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2023 (3) TMI 39 - AT - Income TaxRectification u/s 254 - Delayed payment of employee s contribution to ESI and PF - non-consideration of the decision of the jurisdictional high court/Supreme Court - Payment beyond the due date as prescribed under the relevant law relating to ESI and PF for deposit of employees share of contribution - HELD THAT - We are of the view that the Hon ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange case 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) of the Act 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. 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. The orders of the Tribunal will stand modified/rectified accordingly. MP stands allowed.
Issues: Rectification of order under section 254(2) of the Income Tax Act, 1961 regarding disallowance of delayed payment of employee's contribution to ESI and PF under section 36(1)(va) of the Act.
Analysis: 1. The Appellate Tribunal received a Miscellaneous Petition (MP) from the Revenue seeking rectification of the order dated 8.3.2022, which held that disallowance on delayed payment of employee's contribution to ESI and PF was not justified if contributions were paid within the due date for filing return of income u/s.139(1) of the Act. 2. The Tribunal's decision was based on a subsequent judgment by the Hon'ble Supreme Court in the case of CHECKMATE SERVICES PVT LTD VS CIT-1, which clarified the treatment of delayed Employee PF Contribution payments under the Income Tax Act. The Supreme Court highlighted the distinction between employer and employee contributions, emphasizing that failure to pay employee's contribution within the due date negates the employer's deduction permanently under section 36(1)(va). 3. The Revenue, through the MP, sought to reverse the Tribunal's order and uphold the disallowance of deduction under section 36(1)(va) of the Act. The Tribunal proceeded with the hearing in the absence of the Assessee and considered the Revenue's contentions, citing the importance of rectification powers under section 254(2) to prevent prejudice to either party due to Tribunal mistakes. 4. Referring to legal precedents such as CIT Vs. Saurashtra Kutch Stock Exchange and Honda Siel Power Products Ltd. v. CIT, the Tribunal emphasized the duty to rectify mistakes apparent from the record to ensure fairness and adherence to legal principles. The Tribunal acknowledged the mistake in light of the Supreme Court's decision in the Checkmate Services Pvt. Ltd. case and modified the order accordingly. 5. The Tribunal's decision was guided by Article 141 of the Constitution of India, which mandates that Supreme Court rulings are binding on all courts. The Tribunal concluded that the disallowance made by the revenue authorities under section 36(1)(va) was justified based on the subsequent Supreme Court decision, rectifying the Tribunal's initial order. 6. Ultimately, the Miscellaneous Petition was allowed, and the Tribunal pronounced the modification of its order in open court, aligning with the legal principles and precedents discussed during the analysis.
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