Income Tax Appellate Tribunal - Amritsar
M/S Haveli Restaurant & Resorts ... vs Deputy Commisioner Of Income Tax ... on 27 May, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR.
BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER
AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER
I.T.A. No.326/Asr/2023
Assessment Year: 2018-19
M/s Haveli Restaurant & Vs. ITO-CPC,
Resorts Ltd. Jalandhar Bengaluru.
[PAN:-AABCA1768P]
(Appellant) (Respondent)
Appellant by Sh. Surinder Mahajan, CA.
Respondent by Sh. Rajiv Wadhera, Sr. DR
Date of Hearing 30.04.2024
Date of Pronouncement 27.05.2024
ORDER
Per: Udayan Dasgupta, JM:
This appeal has been filed by the assessee, against the order of ld.
Commissioner of Income Tax (Appeals)-5, Ludhiana, dated 30/10/2023, passed u/s 154 / 250, of the Act 61, rectifying a mistake apparent from record, in respect of the earlier order passed by the first appellate authority u/s 250 of the Act 61 dated 14/08/2020.
2. The assessee has taken the following grounds: -
I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 2 "1. That on the facts & circumstances of the case, Learned Commissioner of Income Tax (Appeals) ['CIT(A)'] has grossly erred in law in passing order u/s 154 of the Act since conditions for assumption of jurisdiction u/s 154 of the Act were lacking, in as much as, neither there was mistake apparent from records nor there was any application of mind before assumption of jurisdiction.
It may kindly be held that notice u/s 154 issued by the Learned Commissioner of Income Tax (Appeals) ['CIT(A)'] was illegal and invalid and consequent order passed u/sl54of the Act be held illegal and bad in law.
2. That on the facts and circumstances of the case, order passed u/s 154 of the Act is opposed to judgment of Honorable Supreme Court in the case of T.S. BALARAM, INCOME TAX OFFICER vs. VOLKART BROTHERS & ORS. SUPREME COURT OF INDIA (1971) 82 ITR 0050wherein it has been held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions.
3. That on the facts & circumstances of the case, order passed u/s 154 of the Act is opposed to judgment of Honorable Calcutta High Court in the case of JIYAJEERAO COTTON MILLS LTD. vs. INCOME TAX OFFICER & ORS. HIGH COURT OF CALCUTTA (1981) 130 ITR 0710, wherein it has been held that A subsequent decision of the Supreme Court I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 3 resolving the conflict on a debatable point does not obliterate the conflict existing prior to the decision.
4. That without prejudice to ground of appeal no. 1 to 3, even otherwise also there is no delay in deposits of employees share of EPF/ESI since default under the relevant Act has been calculated with reference to credit of salary and not with reference to date of disbursement of salary. Accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employee contribution in the labour Act.
5. That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed off."
3. That assessee filed income tax return declaring income of Rs 1,45,69,490/-. Centralized Processing Center assessed the income at Rs. 1,78,05,340/- by making adjustments u/s 143(1) of the Act. Addition of Rs. 32,35,850/- has been made on account of employees contribution towards ESI and PF deposited beyond due date under respective Acts, but before the date of filing income tax return, u/s 139(1) . 3.1 The addition of Rs.32,35,850/- has been made by CPC, Bangalore, vide order dated 15.07.2019, u/s 143(1) of the Act 61, on the basis of disallowance of expenditure indicated in the audit report (TAR ) but not taken into account in I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 4 computing the total income in the return , as per provisions of section 143(1)(a)(iv) of the Act 61.
Appeal filed by the assessee against the order u/s 143(1), before the CIT(A) , has been disposed of vide appellate order dated 14/08/2020 , "passed u/s 250(6) of the Act 61, by deleting the addition of Rs.32,35,843/- on account of late deposit of employees portion of the contribution of EPF and ESI , by observing as follows:
"I have carefully considered the appellant's submissions. From the facts on record as above, it is evident that the all outstanding amount on account of employee's contribution towards ESI/EPF/LWF was deposited before the due date of filing of return. Therefore, the addition made by the AO was not justified. The issue is squarely covered by the decision of Hon'ble Jurisdictional High Court in the case of CIT V/s Mark Auto Industry (2013) 40 taxman.com 482 (Punjab & Haryana). In this decision, the Hon'ble High Court held that where the assessee deposited employees and employer's contribution for ESI and PF, prior to filing of return u/s 139(1), it was entitled to deduction of amount so deposited. Reference in this regard, is also made to the following case laws in which it has been held that payments made before the due date of filing of income tax return are to be considered as having been made within due date:
