2022 (11) TMI 1328 - AT - Income Tax

Rectification u/s 254 - period of limitation - non-consideration of the decision of the jurisdictional high court/Supreme Court - Belated deposit of employees contribution towards the EPF and ESI - HELD THAT - As the time limit to file a miscellaneous petition u/s 254(2) of the Act to rectify the order of the Tribunal passed u/s 254(1) of the Act is to be considered is within 6 months from the end of the month in which the order was communicated so as to rectify the mistake passed u/s 254(1) of the Act. Accordingly we admit the miscellaneous petition filed by the revenue as the miscellaneous petition has been filed on 31.10.2022 as it was received only on 25.4.2022 by the revenue authorities and in our opinion miscellaneous petition filed in this case is within time limit allowed u/s 254(2) of the Act and the same is admitted for adjudication. Coming to the merit of the issues raised by the revenue in its miscellaneous petition we not that Hon ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange 2008 (9) TMI 11 - SUPREME COURT 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). 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. 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. 2022 (10) TMI 617 - SUPREME COURT 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 appeal by the Assessee will stand dismissed. The order of the Tribunal will stand modified /rectified accordingly.

Summary

Issues Involved:
1. Timeliness of the miscellaneous petition filed by the revenue under Section 254(2) of the Income-tax Act, 1961.
2. Justification of disallowance on delayed payment of employee's contribution to ESI and PF under Section 36(1)(va) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Timeliness of the Miscellaneous Petition:

The revenue filed a miscellaneous petition under Section 254(2) seeking rectification of the Tribunal's order dated 22.3.2022. The primary objection raised by the appellant was that the petition was time-barred, as it was filed on 31.10.2022, beyond the six-month limit from the date of the order (22.3.2022). The appellant argued that the time limit expired on 30.9.2022.

Conversely, the respondent contended that the limitation period should commence from the date the order was communicated to the revenue authorities (25.4.2022), not the date of the order's passage. The Tribunal examined Section 254(2) and relevant case law, including the Mumbai Tribunal's decision in Powan Kumar Jain vs. Dy. CIT and the Hyderabad Tribunal's decision in Srinivas Sashidhar Chaganty vs. ITO. The Tribunal also referenced the Allahabad High Court's ruling in Vijay Kumar Ruia Vs. CIT, which emphasized that the limitation period should start from the date of communication or knowledge of the order.

The Tribunal concluded that the six-month period should be reckoned from the end of the month in which the order was communicated, thus admitting the miscellaneous petition as timely filed.

2. Justification of Disallowance on Delayed Payment of Employee's Contribution:

The Tribunal initially held that the revenue authorities were unjustified in disallowing the deduction for delayed payment of employee's contribution to ESI and PF, as the payment was made within the due date for filing the return of income under Section 139(1). However, the revenue sought rectification based on the Supreme Court's decision in Checkmate Services Pvt Ltd vs. CIT, which clarified the distinct due dates and consequences for employee and employer contributions under Sections 36(1)(va) and 43B(b) of the Act.

The Supreme Court held that employee contributions must be paid within the due dates specified in the respective Acts, and failure to do so results in a permanent disallowance under Section 36(1)(va). In contrast, employer contributions are subject to deferment of deduction under Section 43B but are not permanently disallowed.

Given this binding precedent, the Tribunal acknowledged a mistake apparent on record and rectified its order, holding that the disallowance made by the revenue authorities under Section 36(1)(va) was justified. Consequently, the appeal by the Assessee was dismissed.

Conclusion:

The Tribunal allowed the miscellaneous petition filed by the revenue, rectifying its earlier order to align with the Supreme Court's ruling in Checkmate Services Pvt Ltd vs. CIT. The disallowance of the deduction for delayed payment of employee's contribution to ESI and PF was upheld, and the appeal by the Assessee was dismissed.