Income Tax Appellate Tribunal - Delhi
Super Seals India Private Limited, ... vs Income Tax Officer, Ward 24(1), Delhi on 25 September, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G", NEW DELHI
BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
AND
SHRI ANUBHAV SHARMA, JUDICIALMEMBER
ITA No.2703/DEL/2023
(Assessment Year: 2017-18)
Super Seals India Private Limited, vs. ITO, Ward 24 (1),
201, 2nd Floor, LSC, Pankaj Plaza, Delhi.
Pocket H & J, Sarita Vihar,
New Delhi - 110 076.
(PAN: AAACS5116L)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Ved Jain, Advocate
Ms. Supriya Mehta, CA
REVENUE BY : Shri Anuj Garg, Sr. DR
Date of Hearing : 04.07.2024
Date of Order : 25.09.2024
ORDER
PER S. RIFAUR RAHMAN, AM :
This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) (for short 'Ld. CIT (A)')/National Faceless Appeal Centre (NFAC), Delhi dated 29.07.2023 for the Assessment Year 2017-18.
2 ITA No. 2703/DEL/20232. Brief facts of the case are, the assessee filed its return of income on 27.10.2017 declaring income u/s. 115JB at Rs.34,26,200/-. The case was selected for complete scrutiny and notice u/s. 143(2) was issued on 13.08.2018.
All the details of the case, as sought by the AO during assessment proceedings, were duly submitted from time to time. One of the queries which the AO had raised during the course of assessment proceedings was the reasons for delay, beyond the due date as per ESI and EPF Acts, in deposit of ESI (Rs.332,882) and EPF (Rs.39,53,230) dues of Employees' share with respective authorities.
In response, the assessee submitted a written reply to this query vide its letter dated 28/11/2019 which was uploaded on the online portal on 04.12.2019 stating that though such dues have been deposited beyond the due dates prescribed under ESI and EPF Acts but nevertheless such dues have been paid during the financial year itself or within the due date of filing of return of income, therefore are allowable. In support of its contentions, along with that letter, the assessee had also submitted a copy of CIT (A) order for the AY 2014-15, decided in the case of the assessee in which the CIT(A) had allowed the Employees' share of ESI and EPF which were deposited beyond the dates prescribed under respective Acts but before the due date of filing of return of income. The Ld CIT(A) decision was based on the decision of Jurisdictional Delhi High Court in the case of CIT v. AIMIL Ltd. (2010) 321 ITR 509. The 3 ITA No. 2703/DEL/2023 AO was satisfied with the reply of the assessee and since the matter was covered by the CIT (A) order in the earlier year of the same assessee and for which the department has not filed any further appeal, thereby it attained the finality, formed his conscious opinion about the allowability of such expenditure, accordingly allowed the same and passed the assessment order on 08.12.2019. Subsequently, the AO in April 2022 issued a notice u/s. 154 of the Act, and that too only through the portal of the income tax, alleging that the Employees' share of ESI and EPF have been deposited late as per information available in form 3CD of tax audit report, hence, the deposit of such dues after such delay has not been disallowed by the AO, accordingly treated this as a mistake apparent from records and added a sum of Rs. 54,07,029/- in the total income of the assessee, ignoring the fact that the point under consideration has already been deliberated upon during the assessment proceedings. The AO has only uploaded the notice issued u/s. 154 on the portal of the Income Tax without sending a proper notice through primary email of the assessee company. Therefore, the assessee could not give any reply to such notice as it was not aware of any such notice issued in its case.
3. Aggrieved, assessee made a detailed submissions and grounds raised before the NFAC, Delhi. After considering the detailed submissions of the assessee and arguments, ld. CIT (A) discussed the grounds raised by the 4 ITA No. 2703/DEL/2023 assessee on the issue of maintainability of rectification order made under section 154 of the Income-tax Act, 1961 (for short 'the Act') with the following observations :-
"5.4. Respectfully following the decisions of Hon'ble ITAT as discussed above and decision of the Hon'ble of Supreme Court in the case of Checkmate Services Pvt. Ltd, the appellant claim that the same issue cannot be rectified u/s 154 by treating it as a mistake apparent from records (record consisting of tax audit report in Form 3CB only). Rather, it is a change of opinion by the AO which cannot be acted upon as part of section 154 is not found to be tenable and hence, grounds raised is treated as dismissed. In view of the foregoing discussion, the ground no. (1) and (3) are hereby treated as dismissed."
4. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-
"1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals), Income Tax Department, {CIT(A), ITD}, NFAC is bad both in the eye of law and on facts.
2. (i) On the facts and circumstances of the case, the learned CIT(A), ITD has erred both on facts and in law in sustaining the order passed by the AO under section 154 of the Act.
(ii) That the learned CIT(A), ITD has confirmed the order passed by the AO under section 154 of the Act rejecting the contention of the assessee that AO cannot review it's earlier order under section 154 of the Act
(iii) That the learned CIT(A), ITD has confirmed the order under section 154 passed by the AO despite the fact that there was no mistake apparent from record in the earlier order passed under section 143(3) of the Act.
