2023 (8) TMI 1456 - AT - Income Tax

Rectification of mistake u/s 154 - Addition u/s.36(1)(va) r.w.s. 43B - Delayed deposit of employee s share of contributions towards ESI/PF - HELD THAT - On a careful perusal of the statutory provision r.w. settled position of law as had been expounded in various judicial pronouncements, we find that it is only in a case where an order passed by the A.O is found to be suffering from a mistake which is glaring, patent, apparent and obvious from record that a recourse can be sought for rectification of the same u/s.154 of the Act. Our aforesaid view is supported by the landmark judgment of T.S. Balaram ITO 1971 (8) TMI 3 - SUPREME COURT as held that power of the officers mentioned in S. 154 of the Income-tax Act, 1961 to correct any mistake apparent from the record is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an error apparent on the face of the record . Considering the limited scope of Section 154 of the Act, we are of the considered view that as the issue involved in the present appeal, i.e. disallowance u/s.36(1)(va) of the Act of the assessee s claim for deduction of the delayed deposit of employees share of contribution towards ESI/PF at the relevant time was not free from doubts and debate, therefore, the same could not have been brought within the realm of rectification u/s.154. Our aforesaid conviction is all the more fortified by the fact that as the assessee has assailed the order passed by the A.O u/s.154 of the Act, inter alia, on the ground that prior to the judgment of Checkmate Services (P) Ltd. 2022 (10) TMI 617 - SUPREME COURT there were two school of thoughts on the issue in hand, i.e. as to whether or not the delayed deposit of the employees share of contribution towards ESI/PF was allowable as deduction u/s.43B of the Act, therefore, for the said reason no disallowance of the same could have been made u/s.143(1) of the Act. The aforesaid contention of the Ld. AR takes the case of the assessee beyond the scope and ken of Section 154 of the Act. Decided against assessee.

Summary

Issues Involved:
1. Disallowance of Employees' Contribution to ESI/PF under Section 36(1)(va) read with Section 43B of the Income-tax Act, 1961.
2. Validity of adjustments made under Section 143(1)(a) for debatable issues.
3. Maintainability of rectification application under Section 154 for a debatable issue.

Summary:

1. Disallowance of Employees' Contribution to ESI/PF:
The assessee challenged the disallowance of Rs. 21,97,161/- made under Section 36(1)(va) read with Section 43B of the Income-tax Act, 1961, for delayed deposit of employees' contributions towards ESI/PF. The CIT(Appeals) upheld the disallowance, stating that deductions are allowed only if contributions are credited before the due date as per the relevant PF/ESI Act. The CIT(Appeals) noted conflicting High Court decisions on whether Section 43B applies to employees' contributions, but the Finance Act, 2021, clarified that Section 43B does not apply to Section 36(1)(va).

2. Validity of Adjustments under Section 143(1)(a):
The assessee argued that the issue was debatable and could not be adjusted under Section 143(1)(a). The CIT(Appeals) found that the appeal was essentially challenging the original intimation under Section 143(1), which was not appealed against initially. The CIT(Appeals) concluded that the issue was debatable and thus could not be rectified under Section 154.

3. Maintainability of Rectification Application under Section 154:
The Tribunal examined the scope of Section 154, which allows rectification of mistakes apparent from the record. It cited the Supreme Court's judgment in T.S. Balaram ITO vs. Volkart Bros, stating that a mistake must be glaring and obvious. The Tribunal concluded that the issue was debatable and thus outside the scope of Section 154. It upheld the CIT(Appeals)' order, which had affirmed the AO's decision to reject the rectification application.

Conclusion:
The Tribunal dismissed the appeal, concluding that the rectification application under Section 154 was not maintainable for a debatable issue. The grounds of appeal related to the disallowance under Section 36(1)(va) and adjustments under Section 143(1)(a) were dismissed. Grounds 3 and 4 were dismissed as not pressed. The order was pronounced in open court on August 10, 2023.