260/Bang/2022) Assessment year : 2018-19 The Deputy Commissioner of Income Tax, Central Circle 1(1), Bengaluru. Vs. M/s. Sycone CPMC Pvt. Ltd., No.36, 20 th Main, 2 nd Block, Rajaji Nagar, Bangalore – 560 010. PAN: AAICS 3458H APPLICANT RESPONDENT Applicant by : Shri Ganesh R. Gale, Standing Counsel. Respondent by : Shri Siddesh Nagaraj Gaddi, CA Date of hearing : 10.11.2023 Date of Pronouncement : 16.11.2023 O R D E R This miscellaneous petition is filed by the department seeking rectification of the order of the Tribunal dated 31.05.2022. 2. The ld. DR submitted that the issue of belated payment of employees contribution to PF/ESI account has been decided by the Tribunal in favour of the assessee; whereas the assessee has violated the provisions of section 36(1)(va) r.w. 2(24)(x) of the Act by belated deposit of the employees contribution under the respective Act. He submitted that in the light of the judgment of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. v. CIT in Civil MP No.95/Bang/2023 Page 2 of 14 Appeal No2833 of 2016 dated 12.10.2022 where the issue is held in favour of the department, the order of Tribunal is to be rectified. He further submitted that order of the Tribunal dated 31.05.2022 was not received in the office of the jurisdictional PCIT and subsequent to the decision of Checkmate Services Pvt. Ltd. (supra), the said order was downloaded from the ITAT website on 31.01.2023 and MP filed before the Tribunal on 15.02.2023. 3. The ld. AR submitted that the revenue has filed the miscellaneous petition before the Tribunal beyond the period of six months and therefore it is not maintainable. He further submitted that the assessee filed OGE application on 17.06.2022 before the DCIT, CC 1(1), Bangalore in which the Tribunal order dated 31.05.2022 was enclosed and therefore the limitation period u/s 254(2) should be counted from 17.06.2022 and not from the date of 31.01.2023 as submitted by the ld. DR i.e., the date of downloading the order of the Tribunal by the Office of PCIT. Therefore, the miscellaneous petition filed by the Revenue is beyond the prescribed period of limitation and not maintainable. 4. In the rejoinder, the ld. DR submitted that the order of the Tribunal was not served to the concerned PCIT (CIT) and the department came to know about the order of the Tribunal dated 31.05.2022 only when the order was downloaded on 31.01.2023. Thereafter, immediately, the PCIT granted approval on 13.02.2023 for filing MP and accordingly MP was filed before the Tribunal on MP No.95/Bang/2023 Page 3 of 14 15.02.2023. In this regard, he submitted that an Affidavit dated 23.08.2023 has been filed by the department & placed on record. Therefore, considering that order of Tribunal was downloaded on 31.01.2023 which is the date of receipt of order by the jurisdictional PCIT, the ld. DR submitted that the MP filed by the department is well within time and maintainable. 5. Considering the rival submissions, the first issue to be adjudicated is whether the MP is within time and maintainable or not. After perusing the material on record, I note that as per Affidavit dated 23.08.2023 filed by the department, the order of the Tribunal dated 31.05.2022 was not received and the same has been downloaded on 31.01.2023 from the ITAT website by the office of the PCIT. The assessee filed OGE application dated 17.06.2022 enclosing order of the Tribunal before the DCIT, CC1(1) for the purpose of passing OGE to the Tribunal order and it is the contention of the ld. AR that the department was in the knowledge of the Tribunal’s order dated 31.05.2022 as on 17.06.2022 and hence the date of limitation must be counted from 17.06.2022 i.e., the date of filing OGE application before the Assessing Officer. But, the order of the Tribunal dated 31.05.2022 was not served on the office of the jurisdictional PCIT and this fact has been verified from the Tribunal’s record that the order was inadvertently dispatched on 14.06.2022 to the CIT(TDS) instead of the concerned CIT/PCIT. It is stated that the order of the Tribunal was downloaded by the PCIT from the ITAT website on 31.01.2023. Since the order of the Tribunal dated 31.05.2022 was not served on the MP No.95/Bang/2023 Page 4 of 14 jurisdictional PCIT, the date of downloading of the Tribunal order has to be considered as date of receipt of the order by the concerned PCIT. Further, the PCIT granted approval for filing MP on 13.02.2023 and accordingly MP was filed on 15.02.2023 before the Tribunal. In view of the above facts, the MP filed by the department is within time and maintainable. In this regard, reliance is placed on the Hon’ble Delhi High Court judgment dated 13.01.2020 in the case of Golden Times Services (P) Ltd. [2020] 113 taxmann.com 524 (Delhi) wherein