1. CIT V/s Alom Extrusion Ltd. (209) 319 ITR 306 (SC).
I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 5
2. CIT v. Hernia Embroidery Mills (P) Ltd. (2014) 56 (I) ITCL 157 (P&H- HC): (2014) 265 CTR (P&H) 57
3. CIT vs. Lakhani India Ltd., 288 Taxman 132 On a similar issue the Hon'ble Supreme Court dismissed the SLP in the case of Principal Commissioner of Income-tax, Jaipur, vs. Rajasthan State Beverages Corporation Ltd [2017] 84 taxmann.com 185 (SC). The head notes of this decision read as under:
ESI and EPF contribution: Amount claimed on payment of ESI and EPF having been deposited on or before due date of filing of returns, same could not be disallowed under section 43B or under section 36(l)(va); SLP dismissed" z In view of the above, addition made on account of late deposit of ESI/EPF is deleted subject to verification by the Assessing Officer of deposit of the same by the assessee before due date of filing of return. Grounds of appeal nos. 1 & 2 are allowed for statistical purposes."
3.2 Subsequently, the Hon'ble Apex court, vide order dated 12th October, 2022, in the case of Checkmate Services Private Limited, appeal No 2833 of 2016 (reported in 143 taxmann.com 178) has laid down the law that deduction of employees share of ESI and PF can be allowed only if the deposit has been made before the due date under the respective Acts.
I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 6 3.3 Enlightened by the judgment of the Hon'ble Supreme court dated 12.10.2022, in the case of Checkmate Services P Ltd, ( supra ) , the first appellate authority initiated rectification proceedings u/s 154 (2) of the Act 61, vide SCN dated 20/04/2023 , for rectifying the mistake apparent from record , in respect of the earlier order passed u/s 250(6) dated 14.08.2020, in relation to the employees portion of PF and ESI , allowed as deduction u/s 36 of the Act 61, even though deposited beyond due dates under respective Acts, but within time allowed u/s 139(1) of the Act 61.
3.4 The CIT(A) vide his rectification order u/s 154 dated 30/10/ 2023, rectified the error by disallowing the amount of Rs. 32,35,843/-, being the employees share of ESI and PF, which was earlier allowed vide his order dated 14/08/2020, by drawing a conclusion as follows:
"Now it is a settled issue as per Hon'ble Apex Court. As per above legal position, allowing late deposit of employee's share of ESI/PF/LWF beyond the due date as per the Act is a mistake apparent from record in view of decision of Hon'ble Apex Court in the case of Checkmate Services P. Ltd. Versus Commissioner of Income Tax-1 (Supra). Therefore, delayed payment of the employee's shares of ESI/PF/LWF of Rs.32,35,843/- beyond due date as per these Act, allowed as an expenditure in the appellate order dated 14.08.2020 is held to I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 7 be mistake apparent from record and is being rectified accordingly. This amount of Rs.32,35,843/- is to be disallowed and added back to the income of appellant."
The assessee is in appeal before the Tribunal against the rectification order of the CIT(A) dated 30/10/2023, passed in rectification proceedings u/s 154 of the Act
61.
4. The Ld. AR, of the assessee argued that the first three grounds of appeal, preferred by the appellant, are interlinked and relates to the legal validity of the rectification order passed by the CIT(A) . The Ld. AR, of the assessee argued that the original appeal order dated 14/08/2020, has been passed based on the judgment of the jurisdictional high Court in the case of CIT v Lakhani India (232 CTR 81), CIT vs Lakhani Rubber (232 CTR 350) and CIT v Hemla Embroidery (366 ITR
167) , on the basis of interpretation of the law as it stood at that particular period of time, when the appeal order was passed . He further placed reliance in the case of PCIT vs Rajasthan State Beverages Corporation Ltd (2017) reported in 84 taxman.com 185, where the Hon'ble Supreme Court, has dismissed the SLP of the revenue.
4.1 He further argues that the mistake to be rectified u/s 154 should be apparent from the record, which has to be an obvious mistake and not something on which there might conceivably two different views, because the provisions of sec 154 I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 8 cannot be invoked on debatable issues , and in the instant case the CIT(A) was legally wrong in taking recourse to section 154 of the Act 61, for withdrawal of the deduction already allowed in the earlier appellate proceedings. In support of his argument he relied on numerous judgments, of various high courts, some of which are CIT vs Keshri Metal Pvt Ltd 237 ITR 165 (SC), CIT vs Hero Cycles (SC) (142 CTR 122), CIT vs Bhima Bros 214 ITR 302 (Kerala), Deva Metal Vs CIT (SCC 439 TIOL 221 SC IT), CCE vs ASCU Ltd, 151 ELT 481, ITO vs Volkart Brothers 82 ITR 50.
4.2 The Ld. AR further argues that the order passed by the CIT (A) u/s 154 of the Act 61, is opposed to the judgment of the Hon'ble Calcutta High court in the case of M/s Jiyajee Cotton Vs ITO (130 ITR 710), where the Hon'ble High court has held that a subsequent decision of the Supreme Court resolving the conflict on a debatable point does not obliterate the conflict existing prior to the decision. He concludes by submitting that the rectification order passed by the CIT(A) is legally invalid, because he has commenced and passed rectification orders on debatable point which has two different views, more so considering the fact that the appellate order was passed on 14/08/2020, on the basis of interpretation of the law by the jurisdictional high court, as it stood at that particular period of time. In the fourth ground of appeal, the Ld AR , placed an entirely new argument , that on facts of the case , that the default under the PF and ESI Act , in this case , has I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 9 been calculated with reference to credit of salary and not with the reference to date of actual disbursement of salary, and as such the default in deposit of employees portion of ESI and PF if any , should be counted from the date of actual disbursement , which means the "due date" , of deposit should be counted from the date of actual payments made to employees.
4.3 On this issue he relied upon the judgment of Lally Automobiles in ITA No 941 and 942 / Delhi / 2023, order dated 24/08/2023, in the case of Sentinel Consultants Pvt Ltd, ITA No: 7 and 8 / Delhi / 2023, order dated 12/06/2023, and on Kanoi Paper and Industries ITA No 1260/ Cal/1996, order dated 28/05/2001.
5. The Ld. DR, relied upon the rectification order of the CIT(A) passed u/s 154 and argued that the law is already laid down by the Hon'ble Supreme Court in the case of "Checkmate Services", and once the Hon'ble Apex court lays down the law, as per Article 141 of the Constitution of India, it is the law of the land, and the said law is applicable from the inception of the relevant provision, and in this case the same will apply from the date of inception of section 36(1) of the Act 61. Regarding the legal validity of the rectification order passed u/s 154 of the Act 61, the Ld DR argued that the Andhra Pradesh High Court in the case of BVK Seshavataram (reported in (1995 )124 CTR (AP) 332) has held that subsequent interpretation of law by the Supreme Court would constitute a mistake apparent I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 10 from record . In support of his contention he relied on the judgment of the ITAT, Pune Bench, in the case of Shivamm Industries in ITA No: 393/PUN/2023, where the Tribunal has upheld revenues sou moto rectification u/s 154 to disallow delayed ESI and EPF payments to give effect to Supreme Court ruling in the case of Checkmate Services.
5.1 The Ld DR further relied on the decision of the jurisdictional High Court in the case of CIT vs Arun Luthra 252 ITR 76(P&H) where the court has held that proceeding for rectification of an order passed under provisions of the Act can be initiated on basis of judgment delivered by jurisdictional High Court or a superior court after passing of the said order.
6. As such he argued that the first appellate authority was legally correct in taking recourse to section 154 of the Act 61, for rectification of the order passed u/s 250 of the Act 61, to bring it in conformity with the law laid down by the Hon'ble Apex court.