3. (i) On the facts and circumstances of the case, the learned CIT(A), ITD has erred both on facts and in law in rejecting the contention of the assessee that the issue involved in the present appeal is of debatable in nature and outside the purview of section 154 of the Income Tax Act.5 ITA No. 2703/DEL/2023
(ii) That the CIT(A), ITD has erred both on facts and in law in ignoring the various judicial precedents brought on record by the assessee in this regard.
4. (i) On the facts and circumstances of the case, the learned CIT(A), ITD has erred both on facts and in law in confirming the disallowance of Rs.54,07,029/- made by the AO on account of late deposit of ESI, PF and Welfare fund invoking the provisions of section 36(1)(va) of the Income Tax Act.
(ii) That the abovesaid disallowance has been confirmed rejecting the detailed submissions and explanations made by the assessee in this regard.
5. Without prejudice to the above, the CIT(A), ITD has erred both on facts and in law in rejecting the contention of the assessee that the actual amount on account of late deposit of ESI, PF and welfare fund is Rs.42,86,112/- whereas the AO has made the disallowance of Rs.54,07,029/-."
5. At the time of hearing, ld. AR for the assessee submitted as under :-
"GROUND NO. 4 TO 6 - Disallowance on account of late deposit of ESI, PF and Welfare Fund invoking the provisions of Section 36(1)(va) of the Act is bad in law.
There was no mistake apparent from record either on the date of passing of Assessment Order or on the date of issuance of notice under section 154 or on the date of passing of Rectification Order
1. The issue is squarely covered in favour of the assesses by the judgement passed by Hon'ble Delhi Tribunal in the case of SAN JAY KUMAR VERSUS INCOME-TAX OFFICER, WARD-4 (1), GURGAON , 2024 (3) TMI 606 - ITAT DELHI, Dated: - 21-6-2023 wherein the Hon'ble Delhi Tribunal has held that:
"6 After giving thoughtful consideration to the material on record the Bench is of the considered opinion that the issue involved in the appeal is not with regard to merits of addition but whether such addition could be made by learned AO by exercising powers u/s 154 of the Act The matter of fact is that learned AO had accepted the return filed u/s 139 of the Act vide intimation u/s 143(1) of the Act dated 24.11.2019. The same was based on the tax audit report in form no. 3CB and 3CD. Thus, the question of delay in deposit of the employees' contribution was very much in the assessment records upon which the intimation u/s 143(1) was served upon the assessee. As at relevant time there was law in favour of assessee allowing such expenditure 6 ITA No. 2703/DEL/2023 so it has to be concluded that assesses was benefited by same and failure to follow a divergent view in favour of Revenue cannot be considered to be an error apparent on record and thus learned AO was not justified to substitute his opinion by invoking provision of Section 154. The question of relying any judgment in favour of Revenue to invoke section 154 powers is not manifested from the order u/s 154 and thus the learned CIT(Appeal) too erred to sustain the order on the basis of the judgment of the Hon'ble Supreme Court in Checkmate 'Services Pvt. Ltd, case (supra}."
2. Brief facts of the case are that during the year under consideration,-
there was a delay in depositing the amount of ESI and PF as is evident from the Tax Audit Report at PB Pg. 29-42.
3. However, it is an undisputed fact that the amount of ESI and PF was deposited before the due date of filing of the ITR for the year under consideration. In no case the amount was deposited beyond the date of filing of ITR. Moreover, the claim for ESI and PF was allowed in earlier Assessment years i.e. AY 2014- 15 and AY 2016-17 and no appeal was preferred against such orders.
4 Accordingly, the AO had allowed the claim for deduction of ESI/PF during the course of scrutiny assessment proceedings and no adverse inference was drawn.
5. However, to the surprise of the assessee, notice under section 154 was issued on the basis of Tax Audit Report and by placing reliance on the CBDT Circular No. 22/2015 -dated 17.02,2015. Thereafter, Rectification Order under section 154 of the Act was passed disallowing the claim for "ESI/PF on account of delay in depositing such sum beyond the dates stipulated in respective Acts.
6. It is an undisputed fact that the question of delay in deposit of the employees' contribution of ESI/PF was very much before the AO during the course of assessment proceedings and the AO, after thorough verification of facts of the case, had come to a conclusion of accepting tie income returned by the assessee.
7. It is relevant to note here that, the issue with respect to allowance of ESI/PF if deposited on/before the due date of filing of ITR was then duly covered by various judgements of the Hon'ble Jurisdictional High Court. Thus, there was no mistake apparent from record on either the date of passing of Assessment Order on 08.12.2019 or on the date of issuance of notice u/s 154 on 19.04.2022 or on the date of passing of Rectification Order on 05.05.2022. Moreover, the AO has not relied upon arty judgement to hold that the claim for deduction of employees' contribution of ESI/PF is not allowable.
