S. Padmavathy ORDER
N.V. Vasudevan, Vice President
1. This is a Miscellaneous Petition (MP) filed by the Revenue under section 254(2) of the Income Tax Act, 1961 (hereinafter called 'the Act') praying for rectification of the order dated 8.3.2022 passed by this Tribunal in the aforesaid appeal.
2. By the aforesaid order this 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 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. On the above issue, as per the subsequent decision of the Hon'ble Supreme Court rendered in the case of CHECKMATE SERVICES PVT. LTD VS. CIT-1 in CIVIL APPEAL 2833/2016 vide its judgment dated 12th October 2022 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.
3. Through this miscellaneous petition, the Revenue seeks an order to reverse the order of the Tribunal and hold that the disallowance of deduction by the revenue authorities u/s. 36(1)(va) of the Act is fully justified and dismiss the appeal of the assessee.
4. Notice of this MP for the hearing on 6.1.2023 was issued to Assessee on 9.12.2022 by RPAD to the Assessee. Since the Bench did not function on that day, the case was adjourned to 10.2.2023. When the case was called for hearing none appeared for the Assessee. We therefore proceed to decide the MP after hearing the submission of the learned DR who relied on the averments in the MP.
5. We have considered the contentions of the revenue in the MP and We are of the view that 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 MANU/SC/8241/2007 : 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 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 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 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. The orders of the Tribunal will stand modified/rectified accordingly.
8. In the result, MP stands allowed.
Pronounced in the open court on the date mentioned on the caption page.
© Manupatra Information Solutions Pvt. Ltd.