ITAT erred in recalling its original judgment deleting disallowance u/s 36(1)(va) for late deposit of PF based on Supreme Court judgment in Checkmate services which was delivered after the date of ITAT decision.
In a recent judgment, Hon’ble Supreme Court has dismissed Special Leave Petition against the decision of the Bombay High Court that there was no mistake apparent in ITAT judgment delivered before the date of Supreme Court judgment in Checkmate whereby ITAT deleted disallowance u/s 36(1)(va) for late deposit of PF.
ABCAUS Case Law Citation:
4747 (2025) (09) abcaus.in SC
Important Case Laws relied upon by Parties:
Checkmate Services Private Limited vs. Commissioner of Income Tax
In the instant case an addition was made by the Assessing Officer (AO) for three assessment years by making a disallowance of the amount received from the employees as contribution to provident fund and not paid within the due dates prescribed u/s 36(1)(va) of the Income Tax Act, 1961 (the Act).
The CIT(A) partly allowed the appeals. Against the orders passed by the CIT(A), the petitioner approached the Tribunal. The Tribunal allowed the appeals of the petitioner and delete the additions made by the assessing officer.
The Revenue however, invoked the provisions of Section 254 of the Act and approached the Tribunal by filing Miscellaneous Application, praying that the original orders passed by the Tribunal, allowing the petitioner’s appeal, be set aside on the ground that the view taken by the Tribunal qua setting aside of the additions as made by the assessing officer, cannot be accepted to be a correct view, in view of the decision of the Supreme Court in Checkmate Services Private Limited which was rendered subsequent to the orders passed by the Tribunal.
It was contended by the Revenue that in such decision the Supreme Court had held that deduction of employees share can be allowed under Section 36(1)(va), only if, it is deposited before the time limit under the respective statute and not before the due date under Section 139(1) of the Act. In this view of the matter, it was urged by the Revenue in the Miscellaneous Applications that due to such change in law, the basis of the original order passed by the Tribunal had vanished and accordingly the same will be required to be set aside, by allowing the Miscellaneous Applications filed under Section 254(2) of the Act.
ITAT allowed the said Miscellaneous Application of the Revenue by relying upon the decision of the Hon’ble Supreme Court in Checkmate Services (which was a subsequent decision), and recalled its original order holding that the judgement of the Hon’ble Supreme court in Checkmate which was passed subsequent to its original order gave rise to a mistake apparent from the record.
Aggrieved by the recall of order by the Tribunal, the assessee approached Hon’ble High Court and submitted that the jurisdiction of the Tribunal under Section 254(2) is akin to the jurisdiction of the Civil Court of a review in terms of the Code of Civil Procedure, 1908 (CPC) and hence it is only when there is an error apparent on the face of the order, it can be corrected by the Tribunal in exercise of its jurisdiction under Section 254(2).
It was contended that in the instant case, it was not where the existing position in law was not noticed by the Tribunal in rendering its original decision whereas the decision of the Supreme Court in the case of Checkmate was rendered subsequent to the decision of the Tribunal.
It was submitted that the subsequent judgment being rendered by the Supreme Court, cannot be a ground to invoke the provisions of Section 254(2) of the Act, as in this event, the only remedy for the Revenue would be to assail the orders passed by the Tribunal in an appeal to be filed before this Court under Section 260A of the Act.
It was also the submission of the assessee that the Miscellaneous Application was per se barred by limitation and this aspect was not taken into consideration by the Tribunal.
It was submitted that the impugned order passed by the Tribunal was contrary to the provisions of Section 254(2) hence the same would be required to be held invalid and illegal.
The Hon’ble High Court observed that from the plain language of sub-Section (2) of Section 254, it is clear that the jurisdiction of the Tribunal as conferred under sub-Section (2) of Section 254 is akin to the review jurisdiction of the Civil Court, that is to be rectify any mistake apparent from the record.
The Hon’ble High Court opined that in the instant case there was no mistake which could be said to be apparent on the face of the record and also the decision rendered by the Supreme Court subsequent to the Tribunal’s decision could not be relevant to come to a conclusion on the ground that there was a mistake apparent on the face of the order, entitling the Tribunal to substitute its original order.
The Hon’ble High Court stated that the petitioner had succeeded before the Tribunal on the basis of the position in law as it prevailed on the day the decision was rendered. The Supreme Court rendered its decision in Checkmate Services subsequently which held that the deduction of the employees’ share can be allowed under Section 36(1)(va) of the Act, only if such share was deposited before the time limit under the respective statutes and not before the due date under Section 139(1) of the Act. Therefore, it cannot be said that the Tribunal had overlooked the existing position in law, as laid down by the Supreme Court or the High Court, so as to bring about a situation that the law declared by the Supreme Court was not followed by the Tribunal and/or the decision of the Tribunal is contrary to the law as laid down by the Supreme Court.
The Hon’ble High Court held that such decision of the Supreme Court which never existed when the Tribunal passed the original order could never have been applied by the Tribunal, and hence it cannot be said that there was any mistake on the face of the record, so as to confer jurisdiction on the Tribunal to exercise its jurisdiction under Section 254(2) of the Act.
The Hon’ble High Court further observed that the Hon’ble Supreme Court in a case while rejecting the review petition, observed that no case for review of such judgment was made out, and most importantly on the ground that change in law or subsequent decision/judgment of coordinate or larger bench by itself cannot be regarded as a ground for review. Such principles of law are squarely applicable in the facts of the present case.
The Hon’ble High Court also observed that the Supreme Court following the decision in the Constitution Bench held that that even the change in law or subsequent decision/judgment of coordinate Bench or larger Bench by itself cannot be regard as a ground for review.
As a result, the Hon’ble High Court opined that the Tribunal was in a patent error in exercising jurisdiction under Section 254(2) in passing the impugned order.
Not satisfied with the order of the Hon’ble High Court, the Revenue challenged it before the Hon’ble Supreme Court by filing a Special Leave Petition (SLP).
However, the Apex Court dismissed the SLP with the following observation;
“We see no grounds to interfere with the impugned judgment and order of the High Court. Hence, the Special Leave Petition is dismissed”
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