ITAT rejects revenue's recall application for delayed PF/ESIC deduction claims despite subsequent adverse SC judgment

ITAT Mumbai dismissed revenue's application seeking recall of tribunal order allowing delayed PF/ESIC deduction claims. Revenue argued recall was justified based on subsequent SC judgment in Checkmate Services P Ltd that ruled against such deductions. Tribunal held that finalized orders cannot be recalled or reviewed based on subsequent judgments that overrule earlier precedents relied upon. Citing SC precedent in Govt. of NCT of Delhi vs. K.L. Rathi Steels Limited, tribunal ruled that Section 254(2) powers are limited and cannot reopen matters that have attained finality between parties merely due to later adverse judgments.

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Issues Involved:
1. Recall of Tribunal's order based on subsequent Supreme Court judgment.
2. Allowability of deduction for employees' contribution to PF and ESIC deposited after due dates specified in respective Acts but before the due date of filing the return.
3. Scope and ambit of Section 254(2) of the Income Tax Act.

Detailed Analysis:

1. Recall of Tribunal's Order Based on Subsequent Supreme Court Judgment:

The Revenue filed a Miscellaneous Application under Section 254(2) of the Income Tax Act, seeking to recall the Tribunal's order dated 28/04/2022. The basis for this request was the subsequent judgment of the Hon'ble Supreme Court in the case of Checkmate Services P Ltd. Vs CIT, which clarified that the deduction for employees' contributions to PF and ESIC is not allowable if deposited after the due dates specified in the respective Acts, even if deposited before the due date of filing the return under Section 139(1).

2. Allowability of Deduction for Employees' Contribution to PF and ESIC:

The Tribunal had initially allowed the assessee's claim for deduction of employees' contributions to PF and ESIC, which were deposited after the due dates specified in the respective Acts but before the due date of filing the return under Section 139(1). This decision was based on various judgments from the Hon'ble Bombay High Court and other High Courts, which held that such contributions are allowable if deposited before the due date of filing the return.

The Revenue contended that the Supreme Court's subsequent judgment in Checkmate Services P Ltd. clarified that such deductions are not allowable unless deposited on or before the due dates specified in the respective Acts. The Revenue argued that this constituted a mistake apparent from the record, which warranted rectification under Section 254(2).

3. Scope and Ambit of Section 254(2) of the Income Tax Act:

The Tribunal examined the scope of Section 254(2), which allows rectification of any mistake apparent from the record. The Tribunal referred to the Supreme Court's judgment in CIT vs. Reliance Telecom Ltd., which held that the powers under Section 254(2) are akin to Order XLVII Rule 1 of the CPC. This means that the Tribunal can only rectify mistakes that are apparent from the record and cannot revisit the merits of the case.

The Tribunal also cited the Explanation to Order XLVII Rule 1 CPC, which states that a subsequent decision of a superior court cannot be a ground for review of an earlier judgment. The Tribunal highlighted several Supreme Court judgments, including Beghar Foundation vs. Justice K.S. Puttaswamy and CIT vs. Gracemac Corporation, which reinforced this principle.

The Tribunal concluded that the subsequent judgment of the Supreme Court in Checkmate Services P Ltd. could not be a ground for recalling its earlier order, which had attained finality. The Tribunal emphasized that the decision was based on the law as it stood at the time, supported by binding precedents from the Hon'ble Jurisdictional High Court and other High Courts.

Conclusion:

The Tribunal dismissed the Revenue's Miscellaneous Application, holding that the subsequent judgment of the Supreme Court could not be a ground for recalling or reviewing its earlier order under Section 254(2) of the Income Tax Act. The Tribunal reiterated that the scope of Section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to revisiting the merits of the case based on subsequent judicial pronouncements.

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