7 ITA No. 2703/DEL/20238. Additionally, the reliance placed by CIT(A) on the judgement in the case of CHECKMATE SERVICES P. LTD. VERSUS COMMISSIONER OF INCOME TAX-1, 2022 (10) TMI 617 - SUPREME COURT, Dated.- October 12, 2022 was passed by Hon'ble Supreme Court on 12.10,2022 reversing the views taken by Hon'ble Jurisdictional High Court. It is to be noted here that such judgement was passed much after the date on which order sought to be rectified and in fact the rectification order itself was passed. Thus, at relevant time there was law in favour of assessee allowing such expenditure.
9. Thus, AO as well CIT(A) have erred in passing/upholding such rectification order under section 154 of the Act and hence such order is liable to be quashed. Reliance is placed on the following judicial pronouncements in this regard; • SANJAY KUMAR VERSUS INCOME-TAX OFFICER, WARD-4 (1) , GURGAON , 2024 (3) TMI 606 - ITAT DELHI, Dated: - 21-6-2023 "6. After giving thoughtful consideration to the material on record the Bench is of the considered opinion that the issue involved in the appeal is not with regard to merits of addition but whether such addition could be made by learned AO by exercising powers u/s 154 of the Act. The matter of fact is that learned AO had accepted the return filed u/s 139 of the Act vide intimation u/s 143(1) of the Act dated 24.11.2019. The same was based on the tax audit report in Form No. 3CB and 3CD. Thus, the Question of delay in deposit of the employees' contribution was very much in the assessment records upon which the intimation u/s 143(1) was served upon the assessee. As at relevant time there was law in favour of assessee allowing such expenditure so it has to be concluded that assessee was benefited by same and failure to follow a divergent view in favour of Revenue cannot be considered to be an error apparent on record and thus learned AO was not justified to substitute his opinion by invoking provision of Section 154. The Question of relying any judgment in favour of Revenue to invoke section 154 powers is not manifested from the order u/s 154 and thus the learned CIT(Appeals) too erred to sustain the order on the basis of the judgment of the Hon'ble Supreme Court in Checkmate Services Pvt Ltd, case (supra)."
Commissioner of Income-tax, Kolkata-l V. Peerless General Finance & Investment Co. Ltd., HIGH 8 ITA No. 2703/DEL/2023 COURT OF CALCUTTA, [2015] 59 taxmann.com 37 (Calcutta), DATED-JANUARY 16, 2015 "8. In any event the fact that the decision on a question of law on which the judgement is based has been reversed or modified by any subsequent decision of a superior court cannot be a around for exercise of power under section 154 of the Income Tax Act Reference in this regard may be made to a Division Bench judgement of this Court in the case of Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130ITR 710 wherein the following views were taken :
.....
9. There is still another way of looking at it. Under Order 47 Rule 1 of the Code of Civil Procedure there is a provision for review. But the power of Court to review contains the following restriction. "..Explanation:-- The fact that the decision on a question of law on which the judgment of the Court is based has been reversed or modified by the subsequent decision of a superior Court in any other case, shall not be a ground for the review of such judgment". 10. We are, as such, of the opinion that the learned Tribunal was justified in reversing the order passed in exercise of section 154 by the Assessing Officer."
Smriti Properties (P.) Ltd. v. Settlement Commission, [2005] 149 Taxman 386 (Calcutta), DATED -
SEPTEMBER 13, 2004 "29. To my mind under the provision of section 154 of the said Act the income-tax officials cannot in the guise of rectification, review or recall the earlier order on the strength of the subsequent declaration of law by the Supreme Court. Mistake apparent from the records means which was in existence on the date of passing of the order and the same escaped notice of all concerned. Here this sort of mistake is not there undisputedly.
30. In order to invoke jurisdiction of the aforesaid section one has to see whether without any debate or argument of extraneous matter the correction is possible. The scope of section 154 suggests that the officer concerned is to examine all the records including order, returns and accompanying documents forming assessment, and to find any apparent mistake or defect nor the correctness of the decision on law or fact. For example if it is found on 9 ITA No. 2703/DEL/2023 the facts there is a mistake in calculation or misquoting of the relevant law and further ordering portion of the judgment is not the logical conclusion or does not conform to the decision and reasoning recorded in the order itself rectification under section 154 is permissible. In my view even misapplication of the provision of law stated in the impugned order cannot be a ground for rectification.
....
36. I think one cannot take advantage of the subsequent pronouncement of a superior court in a closed and settled matter particularly in the matter decided and settled four years back, in the guise of rectification. I find in neither of the judgments rendered in Hindustan Bulk Camera's case (supra) and in Gujrat Engineering Construction Co. 's case (supra) the Supreme Court did have any occasion to examine the power of waiver of the Commission in view of the Board's , notification issued under section 119(2)(a) dated May 23, 1996. The Board has power to issue necessary notification under the aforesaid section in relaxation of the provision of sections 234A, 234B and 234C of the said Act. The Supreme Court has not said as yet that the Board had no power to grant relaxation. I hold there was no ground nor does it warrant for exercising jurisdiction under section 154 of the said Act. Thus, the impugned order is not sustainable on this ground also and the same is accordingly set aside."