it has been held as under:- “13. From the abovenoted provisions, it emerges that the section and the Rule mandates the communication of the order to the parties. Thus, the date of communication or knowledge, actual or constructive, of the orders sought to be rectified or amended under section 254(2) of the Act becomes critical and determinative for the commencement of the period of limitation. The ITAT has not applied its mind on this aspect and has been swayed by the literal and mechanical construction of the words "six months from the end of the month in which the order was passed". The ITAT failed to even delve into the question whether the affected party, either actually or constructively, was in knowledge of the order passed by the ITAT. 14. The Supreme Court, in the case of D. Saibaba v. Bar Council of India, [2003] 6 SCC 186, had an occasion to consider a similar question in the context of Advocates Act, 1961 for exercising the remedy to review/reference/appeal. In the said case, the expression used in the provision was "sixty days from the date of that order". The Court noticed several other decisions, rendered under different acts and came to the conclusion that the expression "the date of that order" must be construed as meaning the date of the communication or knowledge, actual or constructive of the order sought to be reviewed. The relevant portion of the said judgment has been extracted hereinunder: MP No.95/Bang/2023 Page 5 of 14 "9. So far as the commencement of the period of limitation for filing the review petition is concerned we are clearly of the opinion that the expression "the date of that order" as occurring in Section 48-AA has to be construed as meaning the date of communication or knowledge of the order to the review petitioner. Where the law provides a remedy to a person, the provision has to be so construed in case of ambiguity as to make the availing of the remedy practical and the exercise of power conferred on the authority meaningful and effective. A construction which would render the provision nugatory ought to be avoided. True, the process of interpretation cannot be utilized for implanting a heart into a dead provision; however, the power to construe a provision of law can always be so exercised as to give throb to a sinking heart. 10. An identical point came up for the consideration of this Court in Raja Harish Chandra Raj Singh v. Dy. Land Acquisition Officer [AIR 1961 SC 1500 : (1962) 1 SCR 676]. Section 18 of the Land Acquisition Act, 1894 contemplates an application seeking reference to the court being filed within six months from the date of the Collector's award. It was held that "the date of the award" cannot be determined solely by reference to the time when the award is signed by the Collector or delivered by him in his office. It must involve the consideration of the question as to when it was known to the party concerned either actually or constructively. If that be the true position, then placing a literal and mechanical construction on the words "the date of the award" occurring in the relevant section would not be appropriate. It is fair and just that a decision is communicated to the party whose rights will ultimately be affected or who will be affected by the decision. The knowledge, either actual or constructive, of the party affected by such a decision, is an essential element which must be satisfied before the decision can be brought into force. Thus construed, the making of the award cannot consist merely of the physical act of writing an award or signing it or even filing it in the office of the Collector; it must involve the communication of the said award to the party concerned either actually or constructively. A literal or mechanical way of construing the words "from the date of the Collector's award" was held to be unreasonable. The Court assigned a practical meaning to the expression by holding it as meaning the date when the award is either MP No.95/Bang/2023 Page 6 of 14 communicated to the party or is known by him either actually or constructively. 11. The view taken in Raja Harish Chandra Raj Singh case [AIR 1961 SC 1500 : (1962) 1 SCR 676] by a two-Judge Bench of this Court was affirmed by a three-Judge Bench of this Court in State of Punjab v. Qaisar Jehan Begum [AIR 1963 SC 1604 : (1964) 1 SCR 971] . This Court added that the knowledge of the award does not mean a mere knowledge of the fact that an award has been made; the knowledge must relate to the essential contents of the award. 