Indian Kanoon - Search engine for Indian Law

Income Tax Appellate Tribunal - Pune

Dy Commissioner Of Income Tax, Circle-5 ... vs Vaibhav Maruti Dombale, Pune on 17 September, 2024

IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE 'B' BENCH, PUNE
              BEFORE HON'BLE SMT ASTHA CHANDRA, JUDICIAL MEMBER
                                      AND
                  SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER
                                 आयकर अपऩल स.ं / MA No. 225/PUN/2023
                                 (Arising out of ITA No. 299/PUN/2021
                                 निर्धारण वषा / Assessment Year : 2019-20

      Dy. Commissioner of Income Tax,
      Circle-5, Pune                                                      . . . . . . . अपीलार्थी / Appellant

                                                   बिधम / V/s
      Vaibhav Maruti Dombale,
      C9-1, Rajmudra, Dhankwadi, Pune.
      PAN: AGHPD9189Q                                                        . . . . . . प्रत्यर्थी / Respondent

                                            द्वधरध / Appearances
                                         Assessee by: Mr B.B. Mane ['Ld. AR']
                                   Revenue by : Mr Ramnath Murkunde ['Ld. DR']
                          सनु वाई की तारीख / Date of conclusive Hearing : 19/07/2024
                          घोषणा की तारीख / Date of Pronouncement        : 17/09/2024
                                              आदेश / ORDER
      PER G. D. PADMAHSHALI, AM;

This Miscellaneous application [for short 'MA'] of the Revenue seeks to reverse the order of the Tribunal passed u/s 254(1) of the Income-Tax Act, 1961 [for short 'the Act'] in ITA No. 299/PUN/2021 dt. 05/09/2022 for assessment year 2019-20 whereby Tribunal allowed the claim for deduction u/s 36(1)(va) of the Act where the relevant amount of PF/ESI was deposited before expiry of due date prescribed u/s 139(1) of the Act but after the expiry of due date specified under respective PF/ESIT Act.

2. We have heard the rival parties submission; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short 'ITAT, Rules'] perused the material placed on records and considered the facts of the case in the ITAT-Pune Page 1 of 10 Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021 light of Hon'ble Apex Court binding decision in 'Checkmate Services Pvt Ltd. Vs CIT' [2022, 448 ITR 518] and the Ld. Co-ordinate Bench decision in 'DCIT Vs Ani Integrated Services Ltd.' [2024, 162 taxmann.com 889]

3. Rival parties have no dispute over nature of amount/expenditure debited & claimed in the return of income and their allowability u/s 36(1)(va) of the Act. Further both the parties do also not negate that deductibility of such amount/expense is not subject to the riders/provisions of section 43B of the Act. Both the parties also agrees that the ratio laid down by Hon'ble Apex Court in 'Checkmate Services' (supra) has settled the issue with respect to deductibility of such amount/expense only when it is paid within the due date prescribed under the respective PF/ESI Act and not otherwise.

4. Relying on 'Checkmate Services' the Revenue seeks to reverse the Tribunal's order thus pursues this MA to confirm the disallowance of amount/expenses of ₹57,92,151/- deposited by the assessee to respective PF/ESI fund after the expiry of due date specified under the respective PF/ESI Act. The Revenue claims that the order of the Tribunal passed deleting the disallowance made u/s 36(1)(va) of the Act is suffered from 'apparent mistake' owning to incorrect application of law as rightly & finally interpreted by Hon'ble Apex Court in 'Checkmate Service' (supra). Per contra assessee without disputing the former settled law denies existence of any such law as on the date when the order of this Tribunal was passed. Thus, assessee claims contrary to the Revenue to the effect that, law interpreted by Hon'ble Apex Court is prospective and not retrospective.

Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021

5. In view of much celebrated judgement rendered in 'CIT Vs Saurashtra Kutch Stock Exchange Ltd.' [2008 173 Taxman 322 (SC)] there is no dispute between the present rival parties that a decision rendered without considering the binding precedents per se sufficient to constitute 'mistake apparent on record' and deserves to be rectified. However, in the present case the acceptance or rejection of Revenue's plea for reversal of Tribunal's order hinges around the effective date of 'Checkmate Services' (supra) judgment which is rendered subsequent to the passing of Tribunal's Order sought to be rectified. The dispute is put to rest if effective date of subsequent binding judgement of Hon'ble Apex Court falls anterior to the date of Tribunal's orders i.e. dt. 05/09/2022 then for this MA it tantamount to 'mistake apparent on record' and thus dictates the rectification as must.

6. On the subject matter of rectification we first note that in 'CIT V India Cements Ltd.' [2000, 241 ITR 62 (Mad)] their Hon'ble Lordship have categorically laid that, 'the power to rectify is restricted only with reference to the law prevailing at the time of the original order sought to be rectified, the fact that subsequent decisions may lead to a different inference cannot justify rectification'. This abundantly implies that; law lay down by the Hon'ble Jurisdictional High Court and Hon'ble Supreme Court by its subsequent judgement on respective issue shall come into effect from the date of its pronouncement and not from inception i.e., law laid down by Hon'ble Jurisdictional High Court & Hon'ble Apex Court shall be prospective in operation, thus would give no right or entitlement to prejudiced party to seek rectification arising on there account.

Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021

7. On the other hand, subsequent to aforestated decision the Hon'ble Gujarat High Court in the case of 'CIT Vs Subodhchandra Patel' [2004, 265 ITR 445 (Guj)] vide para 8 have held otherwise that; 'non-consideration of a judgment of the jurisdictional High Court or the Supreme Court would always constitute a mistake apparent from the record, regardless of the judgment being rendered prior to or subsequent to the order proposed to be rectified'. This contrary to former 'CIT V India Cements Ltd.'(supra) hint sights the ratio that; the law laid down by Hon'ble jurisdictional High Court & Hon'ble Supreme Court in subsequent judgements would come into effect from the date of insertion of respective provisions and thus entitles the prejudiced party to seek rectification therefore. That is to state, the law declared by the Hon'ble Apex Court would apply retrospectively unless it is expressly stated to have prospective operation.

8. It is a trite law that, the Hon'ble Supreme Court does not enact the law, it only interprets it and its interpretation of a provision of law becomes the law of the land which comes into effect retrospectively from the date of its insertion & not from the date of its pronouncement. The Hon'ble Supreme Court being the Apex Constitutional Court of the Country declares the law not as on the date of pronouncement of the judgment but from the date of its enactment and binds all persons within the territory of India, whether or not party to the case in which the decision was rendered and whether or not it was brought to its notice. By virtue of article 141 of Indian Constitution, the judgement rendered by Hon'ble Supreme Court binds all the High Courts, Tribunals & Quasi-Judicial Authorities within the territory of India.

Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021

9. On the subject matter of operation we find that, the Hon'ble Supreme Court in 'ACIT Vs Saurashtra Kutch Stock Exchange Ltd.' (supra) have held that non- consideration of decision of Jurisdictional High Court or Supreme Court can be said to be a "mistake apparent from record" which can be rectified u/s 254(2) of the Act. Their Hon'ble lordships have further held that; the judicial decision rendered by the Apex Court acts retrospectively and it is not the function of the Court to pronounce a "new rule", but to maintain and expound the "old one". Thus, explicitly their Hon'ble lordships have held in former decision that the Judges do not make a law, they only discover or find the correct law. The relevant findings of the Hon'ble Supreme Court, in this regard can be traced in the paragraph 42 & 43 of the judgement which is reproduced hereunder for the sake of readiness;

"42. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite a sometime, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood.

43. Salmond in his well-known work states:

". . . The theory of case law is that a judge does not make law; he merely declares it, and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicator accounts that have been settled in the meantime." (Emphasis supplied) ITAT-Pune Page 5 of 10 Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021

10. Though the facts before the Hon'ble Supreme Court in 'Saurashtra Kutch Stock Exchange Ltd.' (supra) were that, decision of Jurisdictional High Court was available, however, the attention of the Tribunal was not invited to it at the time of hearing/adjudication. Thus, in these circumstances, the aforesaid findings were rendered by the Hon'ble Supreme Court and the decision of the Tribunal in recalling its earlier order u/s 254(2) of the Act was affirmed. However, the moot issue in the present MA arises for our consideration 'as to whether a subsequent decision of the Hon'ble Supreme Court [which is binding as per Article 141 of the Constitution of India] forms a basis for rectification u/s 254(2) where the original order u/s 254(1) of the Act was passed prior thereto? The prospective operation of law laid down by Hon'ble Apex Court would answer the question negatively and retrospective operation answers it positively.

11. Let us quote here that, the Hon'ble Apex Court following its earlier decision rendered in 'East End Dwellings Co. Ltd. Vs Finsbury Borough Council' [1952, A.C. 109] & 'CIT Vs Khemchand Ramdas' [1938, 6 ITR 414] while deciding the effect of subsequent retrospective amendment of law in 'MK Venkatachalam Vs Bombay Dyeing & Mfg. Co. Ltd.' [1958, 34 ITR 143] have categorically held that; prima-facie it may appear somewhat strange that an order which was good & valid when it was made should be treated as patently invalid & wrong by virtue of retrospective operation of the amendment Act. In view of their Hon'ble lordship's the conclusion from retrospective amendment is inescapable that the order of quasi-judicial authority in question was inconsistent with the retrospective amendment of law and therefore must be deemed to suffer from a mistake apparent ITAT-Pune Page 6 of 10 Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021 from the record, hence very much qualify for rectification. That is why the quasi- judicial authorities empowered to rectify the same following due process of law. Any order passed by the Tribunal placing reliance on the decision of Hon'ble jurisdictional/non-jurisdictional high court which in substance overruled at a later stage/date by the Hon'ble Apex Court becomes a law not from the pronouncement of such judgement but from the first day when the provision came into effect [i.e. right from the insertion], in consequence the order of the Tribunal renders itself inconsistence with law so and thus forms as 'apparent mistake' in turn entitles prejudiced party to seek rectification. This view also finds reiterated in context of rectification sought by prejudiced party u/s 154 of the Act by the Hon'ble Andhra Pradesh High Court in 'BV Sehavataram Vs CIT' [1994, 210 ITR 633 (AP)].

12. In view of the aforesaid findings of the Hon'ble Supreme Court in 'Saurashtra Kutch Stock Exchange Ltd.' (supra), as noted in para 42-43 of the judgment, the answer to the issue/question formed in present MA is positive thus affirmative. In dealing with similar circumstances, the Hon'ble Delhi High Court in the case of 'Lakshmi Sugar Mills Co. Ltd. Vs CIT' [2012, 22 taxmann.com 300] held that where the Larger Bench of the Hon'ble Apex Court overrules its earlier decision on which the Tribunal relied on, then Tribunal is duty bound to rectify its earlier order u/s 254(2) of the Act since the later decision of the Hon'ble Supreme Court operates retrospectively as if a law laid down by it u/a 141 of the COI.

Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021

13. Insofar as date of operation of judgment of 'Checkmate Services' is concerned; we are mindful to state that the Law declared by Hon'ble Supreme Court u/a 141 of the Constitution is normally to be assumed to be the law from inception. The prospective overruling is only an exception to this normal rule. Any decision rendered by Hon'ble Supreme Court, unless expressly indicated therein to be operative only prospectively, cannot be treated to be so, more so when it was a judgment overruling the judgments of various High Courts. The judgment thus erases all previous judgments rendered by various High Courts and operates as the law from inception of provision. This finds strength in the decision of 'M.A. Murthy Vs State of Karnataka' [2003, 7 SCC 517]

14. In view of the ratio laid in 'A Srimannarayana Vs Dasari Santakumri & Anr.' [2013, 9 SCC 496 (SC)] a decisions of co-ordinate bench rendered contrary to law laid down in 'checkmate services' cannot be followed as they do not state the law correctly. In view therefore we find much less force Ld. AR's contention to follow decision of 'Ani Integrated Services Ltd.' (supra).