Commissioner of Income-tax V. Agya Wanti, HIGH COURT OF JAMMU AND KASHMIR,[2001] 114 Taxman 557 (Jammu & Kashmir), DATED -
NOVEMBER 17, 2000] "5. We have given our careful consideration to the questions referred to us. Section 154 of the Act provides for rectification of mistake apparent from the record. The power under section 154, therefore, can be exercised only if there is a mistake in the order and the mistake is apparent from the record. Law is well-settled that only a glaring and obvious mistake of law can corrected under section 154, A decision on a debatable point of law cannot be corrected by way of rectification, if the rectification was made at a time when the issue was debatable, it cannot be supported by reference to the Supreme Court's 10 ITA No. 2703/DEL/2023 decision settling the issue which is rendered after the rectification."
10. Thus, in view of the above-mentioned facts and circumstances of the case and the case laws relied upon by the assessee, there was no mistake apparent from record either on the date of passing of assessment order i.e. 08.12.2019 or on the date of issuance of notice for rectification under section 154 on 19.4.2022 or on the date of passing of Rectification order itself i.e. 05.5.2022. Hence, the Rectification order passed by the AO and upheld by the CIT(A) is bad in law and liable to be quashed.
Ground no. 2 - AO cannot review the earlier order under section 154 of the Act.
Assessing Officer cannot review his earlier Order under Section 154 of the Act
1. This is an appeal filed by the assessee against the order dated 29,07.2023 passed by CIT(A) confirming the rectification order under section 154 passed by AO on account of late deposit of ESI.PF and Welfare Fund invoking the provisions of Section 36(1 )(va) of the Act,
2. Brief facts of the case are that the assessee is a private limited company -engaged in the business of manufacturing of Fuel Line Hoses, Oil Seals and Hydrodynamic Seals. During the year under consideration, the assessee had filed its ITR on 27.10.2017. A copy of Acknowledgement of ITR along with Computation of Income is placed at PB Pg.2-6.
3. However, the case of the assessee was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act were issued to the assessee. Moreover, the assessee was asked to justify as to why the disallowance shall not be made as regards the late payment of ESI and PF.
4. The assessee duly submitted a reply (PB Pg.70-71) to the above-
mentioned query explaining that the amount towards ESI and PF was deposited before the due date of filing of ITR and thus the claim shall be allowed as per Section 43B of the Act. Moreover, the assessee furnished a copy of the Order of CIT(A) for AY 2014-15 (PB Pg. 72-93) and a copy of Assessment Order of AY 2016-17 (PB Pg.94-101) wherein the claim for ESI/PF was allowed.
11 ITA No. 2703/DEL/20235. Thereafter, considering the replies filed by the assessee, the AO accepted the returned income of the assessee and passed an Assessment Order on 08.12.2019.
6. However, to the surprise of the assessee, notice followed by rectification order dated 05.05.2022 under section 154 of the Act was passed with a view to disallow the claim of the assessee with - respect to delayed deposit of ESI/PF.
7. Aggrieved by the order passed by AO, assessee filed an appeal before CIT(A).
8. During the course of first appellate proceedings, the assessee duly submitted (PB Pg, 105-124) that the issue of delayed deposit of ESI/PF had been examined and verified in detail by the AO during the course of assessment proceedings. Moreover, the assessee submitted that specific reply was also submitted in this regard during the assessment proceedings and it was after thorough verification only that the AO had concluded to assess the income of the assessee at returned income,
9. However, CIT(A) ignored the submissions filed by the assessee and upheld the rectification order passed by AO for disallowance of delayed deposit of ESI/PF.
10. It is an undisputed fact that the issue of delayed deposit of ESI/PF had been thoroughly debated and discussed during the course of assessment proceedings and no adverse time. This is apparent from the Assessment Order dated 08.12.2019 wherein returned income has been accepted.
11. Thus, passing of rectification order on 05.05.2022 on the issue of delayed deposit of ESI/PF despite the issue having been thoroughly examined by the AO during assessment proceedings tantamount to change of opinion and is accordingly outside the purview of Section 154. Reliance is placed on the following judicial pronouncements wherein it has been held that the provision of section 154 of the Act does not permit to revisit the claim that has already been allowed:
• SUNIL PAGAR1A VERSUS INCOME TAX OFFICER, WARD-2 (1) , UDAIPUR, 2023 (12) TMI 699 - ITAT JODHPUR, Dated; * 9-10-2023 "Based on these facts, we are of the view that under the law on one is permitted to review own order, the provision of section 154 of the Act does not permit to revisit the claim that has already been allowed. The Bench also noted that in this case the assessee was already confronted on the claim 12 ITA No. 2703/DEL/2023 u/s 54F of the act and the same has been examined on its merit under the guise of section 154 of the Act the claim which has already been considered at length-cannot be revised u/s 154 of the Act considering the arguments recorded hereinabove and discussion considering the various decision cited we quash the order passed u/s. 154 of the Act. Based on these observation ground No. 1 raised by the assessee is allowed. The ground no. 2 being the issue raised on merits, since we have considered the technical ground no. 1 ground no. 2 becomes educative in nature. Ground No. 3 is consequential in nature and ground No. 4 being general in nature and does not require any adjudication."
ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2 (1) VERSUS IXIA TECHNOLOGIES PVT. LIMITED (NOW MERGED WITH KEYSIGHT TECHNOLOGIES INDIA PVT. LIMITED) , KOLKATA, 2023(12)TWI1760-ITATKOLKATA, Dated: -11-10-2023 "10. To our mind, the view taken by the Ld. AO in the proceedings initiated u/s. 154 tantamount to a change in view resulting into review of his own order which is not permissible under the provisions of section 154 of the Act. When the id. AO has consciously taken a view to frame the original assessment by making certain additions/disallowances, he is not empowered to take contrary view by adopting a review process for the assessment already completed.
10.1. We are in agreement with the submissions made by the Ld. Counsel on the restricted powers available u/s. 154 to rectify a mistake which is apparent from record, which cannot be otherwise resorted to under the garb of review or reconsideration- of the order already passed. It is well settled law that a power to rectify a mistake does not include a power to review which can be exercised only where the statute it-self grant such power. In the absence of grant of such power of review under the said section, it is not possible for the Ld. AO to review his own order. Thus in our considered view, Ld. AO is not justified in adopting provisions of section 154 which deals with rectification of a mistake apparent from record which in the present case is on a technical issue i.e. allowability of exemption u/s.
13 ITA No. 2703/DEL/202310A in respect of receipt of refund of service tax. To buttress our decision, we find force from the decision of Hon'ble Supreme Court in the case of Saurashtra Kutch Stock Exchange Ltd. (supra)."
* INCOME TAX OFFICER, JAIPUR. VERSUS VINOD KUMAR JHARCHUR HUF, 2022 (11) TMI 467 - ITAT JAIPUR, Dated: - 18-10-2022 "We have gone through the submission of the assessee and orders of the lower authorities it is not disputed that the assessee has earned the capital gain and the claimed the deduction under section 54 of the Act. As the Id. AR of the assessee has already submitted all the details related to the claim made by the assessee against the capital gain expressly showing that all the details were submitted and after examination of all the records the id. AO has taken conscious decision and has allowed the claim after making all the necessary enquiry. The dispute is only about the amount of the claim allowable to the assessee which has already reached to finality once the order of the assessment is passed under section 143(3) of the Act The ld. DR did not controvert the arguments of the ld. AR of the assessee that considering the present set of fact the ld. AO did not bring anything in the notice issued to him so as to demonstrate that in fact there is a mistake apparent on record. The claim of the assessee is already considered which is based on the submission on merits in the scrutiny assessment and order has been passed which is based on the evidences and submission made by the assessee. Merely there is an observation of the revenue audit party it is not a mistake apparent on record. The ld. AO is in error of reviewing his own order under section 154 of the Act. Considering the facts placed on record the bench noted that the issue noted by the Id. AO is not a mistake apparent on record and is not subjected to revision under the guise of provision of section 154 of the Act and therefore, order passed under section 154 of the Act lacks jurisdiction as Id. AO did not demonstrate as to what is the mistake apparent on record and the debatable or change of opinion is not subject matter of the provision of section 154 of the Act, as the law allows the mistake apparent on record be rectified which is expressly not demonstrated before us and see that there exist no mistake which is apparent on record. The law duly empowers the revenue to invoke other provision to consider the audit objection but the same is 14 ITA No. 2703/DEL/2023 not permitted under the provision of section 154 of the Act as it done by the AO."
Maccaferri Environmental Solutions (P.) Ltd. v.
Income Tax Officer, Ward-3(2)(2), Mumbai, IN THE ITAT MUMBAI BENCH 'B1, [2019] 103 taxmann.com 154 (Mumbai - Trib.), DATED -
DECEMBER_12,_2018 "9. We have carefully considered the rival submissions. As our earlier discussion would show, the crux of the controversy revolves around Sec. 154 of the Act invoked by the Assessing Officer to amend the assessment order passed, in order to determine the liability in terms of Sec. 115JB of the Act. Pertinently, Sec. 154 of the Act permits the Assessing Officer to amend an order only with a view to rectify a mistake apparent from the record. It is judicially well-settled that the .power to rectify a mistake apparent from record in Sec. 154 of the Act does not involve a wholesale review of the earlier order and rather, what is permissible is only to rectify an obvious and patent mistake. It is also well understood that even debatable points of law would not fall in the meaning of the expression "mistake apparent" for the purposes of Sec. 154 of the Act."