12.In Asstt. Transport Commr. v. Nand Singh [(1979) 4 SCC 19] the question of limitation for filing an appeal under Section 15 of the U.P. Motor Vehicles Taxation Act, 1935 came up for the consideration of this Court. It provides for an appeal being preferred "within thirty days from the date of such order". The taxation officer passed an order on 20-10-1964/24-10-1964 which was received by the person aggrieved on 29-10-1964. The appeal filed by him was within thirty days — the prescribed period of limitation, calculated from 29-10-1964, but beyond thirty days of 24-10-1964. It was held that the effective date for calculating the period of limitation was 29-10-1964 and not 24-10-1964. 13. In Raj Kumar Dey v. Tarapada Dey [(1987) 4 SCC 398] this Court pressed into service two legal maxims guiding and assisting the court while resolving an issue as to calculation of the period of limitation prescribed, namely, (i) the law does not compel a man to do that which he could not possibly perform, and (ii) an act of the court shall prejudice no man. These principles support the view taken by us hereinabove. Any view to the contrary would lead to an absurdity and anomaly. An order may be passed without the knowledge of anyone except its author, maybe kept in the file and consigned to the record room or the file may lie unattended, unwittingly or by carelessness. In either case, the remedy against the order would be lost by limitation though the person aggrieved or affected does not even know what order has been passed. Such an interpretation cannot be countenanced. MP No.95/Bang/2023 Page 7 of 14 14. How can a person concerned or a person aggrieved be expected to exercise the right of review conferred by the provision unless the order is communicated to or is known to him either actually or constructively? The words "the date of that order", therefore, mean and must be construed as meaning the date of communication or knowledge, actual or constructive, of the order sought to be reviewed." (emphasis supplied) 15. The assessee had challenged the ex parte order dated 18.10.2016 and consequently, keeping in view, the aforesaid decisions, we are of the considered opinion that the starting point of limitation provided under Section 254 (2) of the Act has to commence from the date of the actual receipt of the judgment and order passed by the ITAT which is sought to be the reviewed.” 6. In para 15 of the above judgment, it has been held that the date of commencement of limitation u/s. 254(2) has to be from the date of actual receipt of the judgment. In the present case, as noted above, it is clear the order of the Tribunal was not received in the office of jurisdictional PCIT and it was downloaded by the PCIT office on 31.01.2023 and accordingly MP was filed on 15.02.2023 which is well within time. In the peculiar facts of the present case, the argument of the ld. AR that the limitation for filing MP should be counted from 17.06.2022 which is the date of filing OGE application enclosing Tribunal order before the DCIT, CC1(1) / AO is rejected since it cannot be treated as proper service of Tribunal’s order on the concerned parties as per the ITAT Rules. The service or date of receipt of Tribunal’s order to the PCIT is also relevant, who has downloaded the Tribunal’s order on 31.01.2023 and granted approval for filing of MP No.95/Bang/2023 Page 8 of 14 MP before the Tribunal subsequently. In view of the above, the MP filed by the department is held to be maintainable. 7. On merits, after hearing both the parties and considering the argument of the ld. DR that the order of the Tribunal dated 31.05.2022 is to be rectified in view of the Hon’ble Supreme Court’s judgment in Checkmate Services Pvt. Ltd. (supra), 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) 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/ESI 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. MP No.95/Bang/2023 Page 9 of 14 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. 8. 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 MP No.95/Bang/2023 Page 10 of 14 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.” 9. 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. 10. 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, I hold that the disallowance made by the revenue authorities u/s.36(1)(va) of the Act was justified. Consequently, the appeal by the Assessees is to be dismissed. 11. The Hon’ble ITAT, Mumbai Bench, in the case of M/s. P R Packaging Services Vs. ACIT in ITA No.2376/Mum/2022, for MP No.95/Bang/2023 Page 11 of 14 Assessment Year 2019-20, order dated 07.12.2022 has taken the view that while processing return u/s. 143(1) of the Act, the CPC cannot disallow employees’ contribution to PF and ESI which are paid beyond the due dates for payment under the relevant laws relating to ESI and PF contribution while processing return under section 143(1) of the Act. In this regard, I find that the Hon’ble ITAT had taken the aforesaid view on the basis that the CPC has made the addition based on the provisions of section 143(1)(a)(iv) of the Act which lays down that :- “disallowance of expenditure (or increase in income) indicated in the audited report but not taken into account in computing the total income in the return.” 