ZIQITZA HEALTHCARE LTD ,MUMBAI V. PR. COMMISSIONER OF INCOME TAX -4, MUMBAI

ITA 3637/MUM/2025

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The case involves Ziqitza Healthcare Ltd., which appealed against the order of the Principal Commissioner of Income Tax (PCIT), Mumbai, under section 263 of the Income Tax Act, 1961. The PCIT had found the assessment order passed by the Assessing Officer to be erroneous and prejudicial to the interest of the Revenue, as it did not address the delayed deposit of the employee's contribution towards PF/ESIC. The Tribunal examined whether the subsequent Supreme Court decision in Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1, which changed the legal position regarding the timing of such contributions, could retroactively affect the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784199 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2020-2021
• Appeal Filed On: 23-05-2025
• Other Referred Cases: CIT vs. Ghatge Patil Transports Ltd., Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1, CIT vs. G M Mittal Stainless Steel P. Ltd., Vaibhav Maruti Dombale vs. AR ITAT, CIT vs. Canara Bank, Meghalaya Plywood Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KANTI DATTA
• Assessee Lawyers: KETAN L VAJANI
• Keywords: Set aside; Capital receipt
• Section: 143(3); 263

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “G”, MUMBAI Before Justice (Retd.) C V Bhadang, Hon’ble President & Shri Prabhash Shankar, Hon’ble Accountant Member ITA No. 3637/Mum/2025 (Assessment Year : 2020-21) Ziqitza Healthcare Ltd., 23, Sunshine Tower, Senapati Bapat Marg, Delisle Road, Dadar West, Mumbai 400 013. PAN AAACZ1733C Vs. Principal CIT - 4, Mumbai. (Appellant) (Respondent) Appellant By : Shri Ketan L Vajani-CA Respondent By : Shri Arun Kanti Datta – CIT-DR Date of Hearing : 10.11.2025 Date of Pronouncement: 10.11.2025 O R D E R Per Justice (Retd.) C V Bhadang, President: The challenge in this appeal by the assessee is to the order dated 27.03.2025 passed by the Principal Commissioner of Income Tax, Mumbai, [PCIT for short] u/s. 263 of the Income Tax Act, 1961 [Act for short]. The appeal relates to A.Y. 2020-21. 2. The brief facts are that the assessee filed its Return of Income (RoI) for the relevant assessment year which was selected for complete scrutiny, inter alia, on the claim of the allowable deduction in Schedule BP. The Assessing Officer passed an order u/s. 143(3) r.w.s. 144 dated 21.09.2022 in which no variation was proposed. The record discloses that during the course of scrutiny proceedings one of the questions raised in the show-cause notice dated Printed from counselvise.com 2 ITA 3637/Mum/2025 Ziqitza Healthcare Ltd. 26.02.2022 was relating to payment/deposit made by the appellant towards the employee’s contribution of PF/ESIC. The relevant details were set out in para 4 of the show cause notice which details run into 429 entries. In short, the show cause notice required the appellant to give the response on the following aspect “On perusal of the Audit Report it is found from perusal of column 20b that the following payment (Provident Fund, ESIC and Labour Welfare Fund) has not been made within the due date.” 3. In reply, the appellant contended that no disallowance relating to the employee’s contribution towards PF/ESIC can be made u/s. 36(1)(va) of the Act for the payment, if the payment is made before due date for filing the RoI. Reliance in this regard was placed on the decision of the Bombay High Court in CIT vs. Ghatge Patil Transports Ltd. [53 taxmann.com 141] and some other decisions. A perusal of the assessment order passed in the scrutiny proceedings would indicate that although the issue about the alleged delayed deposit of the employee’s contribution towards PF/ESIC has not been specifically dealt with or addressed by the Assessing Officer, eventually no disallowance was made on this count. According to the appellant the Assessing Officer had accepted on the basis of the decision of the jurisdictional Bombay High Court that it is sufficient to make the deposit of the employee’s contribution before the due date for filing the RoI. It is necessary to note that after the assessment order was passed on 21.09.2022, the Supreme Court in the case of Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 [143 taxmann.com 178] held that the employee’s contribution towards PF/ESIC has to be made within the period allowed in the relevant statutory provisions so as to claim it as allowable deduction. The Supreme Court decision came on 12.10.2022, which is subsequent to the assessment order. Printed from counselvise.com 3 ITA 3637/Mum/2025 Ziqitza Healthcare Ltd. 4. The PCIT by the impugned order has come to the conclusion that the assessment order was erroneous in so far as it is prejudicial to the interest of the Revenue within the meaning of section 263 of the Act. The impugned order has been passed placing reliance on the decision of the Supreme Court in Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 (supra). Learned PCIT has also found that the Assessing Officer had not made any enquiry in this regard. It is this order which is the subject matter of challenge in this appeal. 5. We have heard parties. Perused record. 6. It is submitted by the learned AR that at the time when the assessment order was passed the decision of the jurisdictional High Court was holding the field and thus, no fault can be found with the assessment order. It is submitted that the finding by the learned PCIT that no enquiry was mad is factually incorrect and de hors the record. For this purpose, he has referred to para 4 of the show cause notice and the response submitted thereto. It is submitted that the appellant has no control over the manner in which the orders are drafted. He therefore, submitted that the fact that, this aspect has not been specifically adverted to cannot be invoked against the appellant. It is submitted that in any case the Assessing Officer should be deemed to have accepted the contention as no variation was proposed. On behalf of the appellant reliance is placed on the decision of Bombay High Court in the case of Vaibhav Maruti Dombale vs. AR ITAT [178 taxmann.com 447]; and the decision of the Karnataka High Court in the case of CIT vs. Canara Bank [123 taxmann.com 207] and that of Gauhati High Court in the case of Meghalaya Plywood Ltd. vs. CIT [160 Taxman 89] in order to submit that a subsequent declaration of law which changes the material Printed from counselvise.com 4 ITA 3637/Mum/2025 Ziqitza Healthcare Ltd. position cannot be a basis to hold that the order earlier passed would be erroneous. 