• M/S CITY CLINIC PVT. LTD. VERSUS ACIT CIRCLE 4 (1), CHANDIGARH, 2017 (6) TMI 539 -
ITAT CHANDIGARH, Dated: - 2-6-2017 "When the AO has consciously taken the view to frame regular assessment and made certain additions, AO is not empower to take contrary view to review entire assessment order already framed. It is against the spirit of provision of section 154 of the Act."
• COMMISSIONER OF INCOME TAX VERSUS R.K. SHRIVASTAV (HUF), 2007 (10) TWII 718 -DELHI HIGH COURT, Dated.- October 31, 2007 "There was no rectification carried out by the Assessing Officer but in a sense it was a review of the order passed by him. This was not permissible under Section 154 of the Act."
12. In view of the above-mentioned facts and circumstances of the case and the case laws relied upon by the assessee, it is clear that the 15 ITA No. 2703/DEL/2023 power to review any order is not contained in Section 154 of the Act and hence, the Rectification Order dated 05.05.2022 passed by AO is bad in law and liable to be quashed.
Ground No. 3 - Debatable issues are outside the purview of Section 154 of the Act.
Issues which are debatable in nature are outside the ambit of Section 154 of the Act
1. It is an undisputed fact that the AO has passed the rectification order under section 154 on the sole issue of delayed deposit of ESI/PF.
2. It is relevant to note the scope of rectification which can be made under the ambit of Section 154 of the Act. As per Section 154, only mistakes which are apparent from record can be rectified under section 154 of the Act. Issues of debatable nature where two views are possible fail outside the purview of Section 154 and hence cannot be rectified under Section 154 of the Act.
3. In the present case, following dates are of vital importance:
Particulars Date
Assessment order 08.12.2019
Notice for 19.04.2022
rectification
issued on
Rectification 05.05.2022
order
4. From the above table, it can be noted that the all the three events i.e. passing of Assessment order, issuance of notice for rectification under section 154 as well the Rectification Order under Section 154 have been passed on a date prior to the Judgement given by Hon'ble Apex Court in the case of CHECKMATE SERVICES P. LTD. VERSUS COMMISSIONER OF INCOME TAX-1, 2022 (10) TMI617 - SUPREME COURT, Dated.- October 12, 2022. Thus, on the date of passing of such rectification order, the issue was highly debatable in nature. Moreover, the Hon'ble Jurisdiction a! High Court in the case of PR. COMMISSIONER OF INCOME TAX-7 VERSUS PRO INTERACTIVE SERVICE (INDIA) PVT. LTD., 2018 (9) TMI 2009 - DELHI HIGH COURT, Dated: -10 September 2018 had itself decided the issue in favour of the assessee. There were numerous judgements wherein a similar view had been taken:
16 ITA No. 2703/DEL/2023• COMMISSIONER OF INCOME TAX VERSUS A1M1L LIMITED, NIRWIALA SWAMI, SPEARHEAD DIGITAL STUDIO, M/S. NET 4 INDIA LTD., WIODIPON LTD., & M/S. EKTA AGRO INDUSTRIES LTD., 2009 (12) TMI 38 - DELHI HIGH COURT, Dated,- December 23, 2009 • DC1T CIRCLE-7 (1) , NEW DELHI VERSUS DEE DEVELOPMENT ENGINEERS LTD., 2021 (4) TMI 393 - IT AT DELHI, Dated: - 08 April 2021
5. Thus, at the time of passing of Assessment Order as well as Rectification Order, there were judgements of Hon'ble Jurisdictional High Court which were in the favour of the assessee.
6. Therefore, the action of the AO in holding that there is a mistake apparent from record is bad in law. The issue of delayed payment of employee's contribution to ESI/PF was debatable in nature at that point of time and hence outside the ambit of Section 154 of the Act.
7. Reliance is placed on the following judicial pronouncements wherein it has been held that issues on which two views are possible do not fall under the ambit of mistake apparent from record:
• TS BALARAM, INCOME-TAX OFFICER, COMPANY CIRCLE IV, BOMBAY VERSUS VOLKART BROTHERS AND OTHERS, 1971 (8) TMI 3 -
SUPREME COURT, Dated.-August, 1971 "From what has been said above it is clear that the question whether section 17(1) of the Indian Income-tax Act, 1922, was applicable to the case of the first respondent is not free from doubt. Therefore, the Income tax Officer was not justified in thinking that on that question there can foe no two opinions. It was not open to the income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the income-tax Act, 1961. 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. As seen earlier, the High Court of Bombay opined, that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminaran Hegde v. Mallikarjun Bhavanappa Tirumale, this court while spelling out the scope of the power of a High Court under article 226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error 17 ITA No. 2703/DEL/2023 \ apparent on the face of the record. A decision on a debatable .point of law is not a mistake \ apparent from the record-see Sidhramappa Andannappa Manvi v. Commissioner of Income- \ tax. The power of the officers mentioned in section 154 of the Income-tax Act, 1961 to correct" any mistake apparent from the record " is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an " error apparent on the face of the record. " In this case it is not necessary for us to spell out the distinction between the expressions "error \ apparent on the face of the record" and "mistake apparent from the record". But suffice it to say that the Income-tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent."