12. The Tribunal in coming the aforesaid conclusion placed reliance on another Coordinate Bench in the case of Kalpesh Synthetics Pvt Ltd Vs. DCIT 195 ITD 142 (Mumbai) wherein the ITAT, Mumbai Bench took the view that where CPC while processing return u/s.143(1)(a) cannot disallow Employee's contributions (PF/ESI) claimed as deduction by an assessee-employer in respect of employee's contribution towards PF by invoking section 143(1)(a)(iv). The Tribunal held that the said disallowance was based on observations made by tax auditor in audit report which stated that payments of employee contribution were made by assessee after due date specified under respective acts as judicial decisions have taken the view that said disallowance would not come into play when payment was made well before due date of filing income tax return under section 139(1) and therefore information provided in tax audit report would cease to be MP No.95/Bang/2023 Page 12 of 14 relevant and no disallowance can be made during assessment proceedings under section 143(1)(iv)(a). 13. Also, the decision was rendered by the ITAT Mumbai Bench in the case of Kalpesh Synthetics (P) Ltd. (supra) on 27.4.2022 prior to the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd., (supra) and therefore not applicable. The decision rendered by ITAT Mumbai Bench in the case of M/s. P. R. Packaging Services, follows the decision in the case of Kalpesh Synthetics (supra). In paragraph 5 of the order, a reference has been made to the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd., (supra) but has been distinguished on the ground that the said decision was rendered in the context of assessment framed u/s.143(3) of the Act and therefore not relevant for processing returns u/s.143(1) of the Act. If the basis of decision of ITAT Mumbai in the case of Kalpesh Synthetics (supra) is that clause (iv) of Sec.143(1)(a) cannot be invoked to disallow delayed payment of employee’s contribution to ESI and PF made by the assessee beyond the due date as prescribed under the relevant law relating to ESI and PF for deposit of employees share of contribution, by invoking the provisions of section 36(1)(va) of the Act, if the said contributions are paid within the due date for filing return of income u/s.139(1) of the Act, owing to decision of High Court in favour of the assessee and if those decisions of High Courts stand overruled by decision of Supreme Court in the case of Checkmate Services Pvt. Ltd., (supra) with retrospective effect, then the very basis of the decision rendered in the case of Kalpesh MP No.95/Bang/2023 Page 13 of 14 Synthetics(supra) no longer survives. Alternatively, the adjustment can be justified on the basis of the provisions of section 143(1)(a)(ii) of the Act which lays down that adjustment can be made to the total income in the event of “an incorrect claim, if such incorrect claim is apparent from any information in the return”. The form of return contains clause with regard to amounts disallowable u/s.36 of the Act. This view is also supported by a decision rendered by the ITAT, Bengaluru Bench in the case Itek Packz Vs. ITO ITA No.995/Bang/2022, order dated 28.12.2022. In that decision, the Tribunal, after considering the decision rendered in the case of P R Packaging (supra) held following the decision of Cemetile Industries Vs ITO in ITA No.693/Pun/2022, order dated 23.11.2022 that disallowance can be made under section 143(1)(a) of the Act of employees’ share of ESI and PF paid beyond the due date under the relevant law relating to PF contribution and ESI contribution. The Tribunal has placed reliance on the decision of the Hon’ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Vs. DCIT (2022) 138 taxmann.com 571. The Hon’ble Madras High Court took the view that while processing a return under section 143(1)(a) of the Act, apparent incorrect claim can be disallowed. 14. In view of the above, the order of the Tribunal requires to be modified. Since the issue of belated employees contribution to PF/ESI is settled by the Hon’ble Supreme Court in Checkmate Services Pvt. MP No.95/Bang/2023 Page 14 of 14 Ltd. (supra) in favour of the revenue, following the same, the appeal by the assessee stands dismissed. 15. In the result, the miscellaneous petition by the revenue is allowed. Pronounced in the open court on this 16 th day of November, 2023. Sd/- (LAXMI PRASAD SAHU ) ACCOUNTANT MEMBER Bangalore, Dated, the 16 th November, 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.