7. The learned DR has supported the impugned order. It is submitted that the assessment order is clearly erroneous in the face of the law laid down by the Supreme Court in Checkmate Services (P.) Ltd. (supra). 8. We have considered the submissions made. Notwithstanding the detailed reproduction of facts and submissions made, the issue lies in a narrow compass. The issue is whether the subsequent declaration of law by the Supreme Court can make antecedent assessment order erroneous and prejudicial to the interest of the Revenue in terms of section 263 of the Act. Before adverting to the decisions on which reliance is placed, it is necessary to note that indisputably in this case the employee’s contribution of PF/ESIC was paid/deposited after the due date under the relevant acts but before the due date of filing of the return. It is also not in dispute that going by the law as was prevailing then viz. the decision of Bombay High Court in Vaibhav Maruti Dombale (supra) the deduction was allowable if the employee’s contribution is paid/deposited till the due date of filing of the return. It is also a matter of record that this legal position has undergone a change on account of the decision of Supreme Court in Checkmate Services (P.) Ltd. (supra). 9. The issue is no longer res integra. The Supreme Court in the case of CIT vs. G M Mittal Stainless Steel P. Ltd. [263 ITR 255] has, inter alia, held that the subsequent change of law cannot be a ground for exercising power of suo moto revision u/s. 263 of the Act. The following observations of the Supreme Court are apposite: Printed from counselvise.com 5 ITA 3637/Mum/2025 Ziqitza Healthcare Ltd. “Although nobody appears on behalf of the respondent despite service of notice of appeal, we are of the view that the High Court was entirely correct in deciding the question framed in favour of the assessee and against the revenue. Section 263 of the Act requires that the Commissioner can call for and examine the record of any proceeding under the Income-tax Act only on the basis of his being satisfied (1) that the Assessing Officer was erroneous in passing the assessment orders, and (2) that the decision of the Assessing Officer was prejudicial to the interest of the revenue. Needless to say that the satisfaction must be one which is objectively justifiable and cannot be the mere ipse dixit of the Commissioner. In this particular case, the Commissioner has not recorded any reason whatsoever for coming to the conclusion that the Assessing Officer was erroneous in deciding that the power subsidy was capital receipt. Given the fact that the decision of the jurisdictional High Court was operative at the material time, the Assessing Officer could not be said to have erred in law. The fact that this Court had subsequently reversed the decision of the High Court would not justify the Commissioner in treating the Assessing Officer's decision as erroneous. The power of the Commissioner under section 263 of the Act must be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the revenue. The satisfaction of the Commissioner, therefore, was based on no material either legal or factual which would have given him the jurisdiction to take action under section 263 of the Income-tax Act.” (Emphasis supplied) Printed from counselvise.com 6 ITA 3637/Mum/2025 Ziqitza Healthcare Ltd. 10. In the case of Vaibhav Maruti Dombale (supra), before the Bombay High Court a similar question arose, specifically in the context of the subsequent decision of Supreme Court in Checkmates Services (P) Ltd. The Bombay High Court has found that on the date when the original order was passed by this Tribunal on 5.09.2022, the earlier decision so far as the deduction available in respect of deposit of employee’s contribution towards PF/ESIC was holding the filed which was over ruled by the Supreme Court in Checkmates Services (P) Ltd. It was held in the context of rectification provisions u/s. 254(2) of the Act that the subsequent change of law cannot make the order erroneous as displaying mistake apparent on record. It is not necessary to multiply authorities on the point particularly in view of the decision of Supreme Court in the case of G M Mittal Stainless Steel P. Ltd. (supra). However, we may note that the decision of the Karnataka High Court in Canara Bank and Gauhati High Court in Meghalaya Plywood Ltd., are specifically in the context of the powers exercisable by PCIT u/s. 263 of the Act. 11. The learned DR pointed out that the impugned order is not only based on the subsequent change of law in the case of Checkmates Services P. Ltd but the assessment order was passed without making any enquiries or verification as contemplated in clause (a) of Explanation 2 to sub-section (1) of Section 263. We are unable to accept the same. This is on account of the fact that in the show cause notice a specific query was raised regarding employee’s contribution of PF/ESIC, which was replied to. Further, as noticed earlier it is a matter of record that the deposit was made beyond the time allowed in the relevant acts but before the due date of filing of the return. In this view of the matter, there was no further enquiry which could be envisaged or contemplated in the matter. The issue purely turned on the application of law as was existing then. Thus, we are unable to find that the order passed by the Assessing Officer is erroneous Printed from counselvise.com 7 ITA 3637/Mum/2025 Ziqitza Healthcare Ltd. in so far as it is prejudicial to the interest of the Revenue, within the meaning of section 263 of the Act. The impugned order thus, cannot be sustained. 12. In the result, the appeal is accordingly, allowed. The impugned order is set aside. Order pronounced in the open court on 10th November,2025. Sd Sd/- Sd/- [Prabhash Shankar] [Justice (Retd.) C V Bhadang] ACCOUNTANT MEMBER PRESIDENT Mumbai, Dated : 10th November, 2025. SA Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The PCIT, Mumbai. 4. The CIT 5. The DR, ‘G’ Bench, ITAT, Mumbai BY ORDER //True Copy// (Assistant Registrar) Income Tax Appellate Tribunal, Mumbai Printed from counselvise.com "