6.1 Regarding the 4th ground of appeal, taken by the assessee, regarding calculation of due date based on the date of actual disbursement , he submitted that this ground was never raised before the CIT ( A ) in memorandum of appeal in form 35, and has never been adjudicated upon , and though in course of proceedings u/s 154, the Ld. AR tried to raise the issue for the first time, the Ld I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 11 CIT(A) never accepted the said issue for adjudication , because it was never a part of the original grounds , as such the DR raised objection , regarding acceptance and admission of the ground before the Tribunal.
7. We have heard both the rival submission and considered the materials on record.
In the instant case before us, the appellant has only raised grounds relating to the legal validity of the rectification order passed by the CIT(A) u/s 154 of the Act 61, disallowing the amount of Rs.32,35,843/-, being the employees portion of ESI and EPF deposited beyond due dates as per respective Acts, to bring it in accordance with the law laid down by the Hon'ble Apex court in the case of Checkmate Services.
7.1 The Ld AR of the assessee has wisely accepted the principles of law laid down by the Hon'ble Supreme Court, but has raised objections in respect of the sou moto rectification carried out by the CIT (A). 7.2 On this issue we would like to rely on the decision of the Hon'ble Supreme Court in the case of "Ramada's Bhikaji and Chowdhury vs Sadananda (1980) reported 180 AIR 126 (SC), and in the case of Manoj Parihar and others vs State of Jammu and Kashmir and Others SLP (C) No 11039 of 2022 dated 27/06/2022, and also in the case of Asst Commissioner vs Saurashtra Stock Exchange Ltd 305 ITR
227. It has been held time and again that law declared by a court will have I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 12 retrospective effect, if not otherwise stated to be so specifically. It is also well settled proposition that whenever, a previous decision is completely wiped out and Article 141 will have no application to the decision which has already been overruled and the court would have to decide the cases according to the law laid down by the latest decision of the Hon'ble Supreme Court and not by the decision which has been expressly overruled. The above reasoning stems from the principle that when a court decides a matter, it is not as if it is making any new law but it is as if it is only restating what the law has always been. The reliance in this respect can be placed on the decision of the Hon'ble Supreme Court in the case of "RamdasBhikaji and Choudhary vs. Sadananda and on the decision of the Hon'ble Supreme Court in the case of "Manoj Parihar and Ors. Vs. State of Jammu & Kashmir and Ors.". Assistant Commissioner vs. Saurashtra Kutch Stock Exchange Ltd.305 ITR 227, wherein, the Hon'ble Supreme Court has held that judges do not make law, they only discover and find the correct law. Even, that where an earlier decision of the court operates for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which were earlier not correctly understood.
8. In view of the above stated legal position, the law declared by the Hon'ble Supreme Court will be retrospectively applicable and it will be treated that earlier decisions of different High Court favouring the assessee would be of no benefit of I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 13 assessee at this stage as the said decisions of the High Courts are treated to be never existed or to say are wiped out by the aforesaid decision of the Hon'ble Supreme Court.
8.1 As such we are of the opinion that the rectification order passed by the CIT(A), u/s 154 of the Act 61, dated 30/10/2023, is legal and valid and passed as per provisions of law and the same is upheld.
9. Regarding the 4th ground of appeal, we find that this ground was never taken before the first appellate authority, neither in the grounds of appeal in Form 35, nor in the written submissions filed in appellate proceedings before CIT(A), nor is it borne out from the return filed in regular course. During 154 proceedings the Ld AR tried to take up this issue before the first appellate authority, for the first time in rectification proceedings, but the CIT(A) refused to entertain the new argument. The AR, during the hearing before us, relied upon the judgements of the Delhi bench in the case of Lally Automobiles ITA No: 941 and 942 / Delhi / 2023 dated 24/08/2023, which followed the view taken in Sentinel Consultants pvt ltd ITA 7 and 8 / Delhi / 2023 dated 12/06/2023, with reference to the date of actual disbursement of salary and the plea of the assessee that the due date of deposit of I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 14 EPF / ESI should be counted from the date of actual disbursement made to employees.
