2023 (6) TMI 1531 - AT - Income Tax

Rectification for mistake apparent from record permits recall of an order contrary to binding Supreme Court law on delayed EPF and ESI contributions.

A Tribunal may rectify an earlier order under section 254(2) when that order is inconsistent with a later Supreme Court declaration of law, because such ... Rectification of mistake apparent from record - Subsequent Supreme Court decision as basis for rectification - Employees' contribution to EPF and ESIRectification under section 254(2) - Subsequent declaration of law - Employees' contribution to labour welfare funds - The Tribunal's earlier order deleting disallowance of delayed deposit of employees' contribution towards EPF and ESI was liable to be recalled under section 254(2) because it was not in conformity with the subsequent decision of the Supreme Court in Checkmate Services Pvt. Ltd. - HELD THAT: - The Tribunal held that the controversy stood covered by its earlier consolidated order in DCIT, Circle-1(1), Bhilai Vs. N.R Wires Pvt. Ltd. & Ors , which had considered the effect of the Supreme Court decision in Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I . Adopting the same reasoning, it accepted that where the Tribunal's earlier view is rendered inconsistent with the law subsequently declared by the Supreme Court, the order suffers from a mistake apparent from record amenable to rectification under section 254(2). Since Checkmate had held that delayed deposit of employees' contribution to EPF and ESI is not allowable by resort to section 43B, the earlier order vacating the addition could not stand and had to be recalled for the limited purpose of giving effect to that declaration of law. [Paras 8, 9, 10]The miscellaneous application was allowed, the earlier appellate order was recalled, and the appeal was directed to be fixed for hearing only for giving effect to the Supreme Court decision in Checkmate Services Pvt. Ltd.Final Conclusion: The Tribunal held that its earlier order, having taken a view contrary to the law subsequently declared by the Supreme Court on employees' contribution to EPF and ESI, contained a mistake apparent from record. The department's miscellaneous application was therefore allowed and the earlier order was recalled for limited rehearing in conformity with that law. Issues: Whether the Tribunal's earlier order disallowing the Revenue's claim on delayed employee's contribution to EPF and ESI could be recalled under section 254(2) of the Income-tax Act, 1961 on the ground that it was inconsistent with the subsequent decision of the Supreme Court in Checkmate Services.Analysis: The Tribunal held that a later declaration of law by the Supreme Court states the law as it always existed and, unless expressly made prospective, applies retrospectively. Non-consideration of the correct legal position as settled by the Supreme Court constitutes a mistake apparent from the record. It further held that rectification under section 254(2) is permissible when an existing order is not in conformity with binding law declared by the Supreme Court, and such exercise does not amount to a review on merits. On that basis, the Tribunal applied the Supreme Court's ruling on delayed employee contributions and concluded that its earlier view required correction.Conclusion: The miscellaneous application was maintainable and was allowed. The earlier order of the Tribunal was recalled, and the appeal was directed to be listed for fresh hearing to give effect to the Supreme Court's ruling.Final Conclusion: The Tribunal accepted the Revenue's rectification plea, treated the earlier order as containing a rectifiable mistake, and reopened the matter for limited reconsideration in light of the binding Supreme Court decision.Ratio Decidendi: A Tribunal order contrary to the law subsequently declared by the Supreme Court can be rectified under section 254(2) because such later declaration operates retrospectively unless expressly made prospective, and non-conformity with binding law is a mistake apparent from the record.