Commissioner of Income-tax V. Lakhani Rubber Udyog Ltd., HIGH COURT OF PUNJAB AND HARYANA, [2009] 184 Taxman 236 (Punjab & Haryana), DATED - FEBRUARY 4, 2008 "2. The brief facts of the case are that, vide order passed under section 154 of the Act, the Assessing Officer, while rectifying his earlier order, disallowed Rs. 46,59,304 on account of provident fund being paid after due dates and Rs. 57,184 on account of ESI contribution not paid within due date. Consequently, the said amount was added in the taxable income of the assessee. On appeal by the assessee. the Commissioner of Income-tax /Appeals) deleted the said addition on the ground that the issues were debatable and that all the payments have been made within grace period, while observing as under :
6. After hearing learned counsel for the appellant and going through the impugned order, we are of the opinion that the aforesaid questions of law do not arise from the order of the Income Tax Appellate Tribunal. The only question which is arising from the order of Income Tax Appellate Tribunal is whether the Assessing Officer has gone beyond his jurisdiction section 154 of the Act while rectifying its earlier order. The appellate authority as well as the Income-tax Appellate Tribunal have rightly come to the conclusion that the Assessing Officer has gone beyond the jurisdiction under section 154 of the Act while changing his earlier order on the merits, which, in our opinion, does not amount to rectifying the mistake apparent on the record.
Even the Assessing Officer himself has admitted in his 18 ITA No. 2703/DEL/2023 order that the provident fund amount was deposited by the assessee within the grace period provided under the circular. In spite of that fact, the Assessing Officer changed the order on the merits in the garb of rectification. Therefore, we do not find any merit in this appeal nor any substantial question of law is arising in this appeal."
The ACIT V. The Villupuram District Central Co- operative Bank Ltd.,, IN THE INCOME TAX APPELLATE TRIBUNAL, ITA No.: 981/CHNY/202Q, Dated - 18.10.2023 "33. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO wanted to rectify the claim of deduction u/s.36(1 )(viia) of the Act which was allowed by AO and consequently while giving effect to the order of OIT(A) dated 18.07.2017 at Rs.33,42,28,494/- instead of Rs.20,00,18,7327-. According to AO, deduction u/s.36(1)(viia) of the Act is allowable only to the extent of claim made in the books of accounts i.e., provision for bad and doubtful debts made in the books of accounts and it cannot be claimed in the computation simpliciter. We noted that there is a lot of debate and it is highly debatable issue and it cannot be decided while acting u/s.154 of the Act as there is a limitation in the provisions of section 154 of the Act that only the mistake apparent from record which can be rectified but where two views are possible or there is a debate available, it cannot be rectified u/s.154 of the Act. Here is the case where the AO has allowed this claim while giving effect to the order of CIT(A) dated 18-07.2017 and that cannot be rectified while acting u/s.154 of the Act Hence the very issue on assumption of jurisdiction, we allow in favour of assessee and against Revenue. This issue of assessee's appeal is allowed." Sandeep Bhargava ("HUF'} V. Deputy Commissioner of Income-tax, Circle-1 (1), Chandigarh, IN THE ITAT CHANDIGARH BENCH 'B1, [2020] 117 taxmann.com 677 (Chandigarh -Trib.), DATED - JULY 6, 2020 "It is a settled law that powers of the Assessing Officer to rectify an order u/s 154 are very limited and can be exercised only in a case where the Assessing Officer finds that a mistake apparent on record had occurred. However, in the case of a debatable issue or where the lengthy arguments are needed to decide the issue, powers u/s 154 of 19 ITA No. 2703/DEL/2023 the Act cannot be exercised to amend an already passed order. It has also been held time and again that powers u/s 154 of the Act cannot be exercised on change of opinion by the Assessing Officer on an issue relating to any admissibility of a claim."
8. In view of the above-mentioned facts and circumstances of the case and the case laws relied upon by the assessee, it is evident that the issue of allowance of deduction with respect to ESI/PF was debatable in nature as there was difference in judicial opinion between several High Courts and hence Rectification Order passed u/s 154 of the Act is liable to be quashed."
6. Further, on the issue of mistake apparent on record, the Assessing Officer reviewed his earlier order u/s 154 of the Act. He submitted as under :-
"RECTIFICATION ORDER The assessment order under section 143(3) of the Income Tax Act, 1961, for the assessment year 2017-18 made on 08.12.2019 requires to be amended as there is a mistake apparent from the record within the meaning of Section 154/155 of the Income tax Act, 1961. The rectification of the mistake, as per particulars given below will have the effect of enhancing the assessed income.