9.1 On this issue we would like to reproduce the observation of the Hon'ble Supreme Court in the case of Organo Chemical Industries and Anr vs Union of India ( 1979 AIR 1803 ) :
( Observation of the Hon'ble Apex court , only relevant portion reproduced ):
"The initial responsibility for making payment of the contribution of the employer as well as of the employee, lies on the employer. Para 30 of the Scheme makes it incumbent on the employer that he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employed by him. Under para 38, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. It further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month, i.e., a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence. Section 14 of the Act provides for penalties. Failure to comply with the requirements of s. 6 is punishable with various terms of imprisonment which may extend to a period of six months, or with fine which may extend to one thousand to two thousand I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 15 rupees, under the provisions of s. 14, depending upon the nature of the breach, viz., failure to pay the contributions, or failure to submit the necessary returns, or failure to pay administrative charges. Section 14A provides for offences by companies and other corporate bodies.
9.2 Tthe specific issue raised by the Ld AR is also settled by the judgment of the Hon'ble Madras High court in the case of CIT vs Madras Radiators & Pressings Ltd. on 31 December, 2002 ( Madras H C ) 129 taxman 709 ( Madras ) .
( Only relevant portion reproduced ):
We heard the arguments of Mrs. Pushya Sitharaman, learned senior standing counsel appearing for the revenue and perused the materials on record. The assessee in spite of due notice has not represented.
In our considered opinion, we are of the view that the Tribunal is not correct in coming to the conclusion that there was some ambiguity in construing the expression "month"
used in para 38 of the Scheme under the Provident Fund Act on the premise that the assessee used to pay the salary to its employees only on the 7th day of succeeding month under section 5 of the Payment of Wages Act. It is true that section 5 of the Payment of Wages Act provided for payment of wages in respect of certain categories of industries on or before the 7th day of succeeding month. However, section 4 of the Act I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 16 provided for fixation of wage period and also provided that no wage period shall extend one month.
Para 29 of the Scheme under the Provident Fund Act provided that the contribution payable should be calculated on the basis of the basic wages and other allowances actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis. The expression "basic wages" is defined as all emoluments, which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him.
Para 30 of the Scheme of the Provident Fund Act imposed an obligation on the employer to remit both the shares of contributions in the first instance and para 32 empowered the employer to recover the employees' contributions from the wages of the employees. As per para 38 of the Scheme, the employer is required to remit both the contributions together with the administrative charges thereon within 15 days before the close of every month.
Thus as seen from the above provisions, it is clear that it is the responsibility of the employer to make payment of the contributions at the first instance irrespective of the fact, whether the wages are paid in time or not. Hence the actual payment of wages on the 7th day of succeeding month would not any way alter the situation and give room for interpreting I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 17 that the "close of 15th day" has to be calculated from the end of the month in which the wages were actually paid. The payment of wages on the 7th day of succeeding month would not in any way alter the initial responsibility of the employer for making payment of contributions, which he is statutorily authorised to recover from the employees salary, whether the salary is paid in time or not. Hence the one and only reasonable conclusion is that the employer has to remit both the contributions to the Provident Fund within 15 days from the close of the month for which the employees earned their salary i.e., Salary payable.
"Our view has been fortified by the Division Bench of this court in Presidency Kid Leather (P) Ltd. v. Regional Provident Fund CIT (1997) 91 F.J.R. 661, wherein the Division Bench of this court held as follows: "As per para 38 of the Employees' Provident Funds Scheme, the employer is required to remit both the employees' as well as the employer's share of contributions together with administrative charges thereon before the close of the 15th of every month. Para 30 of the Scheme imposes an obligation on the employer to remit both the shares of contributions in the first instance and para 32 of the Scheme enables the employer to recover the employee's contributions from the wages of the employees. The initial responsibility for making payment of the contributions lies on the employer irrespective of the fact whether the wages are paid in time or not. As such, the I.T.A. No.326/Asr/2023 Assessment Year: 2018-19 18 Provident Fund payments made after the due date will attract the penal damages under section 14 B of the Act."
10. On the face of such judicial pronouncements, (cited above) the new ground raised by the assessee, has got no merits at all and the same is dismissed being devoid of merits.
11. In the result, the appeal of the assessee bearing ITA No. 326/Asr/2023 is dismissed.
Order pronounced in the open court on 27.05.2024 Sd/- Sd/-
(Dr. M. L. Meena) (UDAYAN DASGUPTA)
Accountant Member Judicial Member
AKV
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.
True Copy
By order