2023 (6) TMI 516 - AT - Income Tax

Rectification u/s 254 - Rectification of earlier orders passed by the ITAT based on subsequent judgment of Supreme Court - Delayed payment of employee s contribution to ESI and PF - Addition u/s 36(1) r.w.s. 43B - Whether judgment be given a prospective applicability? - Delayed deposit of employee s share of contributions towards labour welfare funds Employee s Provident fund (EPF) and Employee s State Insurance (ESI) addition deleted by Tribunal - as per department that orders of the Tribunal are not found to be in conformity with the recent judgement of the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT thus, the same suffers from a mistake which being glaring, apparent, patent and obvious from record HELD THAT - We are unable to persuade ourselves to subscribe to the claim of the Ld. AR s that the Hon ble Apex Court in the case of Mepco Industries Ltd. 2009 (11) TMI 24 - SUPREME COURT had held that an order passed by the Tribunal which is not found to be in conformity with the ratio decidendi of a subsequent judgment of the Hon ble Apex Court cannot be rectified under sub section (2) of Section 254 of the Act. The issue leading to filing of the present miscellaneous applications by the department, i.e. as to whether an order passed by the Tribunal while disposing off an appeal can be rectified u/s. 254(2) of the Act for the purpose of bringing the same in conformity with a subsequent judgment of the Hon ble Apex Court or that of the Hon ble Jurisdictional High Court is squarely covered by the judgments in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd. 2008 (9) TMI 11 - SUPREME COURT and S.A.L Narayana Row, CIT Vs. Model Mills Nagpur Ltd 1966 (10) TMI 2 - SUPREME COURT and thus, is no more res-integra. 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. Tribunal had observed that even if the Hon ble Apex Court renders a judgment after passing of the order sought to be rectified, the same is to be strictly followed, as the judgment of the Hon ble Apex Court is always understood from the inception of the provision and it is never considered as a prospective ruling unless so specified As and where the Hon ble Apex Court had intended that its judgment be given a prospective applicability, a specific rider to the said effect as in the case of M/s New Noble Educational Society 2022 (10) TMI 855 - SUPREME COURT had been provided. However, we are afraid that no such rider is found in the judgment of the Hon ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I (supra), which means that the same would have a retrospective application. As stated by the department in its miscellaneous application and, rightly so, as the view taken by the Tribunal in the captioned appeals is not found to be in conformity with the judgment of the Hon ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I (supra), therefore, the same had rendered the orders passed while disposing off the respective appeals as suffering from a mistake, which being apparent from record had therein made those amenable for rectification under sub-section (2) to Section 254 of the Act. 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. Decided against assessee.

Issues Involved:
1. Whether the order passed by the Tribunal, which is not in conformity with the subsequent judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd., suffers from a mistake apparent from the record and is amenable for rectification under Section 254(2) of the Income Tax Act.
2. Whether the Tribunal can rectify its order based on a subsequent judgment of the Supreme Court or the Jurisdictional High Court.
3. Whether the Tribunal has jurisdiction to rectify its order beyond the stipulated time period.
4. Whether the Tribunal can consider new contentions or reliefs raised by the assessee during the rectification proceedings.

Summary:

Issue 1:
The Tribunal had vacated the additions made by the Assessing Officer (A.O) for delayed deposit of employees' share of contributions towards EPF and ESI by the respective assessees. The department contended that these orders were not in conformity with the recent judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I, which held that such delayed deposits were not to be allowed as deductions. Therefore, the department argued that the Tribunal's orders suffered from a mistake apparent from the record, making them amenable for rectification under Section 254(2) of the Act.

Issue 2:
The Tribunal referred to the judgment of the Hon'ble Supreme Court in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd., which held that non-consideration of a decision of the Supreme Court or the Jurisdictional High Court, rendered prior to or even subsequent to the order proposed to be rectified, constitutes a mistake apparent from the record. The Tribunal concluded that a subsequent decision of the Hon'ble Supreme Court does not enact new law but declares the law as it always was, thereby making the Tribunal's earlier order suffering from a mistake apparent from the record.

Issue 3:
The Tribunal rejected the contention that it was functus officio for rectifying the order after the lapse of six months from the end of the month in which the order was passed. The Tribunal referred to the Hon'ble Supreme Court's judgment in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd., which clarified that the Tribunal could rectify a mistake brought to its notice by the assessee or the A.O without being subject to the six-month time limit applicable for suo-motto rectifications.

Issue 4:
The Tribunal did not entertain new contentions or reliefs raised by the assessees, such as the claim that the addition of delayed deposit could not have been made under Section 143(1) or that the employee's share of contribution could be allowed as a deduction under Section 37(1). The Tribunal confined itself to the issue of whether the orders passed by the Tribunal were in conformity with the subsequent judgment of the Hon'ble Supreme Court and found that they were not.

Conclusion:
The Tribunal allowed the miscellaneous applications filed by the department under Section 254(2) of the Act and recalled the respective orders that were passed while disposing of the appeals. The registry was directed to fix the respective appeals for hearing for the limited purpose of giving effect to the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I.

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