On perusal of the Form No.3CA (Audit Report dated
07.09.2017 u/s 44AB of the IT Act, 1961), it has been observed that according to column no.20 related to details of contribution from employees for various funds as referred to in section 36(1)(va), certain payments made towards ESI and Provident Fund after the due date but no such addition was made on the basis of the Form No.3CA by the assessee company.
It can be seen from the company M/s Super Seas India Limited has deposited / credited Rs.54,07,029/- after the due date to the employees accounts in relevant funds. The assessee company is private limited company and having information of all rules and regulations, such delay of deposit by a private limited company which is mainly of employees are not permissible under the provisions of the 20 ITA No. 2703/DEL/2023 LT. Act, 1961, and cannot be allowed. The CBDT vide circular no.22/2015 dated 17/02/2015 has clarified vide para 5 that "it is clarified that this Circular does not apply to claim of deduction relating to employee's contribution to welfare funds which are governed by section 36(1)(va) of the LT. Act, 1961. This, being a mistake apparent from records, needs to rectify.
Therefore, notice u/s 154 of LT. Act was issued on 19/04/2022 issued to assessee to furnish the reply on proposed rectification on or before 25.0~.2022 through electronics means but no reply received till 02.05.2022.This clearly shows that the assessee has nothing to say about proposed addition and accepted the addition.
7. On the other hand, ld. DR for the Revenue relied on the findings of the lower authorities.
8. Considered the rival submissions and perused the material placed on record. We observed from the record that the assessment u/s 143(3) was completed after verification of payments of ESI and provident fund during assessment proceedings by the Assessing Officer by relying on the earlier assessment order and first appellate order, in which the erstwhile Ld CIT (A) has allowed the claim of the assessee by relying on the decision of Hon'ble Delhi High Court in the case of AIMIL Limited (supra). It is a fact on record that Assessing Officer duly verified the claim of the assessee relating to ESI/PF and allowed the same in regular assessment. Subsequently, by relying on the decision of Checkmate Services Pvt. Ltd. (supra), he issued rectification notice u/s 154 of the Act and without giving opportunity to make the 21 ITA No. 2703/DEL/2023 objections/submissions of the assessee, he disallowed the claim of the assessee by passing rectification order u/s 154 of the Act. After considering the facts on record, we observed that no doubt, the Assessing Officer has disallowed the claim of the assessee by relying on the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra). However, as per the facts on record, Assessing Officer has duly verified during assessment proceedings and allowed the same. Now, the Assessing Officer treated the same as mistake apparent on record and reviewed his own order, issued the notice u/s 154 thru IT portal and disallowed the claim of the assessee. According to us after considering the various decisions on this subject of rectification u/s 154 wherever there is scope for debate, the same cannot be rectified under this section, it is more or less settled issue. Therefore, Assessing Officer cannot review his own order after duly verifying the same in regular assessment. The same view was held by the coordinate Bench in the case of Sanjay Kumar (supra) and held as under :-
"6. After giving thoughtful consideration to the material on record the Bench is of the considered opinion that the issue involved in the appeal is not with regard to merits of addition but whether such addition could be made by learned AO by exercising powers u/s 154 of the Act. The matter of fact is that learned AO had accepted the return filed u/s 139 of the Act vide intimation u/s 143(1) of the Act dated 24.11.2019. The same was based on the tax audit report in Form No. 3CB and 3CD. Thus, the Question of delay in deposit of the employees' contribution was very much in the assessment records upon which the intimation u/s 143(1) was served upon the assessee. As at relevant time there was law in favour of assessee allowing such 22 ITA No. 2703/DEL/2023 expenditure so it has to be concluded that assessee was benefited by same and failure to follow a divergent view in favour of Revenue cannot be considered to be an error apparent on record and thus learned AO was not justified to substitute his opinion by invoking provision of Section 154. The Question of relying any judgment in favour of Revenue to invoke section 154 powers is not manifested from the order u/s 154 and thus the learned CIT(Appeals) too erred to sustain the order on the basis of the judgment of the Hon'ble Supreme Court in Checkmate Services Pvt Ltd, case (supra)."
9. Respectfully following the above decision, we observe that subsequent development on the issue of allowability of employees share of respective contribution was unsettled for the issue which was more or less settled in favour of the assessee and the same was accepted by the AO in the regular assessment in this case and even the revenue has not proceeded with the appeal in any of the appellate forum, this shows that the issue at the time of passing the order was settled and for the same issue, the AO cannot invoke the rectification proceeding in such debatable issue. Therefore, we are inclined to allow the grounds raised by the assessee and at this stage, we do not wish to deal with other submissions made by the assessee.
10. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on this 25th day of September 2024.
Sd/- sd/-
(ANUBHAV SHARMA) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 25.09.2024
TS
23
ITA No. 2703/DEL/2023
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals).
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI