2024 (12) TMI 1488 - HC - Income Tax

Rectification u/s 254 - jurisdiction of the Tribunal as conferred under sub-Section (2) of Section 254 - delayed payment of the statutory dues like the Provident Fund and Employees State Insurance Corporation amounts - view taken by the Tribunal qua setting aside of the additions as made by the assessing officer, cannot be accepted to be a correct view, in view of the decision of the Supreme Court in Checkmate Services Private Limited 2022 (10) TMI 617 - SUPREME COURT which was rendered subsequent to the orders passed by the Tribunal. Whether there was any mistake apparent on the face of the record and/or whether a decision which was rendered by the Supreme Court subsequent to the Tribunal s decision of which rectification is sought, could be relevant to come to a conclusion on the ground that there was a mistake apparent on the face of the order, the Tribunal could substitute its original order? - HELD THAT - As recently a bench of the Tribunal in the case of ANI Integrated Services Ltd 2024 (7) TMI 881 - ITAT MUMBAI had the occasion to consider the very issue as raised by the Revenue in light of the decision rendered by the Supreme Court in Checkmate Services Private Limited (Supra). In such case similar applications were filed by the Revenue praying that the Tribunal set aside its orders in relation to Employees State Insurance Corporation ( ESIC for short) (for the Assessment Year 2019-20) considering the changed position in law in Checkmate Services Private Limited (Supra). Tribunal by its decision in ANI Integrated Services Limited 2024 (7) TMI 881 - ITAT MUMBAI did not accept the contentions as urged on behalf of the Revenue and rejected the Miscellaneous Applications filed by the Revenue, also considering the decision in Beghar Foundation 2021 (2) TMI 504 - SUPREME COURT and the scope of its limited jurisdiction under Section 254 (2) of the IT Act. We are in complete agreement with the view taken by the Tribunal in ANI Integrated Services Ltd (Supra) and which is on the very issue as urged by the petitioner. We are of the clear opinion that the Tribunal was in a patent error in exercising jurisdiction under Section 254 (2) in passing the impugned order.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment presented involves the following core legal questions:

Whether the Tribunal had jurisdiction under Section 254(2) of the Income Tax Act, 1961, to amend its original order based on a subsequent Supreme Court decision.
Whether the Miscellaneous Applications filed by the Revenue were barred by limitation under Section 254(2) of the Income Tax Act, 1961.
Whether a subsequent change in law or a new judicial decision can be considered a "mistake apparent from the record" under Section 254(2) of the Income Tax Act, 1961.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction under Section 254(2)

Relevant legal framework and precedents: Section 254(2) of the IT Act allows the Tribunal to amend its order to rectify any "mistake apparent from the record" within six months. The jurisdiction is akin to the review jurisdiction under Order XLVII, Rule 1 of the CPC.
Court's interpretation and reasoning: The Court observed that the Tribunal's jurisdiction under Section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to reconsidering decisions based on subsequent legal developments.
Key evidence and findings: The Tribunal's original decision was based on the legal position existing at the time of its decision. The Supreme Court's decision in Checkmate Services Private Limited was rendered after the Tribunal's decision.
Application of law to facts: The Court found that the Tribunal's decision was not erroneous based on the law at the time, and a subsequent Supreme Court decision could not be used to amend the Tribunal's order under Section 254(2).
Treatment of competing arguments: The Court rejected the Revenue's argument that the Tribunal could amend its order based on a subsequent Supreme Court decision, emphasizing that such jurisdiction is not conferred by Section 254(2).
Conclusions: The Tribunal lacked jurisdiction to amend its order under Section 254(2) based on a subsequent Supreme Court decision.

Issue 2: Limitation under Section 254(2)

Relevant legal framework and precedents: Section 254(2) prescribes a six-month limitation period for filing a Miscellaneous Application to rectify mistakes.
Court's interpretation and reasoning: The Court noted that the Revenue's Miscellaneous Applications were filed 92 days beyond the prescribed limitation period.
Key evidence and findings: The Revenue did not provide any justification for the delay or file an application to condone the delay.
Application of law to facts: The Court held that the Miscellaneous Applications were time-barred and could not be entertained by the Tribunal.
Treatment of competing arguments: The Court emphasized the mandatory nature of the limitation period under Section 254(2) and rejected any implied power to condone delay.
Conclusions: The Miscellaneous Applications were barred by limitation and should not have been entertained by the Tribunal.

Issue 3: Mistake Apparent from the Record

Relevant legal framework and precedents: The concept of a "mistake apparent from the record" is limited to obvious errors and does not include changes in law or subsequent judicial decisions.
Court's interpretation and reasoning: The Court held that a subsequent Supreme Court decision does not constitute a "mistake apparent from the record" under Section 254(2).
Key evidence and findings: The Tribunal's decision was consistent with the law as it stood at the time, and no error was apparent on the face of the record.
Application of law to facts: The Court concluded that the Tribunal's original order was not erroneous and did not require rectification under Section 254(2).
Treatment of competing arguments: The Court referenced the Supreme Court's decisions in Beghar Foundation and Sanjay Kumar Agrawal, which held that subsequent changes in law are not grounds for review.
Conclusions: The Tribunal's order did not contain a mistake apparent from the record, and the Revenue's applications were not maintainable under Section 254(2).

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The jurisdiction of the Tribunal as conferred under sub-Section (2) of Section 254 is akin to the review jurisdiction of the Civil Court, that is to rectify any mistake apparent from the record."
Core principles established: The Tribunal's jurisdiction under Section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to reconsidering decisions based on subsequent legal developments. The limitation period under Section 254(2) is mandatory, and applications filed beyond this period are not maintainable.
Final determinations on each issue: The Tribunal lacked jurisdiction to amend its order based on a subsequent Supreme Court decision. The Miscellaneous Applications were barred by limitation and did not identify a mistake apparent from the record.

The judgment underscores the limited scope of the Tribunal's jurisdiction under Section 254(2) and reinforces the mandatory nature of the limitation period for filing applications under this provision.

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