15. The duty of judicial/quasi-judicial officer when binding precedents are placed before it by the prejudiced party against the contrary order passed by it has been elaborately dealt in 'Har Narain Vs Vinod Kumar' [1987, AIR 1987 All 319 (SC)] wherein their Hon'ble lordships have held that in view of Art. 141 of the Constitution, the law declared by the Supreme Court shall be binding on all courts within the territory of India. This Article 141 of the COI ITAT-Pune Page 8 of 10 Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021 cannot be read to mean that the binding duty of the court to follow the law, declared by the Supreme Court in India, is there when the law already declared by the Supreme Court was shown to it before delivery of decision/judgment and that if the law declared by the Supreme Court subsequently, is brought to the notice of the court after the pronouncement of the its decision/judgment, then there is no duty of the tribunal/court to correct the judgment so as to follow the law declared by the Supreme Court. It is a trite law that the Supreme Court does not make the law but it simply pronounces what the law is. So the law remains the same what it was before the pronouncement of the judgment and what the Supreme Court does is that it simply interprets the correct nature of the law. It means the decision contrary to the law, declared by the Supreme Court, would be a decision contrary to law and comes into operation from the very first date of birth of law/provision. To prevent abuse of process of law, it is duty of all the tribunals/courts to correct its earlier order which runs counter to the law, declared by the Supreme Court either subsequently or otherwise and it is to be corrected as a mistake of the type.

16. Thus, without further multiplying judicial precedents on the subject matter we find the present MA of the Revenue seeking recall of the Tribunal's order on the basis of the subsequent decision of the Hon'ble Supreme Court in 'Checkmate Services' (supra) is in order. In consequence thereof, the order dt 05/09/2022 of this Tribunal passed in assessee's appeal vide ITA No. 299/PUN/2021 for assessment year 2019-20 is hereby recalled.

Vaibhav Maruti Dombale MA No. 225/PUN/2023 (Arising out of ITA No. 299/PUN/2021 ITA No. 299/PUN/2021 AY 2019-20

17. We have heard rival parties submission on sole & substantive issue of 36(1)(va) disallowance made u/s 143(1) of the Act in respect of PF/ESI contribution of ₹57,92,151/- remitted by the assessee beyond the prescribed date under the relevant Acts. In view of decision of the Hon'ble Supreme Court in 'Checkmate Services' (supra) we find the aforestated disallowance is in order and necessitating no interference with the orders of tax authorities below. Further the contention of the assessee that such disallowance cannot be carried u/s 143(1) of the Act has no legs to stand in view of the Hon'ble Jurisdictional High Court's decision in 'Rohan Korgaonkar Vs DCIT' [2024, 298 taxmann 159 (Bom)]. The grounds of the appeal are accordingly stands dismissed.

18. In result, the Revenue's MA stands allowed and appeal of the assessee i.e. ITA No. ITA No. 299/PUN/2021 stands dismissed.

In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Wednesday 17th day of September, 2024.

                               -S/d-                                                                            -S/d-
                    ASTHA CHANDRA                                                                  G. D. PADMAHSHALI
                   JUDICIAL MEMBER                                                                ACCOUNTANT MEMBER

पुणे / PUNE ; ददनाांक / Dated : 17th day of September, 2024.

आदेश की प्रनिनलनप अग्रेनषि / Copy of the Order forwarded to :

1.अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The Pr.CIT, Pune (MH-India)

4. The CIT, Pune (MH-India) 5. DR, ITAT, Bench 'B', Pune 6. गार्डफ़ाइल / Guard File.

आदेशानुसार / By Order वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्यायादधकरण, पुणे / ITAT, Pune.