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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
आदेश / ORDER PER BENCH: Captioned ten appeals filed by different assessees, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (in short “ld. CIT(A)”], which in turn arise out of separate assessment orders passed by Assessing Officer under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
Since, the issues involved in all the appeals are common and identical, therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The facts as well as ground of appeal narrated in ITA No.226/SRT/2021, for assessment year
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. 2018-19, in the case of Zenitex, Surat, have been taken into consideration for deciding these appeals en masse.
The grounds of appeal raised by the assessee (in lead case in ITA No.226/SRT/2021 for AY.2018-19), are as follows: “1. On the facts and circumstances of the case as well as on the subject, the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in confirming the action of Asst. Director of IT, CPC, in making addition of Rs.11,83,960/- on account of disallowance of employees contribution to provident fund and ESI u/s 36 of the I.T. Act, 1961, while processing return of income u/s 143(1) of the I.T. Act, 1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Asst. Director of Income Tax (CPC) has erred in allowing less credit on account of tax deducted at source to the extent of Rs.56,492/- by passing order u/s 143(1) of the I.T. Act, 1961. 3. On the facts and circumstances of the case as well as law on the subject, Asst. Director of IT, CPC has erred in making adjustment u/s 143(1) of the Act in respect of debatable issue as adjustment can be made only in respect of arithmetical/apparent mistake in the return of income. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
Shri Rajesh Upadhyay, Ld Counsel for the assessee states that in case of assessee in ITA No.147 /SRT/2021 (Rekha R. Shokla), the ld CIT(A) did not condone the delay in filing the appeal before him. We have gone through the petition for condonation of delay and note that reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. Therefore, we direct the ld CIT(A) to condone the delay and admit assessee`s appeal for adjudication on merits.
The facts of the case which can be stated quite shortly are as follows. In all these ten appeals, the solitary issue involved is that assessees have not deposited employees contribution to provident fund and ESI within the time limit allowed under the Act. Therefore, Assessing Officer, DCIT, CPC Bengaluru, while passing order under section 143(1) of the Income Tax Act,
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. 1961, added an amount of Rs.11,83,960/- on account of late deposit of employees contribution to PF under section 36(1)(va) of Income Tax Act, 1961.
Aggrieved by the order of the Assessing Officer, DCIT, CPC, Bengaluru (hereinafter referred to as “the AO”), the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer under section 143(1) of the Act, observing as follows: “6.2 DECISION In this context, it is pertinent to mention that the above cited amendments made through the Finance Act 2021 are only clarificatory in nature, with perhaps a view to reduce litigation on adjustments made u/s 143(1 )(a) of the IT Act. 6.2.2 A careful perusal and understanding of the amended (i.e. post 1/4/2008) Section 143(1)(a)(iv) is considered necessary in this situation. Thus, (1) 143(1) of the Act lays down that the return shall be processed in the following manner, (2) Subsequently, Clause (a) of Section 143(1) states that the total income or loss shall be computed after making the following adjustments, namely’, i.e. it empowers the AO to make the following adjustments while processing the return, (3) Thus, keeping in mind the above, when one reads the sub-clause (iv) of Clause (a) of sub-section (1) of Section 143 of the Act. It is immediately clear that the due import of the provision is that for processing the return, the AO is empowered to make the adjustment, one of which is disallowance of "expenditure indicated in the audit report” but not taken into account in computing the total income in the return; (Emphasis supplied) A plain reading would therefore make it clear that if any particular expenditure is indicated in the Audit report as being hit by any provisions of the Income Tax Act, 1961, including the violation of any time limit while the same has been claimed in the Return of Income, the AO is within his rights to make a disallowance of the same while processing the Return u/s 143(1) of the Income Tax Act, 1961. The AO is sufficiently empowered by the Income Tax Act and does not need the Audit report to inform him whether the same is disallowable or not. Therefore, in view of mere remarks in the audit report, adjustments can be made in terms of section 143(1)(a)(iv) of the Act. 6.2.3 Furthermore, this 'expenditure' indicated in information contained in the Audit report, which, if not treated as per law by the Assessee, also lends itself to a default in the nature of an incorrect claim, which is again one of the adjustments 143(1)(a)(ii) that the AO can make while processing the return.
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. 6.2.4. Coming to the facts of this case, in this case, adjustment u/s 143(1) of the Act has been made on the basis of the information contained in the tax audit report. The Audit report indicates details of contribution received from employees for various funds as referred to in section 36(1)(v)(a). It gives the details of the due date of payment and actual date of payment to the concerned authorities. Since it was clear that employee's contribution to Provident fund have been paid beyond the due date specified, the provisions of sec 36(1)(v)(a) r.w.s. 2(24)(x) are attracted leading to the disallowance of the sum to the extent not credited to the employee's account on or before the due date stipulated in the respective PF Act and ESI Act. 6.2.5 Thus the AO is correct in making the said adjustment under either of the Section 143(1)(a)(ii) or 143(1)(a)(iv), which is apparent from the information contained in the tax audit report. In view of the above discussion, I find that the adjustment has correctly been made under section 143(1)(a) of the Income Tax Act. Hence, no relief can be given to the appellant in respect of the above adjustment made under section 143(1) of the Income Tax Act. Thus, this ground of the Appellant fails and is hence Dismissed.” 7. Aggrieved, the assessee is in further appeal before us.
Learned Counsel for the assessee pleads that issue relating to Employees Provident Fund (EPF) and Employees State Insurance (ESI) is a debatable issue and for that no adjustment is required under section 143(1) of the Act. Thus, addition made by the assessing officer is contrary to the provisions of section 143(1) of the Act. This proposition was bolstered by ld Counsel with the help of various judgments of Income Tax Appellate Tribunal (ITAT).
The Learned Counsel further contended that details mentioned in the tax audit report in respect of employees contribution to PF and ESI is only for the purpose of disclosure and assessing officer should not make addition based on the disclosure in tax audit report. The ld Counsel also relied on the judgments of various Hon`ble High Courts and contended that addition made by the Assessing Officer may be deleted.
The Learned Counsel also submitted written submission, which is reproduced below: “In the above case the intimation under section 143(1) of the IT Act has been issued making adjustment / disallowance on account of employees contribution to provident fund.
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. The above disallowance has been made u/s 143(1(a)(iv) of the Act on the ground that disallowance of expenditure is indicated in audit report but the same is not taken into account in computing the total income in the return. This fact has been specifically mentioned in the notice proposing adjustment to be made under above section. (copy enclosed) Firstly, it may be noted that the auditor in Sr. No. 20(b) of his tax audit report has not reported any disallowance to be made on account of employees contribution to provident fund as he has just reported the figures relating to the amount of payment, the due date of payment and the actual date of payment whereas, there are several specific clauses in the audit report which provides for disallowance to be made. For eg. Sr. No. 21(b), 21(c), 21(d) etc. specifically requires auditor to report the disallowance to be made under various sections of Income Tax Act. Consequently, the provisions of section 143(1)(a)(iv) of the IT Act cannot be invoked for making the adjustment while computing income under section 143(1) of the IT Act in respect of the information provided by auditor in his audit report as the same is not in the nature of disallowance. Secondly, it is to state that the amendment has been made to the provisions of section 36(1)(va) by inserting Explanation 2 to provide that section 43B of the Act shall not apply for determining due date under this clause. However, this amendment is only prospective in nature and is applicable w.e.f 01.04.2021. As such, no disallowance of employee's contribution to provident fund can be made for the preceding years. In support of the contention that this amendment is prospective in nature, reliance is placed on following case laws:- (i) Flying Fabrication - 133 taxmann.com 84 (Del-trib) (ii) Gopalakrishna Aswini Kumar - ITA No. 359/Bang/21 dated 13.10.21 (iii) Mavinahalli Shivananjappa Vijay Kumar, - ITA No. 596- 597/Bang/21 dated 13.12.21 (iv) M/s. Technocon Constructions & Infrastructure Private Limited vs Dy. CIT- (ITA No.670/Bang/2021 : Asst.Year 2019-20) Thirdly, it is to state that in the intimation to be issued under section 143(1) of the Act, only the specified adjustments can be carried out i.e. only the adjustments listed in clauses (i) to (vi) of section 143(1)(a) of the IT Act can be carried out. It is evident on perusal of these clauses that no adjustment can be done in respect of the issue which is of debatable nature. There is a huge difference between the additions that can be made in the scrutiny assessment u/s 143(3) of the Act and the adjustments that can be made in the intimation issued under u/s 143(1) of the IT Act. If the issue was not of debatable nature then perhaps there was no need to make amendment to section 36(1)(va) by inserting the Explanation referred above w.e.f. 01.04.2021. Thus, although the decision of Gujarat High Court in case of Gujarat State Road Transport Corporation - 366 ITR 170 provides for disallowance of employees contribution to provident fund if it is not paid on or before the due date prescribed under the PF laws, the said decision cannot be applied for making adjustment in the intimation issued under section 143(1) as debatable issues are outside the purview of such adjustment.
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. It is relevant to mention here that the decision of Gujarat High Court cited supra has not become final as the matter is pending before Honourable Supreme Court which itself indicates that the matter is of debatable nature. Reliance is placed on jurisdictional Gujarat High Court decision in case of Gujarat Petrosynthese Limited - 316 ITR 282(Guj), wherein also it has been observed that when the issue is highly debatable, the same cannot be considered for primafacie adjustment in exercise of the powers u/s 143(1)(a) of the act. Here it was observed that the proposition of law laid down by the apex court at least indicates that the issue would be highly debatable. In para 17 of the decision it has been observed as under:- "As can be seen from the decisions cited on behalf of the petitioner and cited on behalf of the respondent authority as well as what is noted hereinbefore, on the date when the returns of income for the two years under consideration were filed and the returns taken up for processing under s. 143(1)(a) of the Act there was no finality as to the true scope of provisions of s. 115J(2) of the Act so as to warrant disallowance of carried forward unabsorbed depreciation and unabsorbed investment allowance by reducing the figure on the basis of only CBDT circular." Further the Honorable Supreme Court in case of CIT vs Hindustan Electro Graphite Limited - 243 ITR 48(SC) concluded that when assessee had not included the cash compensatory support in his return of income as per the legal position then prevailing, additional Tax under section 143(1A) could not be levied on subsequent inclusion of such receipt by retrospective amendment of section 28 of the Act. Thus, even when the amendment is made on retrospective basis, the Honorable Supreme Court has clearly held that no adjustment under section 143(1) of the Act should be made. It is held by the Hon’ble Supreme Court in the case of Balram vs.Volkart Brother 82 ITR 50 (SC), that: “The Income- tax Officer was not justified in thinking that on that question there can be 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”. The explanatory statement in respect of substitution of section 143(1) by the Finance Act, 2008 is as under: – “ Correction of arithmetical mistakes and adjustment of incorrect claim under section 143(1) through Centralised Processing of Returns” Generally, tax administrations across countries adopt a two-stage procedure of assessment as part of risk management strategy. In the first stage, all tax returns are processed to correct arithmetical mistakes, internal inconsistency, tax calculation and verification of tax payment. At this stage, no verification of the income is undertaken. In the second stage, a certain percentage of the tax returns are selected for scrutiny/audit on the basis of the probability of detecting tax evasion. At this stage, the tax administration is concerned with the verification of the income.
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. Hence, if assessing officer had any opinion that the assessee has claimed excessive deduction or understated income and not agreeing with the specific and categorical findings made on the subject matter of this case by the Apex Court/High Courts, he had been given power u/s 143(3) of the Act to make assessment accordingly. However, the provisions of section 143(1)(a) which mandates for prima facia adjustment on apparent facts only cannot be used on the facts which are contentious, litigated and supported by judicial authorities.
Lastly, it is submitted that in case if the adjustment made in the intimation issued under section 143(1) of the Act is not deleted on the basis of above reasoning, in that case it is requested that the issue may kindly be sent back to the file of assessing officer to be decided in line with the final outcome as per the decision of Honourable Supreme Court in case of Gujarat State Transport Corporation which is pending as of now. Similar view has been taken in following case:- (i) Salasar Laminates Ltd. Vs. Dy. CIT( Tax Appeal No. 1186 of 2018) 10. On the other hand, Learned Departmental Representative (ld. DR) for the Revenue submits that the issue is squarely covered against the assessee by the judgement of Hon`ble jurisdictional High Court of Gujarat in the case of State Road Transport Corporation (GSRTC) 41 taxmann.com 100 (Guj) wherein it has been held that when the assessee did not deposit employees’ contribution to employees’ account in relevant fund within due date prescribed in explanation to Section 36(1)(va) of the Act, no deduction would be admissible, even though the assessee deposits same before due date of filing return of income under section 143(1)(a) of the Act. The ld. DR further pointed out that it is a matter of adjustment under section 143(1) of the Act. The ld. DR took us through sub- clause (ii) of clause (a) of section 143(1) of the Act, wherein it is mentioned as follows: “an incorrect claim, if such incorrect claim is apparent from any information in the return of income.” Therefore, ld DR contended that Assessing Officer can disallow such incorrect claims under section 143(1) (a) (ii) of the Act. The ld. DR argued that judgments referred by the Learned Counsel, in respect of section 143(1) of the Act, are distinguishable on facts and these judgments have not considered the correct interpretation of section 143(1)(a) of the Act. Therefore, ld. DR
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. contended that the order passed by the Assessing Officer under section 143(1) does not contain any infirmity and therefore same should be upheld.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that section 36(1)(va) of the Act provides that any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee`s account in the relevant fund on or before the due date, then in that circumstances, the assessee would be eligible to claim deduction.
No doubt, the issue relating to employees’ contribution to PF and ESI, is a debatable issue. However, the Hon'ble jurisdictional Gujarat High Court is against the assessee. The all assessees, before us, belong to Gujarat State. Therefore, the judicial discipline mandates that we must follow the judgment of Hon'ble jurisdictional High Court of Gujarat. We note that all these appeals are covered by the judgment of the Hon'ble jurisdictional Gujarat High Court in the case of State Road Transport Corporation (GSRTC) 41 taxmann.com 100 (Guj), wherein the Hon`ble Court held as follows: “8. In view of the above and for the reasons stated above, and considering section 36(1)(va) of the Income Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the ‘employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act.
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. 9. Consequently, all these appeals are allowed and the impugned judgement and orders passed by the tribunal in deleting the disallowances made by the AO are hereby quashed and set aside and the disallowances of the respective sums with respect to the Provident Fund / ESI Fund made by the AO is hereby restored. The questions raised in present appeal are answered in favour of the revenue. With this, all these appeals are allowed.”
Therefore, as per the above, judgment of the Hon'ble jurisdictional High Court in the case of Gujarat State Road Transport Corporation (GSRTC), the claim of the assessee is not allowable.
We note that Hon`ble Jurisdictional High Court of Gujarat in the case of Salasar Laminates Ltd. Vs. Dy. CIT (Tax Appeal No. 1186 of 2018), has granted liberty to the assessee that if the Supreme Court reverse the judgment in the case of GSRTC, it would be open for the assessee to revive the appeal. The findings of the Hon`ble Court is reproduced below: “This Appeal is filed by the assessee to challenge the judgment of the Income Tax Appellate Tribunal, Ahmedabad {“Tribunal” for short} dated 22nd March 2018. The issue pertains to Assessment Year 2013-14 and the sole question raised by the assessee in this appeal concerns deductibility of a sum of Rs. 20,34,916/= which was the employees’ contribution towards Provident Fund, ESI, etc. It appears that the assessee did deposit such amount of contribution towards PF & ESIC accounts, however, missed the deadline prescribed in the statutes for such purpose. On account of this, the Revenue did not permit deduction of such sum from the income of the assessee. Such disallowance thereupon became the subject matter of appeal before the Tribunal. The Tribunal dismissed the ground, relying upon the judgment of this Court in the case of Commissioner of Income-tax vs. Gujarat State Road Transport Corporation Limited, reported in 366 ITR 170 [Gujarat]. Counsel for the appellant did not dispute that the issue on hands is squarely covered by this Court in the case of CIT v. GSRTC [Supra]. He, however, submitted that the appeal is pending against the judgment of the High Court before the Supreme Court and SLP has been granted. The amount involved is not very large and it would be extremely expensive for the assessee to carry this in appeal before the Supreme Court. He, therefore, suggested that the benefit of this judgment of the Supreme Court may be made available to the assessee; as and when rendered and in case, the judgment of the High Court is reversed. Two clear ways are possible to enable the appellantassessee to get benefit of the judgment of the Supreme Court, in case the High Court judgment is reversed. One is to dismiss this appeal and allow the assessee to approach the Supreme Court; like some other assesses would have. The other way is to make some arrangement under which without filing the appeal, the assessee would also be able to claim the benefit of the judgment. Looking to the smallness of the disputed amount, we adopt the latter option by providing as under : This appeal at this stage is dismissed. However, if the Supreme Court reverses the judgment in the case of CIT vs. GSRTC [Supra], it would be open for the appellant to revive this appeal Page | 10
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. by filing an application for such purpose within three months from the date of the judgment.” 14. Since against the order of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation(supra), the Special Leave Petition (SLP) filed before the Hon`ble Supreme Court is pending, hence following the judgment of Hon`ble Jurisdictional High Court of Gujarat in the case of Salasar Laminates Ltd (supra) all these appeals is restored to the file of the ld CIT(A) with the direction to adjudicate the issue as per the outcome of the decision of the Hon`ble Supreme Court.
We also note that on identical facts, similar issues have been remitted back to the file of the ld. CIT(A) by the Co-ordinate Bench of ITAT Surat, in the case of Puja Chemicals in ITA No.161 & 162/SRT/2021. The findings of the Tribunal is as follows: “5.We have heard both the parties and perused the material available on record. We note that the issue involved in these four appeals are covered against the assessee, as the assessee has not deposited Employees Provident Fund (EPF) with the prescribed authority within stipulated time, therefore as per the judgment of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Company (supra), the issue had already been decided by the Hon'ble Court against the assessee. However, we note that jurisdiction ITAT, Ahmedabad in the case of M/s Unicorn Remedies Pvt. Ltd. in ITA Nos. 3058/AHD/2014 for AY.2011-12 and 2599/AHD/2016 for AY.2012-13, order dated 30.01.2019 wherein the similar issue has been remitted back to the file of the Ld. CIT(A) to decide the matter after taking into account the outcome of the judgment of the Hon'ble Supreme Court. The findings of the Tribunal are reproduced below: “14. This issue is already against the appellant for late deposit of Employees Provident Fund with the authority by the judgment of Hon'ble Gujarat High Court in the matter of GSRTC 366 ITR 170 wherein it is held: "Section 43B, read with section 36(1)(va) of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed on actual payment (Employees contribution) - Whether where an employer has not credited sum received by it as employees' contribution to employees' account in relevant fund on or before due date as prescribed in Explanation to section 36(1)(va), assessee shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B. i.e., prior to filing of return under section 139(1) -Held, yes - Assessee State transport corporation collected a sum being provident fund contribution from its employees - However, it had deposited lesser sum in provident fund account -Assessing Officer disallowed same under section 43B - However, Commissioner (Appeals) deleted Page | 11
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. disallowance on ground that employees contribution was deposited before filing return - Whether since assessee had not deposited said contribution in respective fund account on date as prescribed in Explanation to section 36(1)(va), disallowance made by Assessing Officer was just and proper - Held, yes [Para 8] [In favour of revenue] 15. In the meanwhile, it is noticed that on this issue appeal is pending before the Hon'ble Supreme Court and recently Hon'ble Gujarat High Court in Tax Appeal No. 1186 of 2018 has held that two clear ways are possible to enable the appellant-assessee to get benefit of the judgment of the Supreme Court, in case the High Court Judgment is reversed by the Hon'ble Supreme Court and relevant part of the said order of the High Court is reproduced: "This Appeal is filed by the assessee to challenge the judgment of the Income Tax Appellate Tribunal, Ahmedabad {"Tribunal" for short} dated 22nd March 2018. The issue pertains to Assessment Year 2013-14 and the sole question raised by the assessee in this appeal concerns deductibility of a sum of Rs.20,34,916/- which was the employees' contribution towards Provident Fund, ESI, etc. It appears that the assessee did deposit such amount of contribution towards PF & ESIC accounts, however, missed the deadline prescribed in the statutes for such purpose. On account of this, the Revenue C/TAXAP/1186/2018 ORDER did not permit deduction of such sum from the income of the assessee. Such disallowance thereupon became the subject matter of appeal before the Tribunal. The Tribunal dismissed the ground, relying upon the judgment of this Court in the case of Commissioner of Income-tax vs. Gujarat State Road Transport Corporation Limited, reported in 366ITR 170 [Gujarat]. Counsel for the appellant did not dispute that the issue on hands is squarely covered by this Court in the case of CIT v. GSRTC [Supra]. He, however, submitted that the appeal is pending against the judgment of the High Court before the Supreme Court and SLP has been granted. The amount involved is not very large and it would be extremely expensive for the assessee to carry this in appeal before the Supreme Court. He, therefore, suggested that the benefit of this judgment of the Supreme Court may be made available to the assessee; as and when rendered and in case, the judgment of the High Court is reversed. Two clear ways are possible to enable the appellant- assessee to get benefit of the judgment of the Supreme Court, in case the High Court judgment is reversed. One is to dismiss this C/TAXAP/1186/2018 ORDER appeal and allow the assessee to approach the Supreme Court; like some other assesses would have. The other way is to make some arrangement under which without filing the appeal, the assessee would also be able to claim the benefit of the judgment. Looking to the smallness of the disputed amount, we adopt the latter option by providing as under: This appeal at this stage is dismissed. However, if the Supreme Court reverses the judgment in the case of CIT vs. GSRTC [Supra], it would be open for the appellant to revive this appeal by filing an application for such purpose within three months from the date of the judgment. Appeal stands disposed of accordingly."
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. 16. At the outset, ld. A.R. requested that in view of the order passed by the Hon'ble Gujarat High Court as aforesaid therefore this matter may be restored to the file of the ld.CIT(A). 17. In view of the above and order passed by the Hon'ble Gujarat High Court, we set aside the matter to the file of the ld.CIT(A) to decide the matter after taking into account order of the Supreme Court as and when will be passed by the Hon'ble Supreme Court. Accordingly will decide the matter.” 16. We note that Learned Counsel has argued a lot, stating that disallowance of employees PF and ESI is highly debatable issue which cannot be a subject matter of section 143(1)(a) of the Act, nevertheless, we have to follow the judgment of the Hon'ble jurisdictional High Court, in the case of Gujarat State Road Transport Corporation, which is a direct judgment on the issue of employees PF and ESI.
We note that Hon`ble Bombay High Court in the case of Thana Electricity Supply Ltd. 206 ITR 0727, held that the decisions of the High Court are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. The detailed findings of the Hon`ble Court is reproduced below:
“17. From the foregoing discussion, the following propositions emerge : (a) The law declared by the Supreme Court being binding on all Courts in India, the decisions of the Supreme Court are binding on all Courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein. (b) The decisions of the High Court are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not extent beyond its territorial jurisdiction. (c) The position in regard to binding nature of the decisions of a High Court on different Benches of the same Court, may be summed up as follows : (i) A Single Judge of a High Court is bound by the decision of another Single Judge or a Division Bench of the same High Court. It would be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper procedure is to refer the binding decision and direct the papers to be placed before the Chief Justice to enable him to constitute a larger Bench to examine Page | 13
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. the question [see Food Corporation of India vs. Yadav Engineer & Contractor AIR 1982 SC 1302]. (ii) A Division Bench of a High Court should follow the decision of another Division Bench of equal strength or a Full Bench of the same High Court. If one Division Bench differs with another Division Bench of the same High Court, it should refer the case to a larger Bench. Where there are conflicting decisions of Courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. (d) The decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only a persuasive effect. By no amount of stretching of the doctrine of stare dicisis judgments of one High Court can be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate Courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all Courts in the country by virtue of Art. 141 of the Constitution.” 18. It is abundantly clear from the judgment of the Hon`ble Bombay High Court in the case of Thana Electricity Supply Ltd (Supra), that decisions of the High Court are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. Hence, decision of the Hon`ble Jurisdictional High Court of Gujarat in the case of Gujarat State Road Transport Corporation(supra), is binding on us.
In the case of Union of India v. Raghubir Singh (1989) 178 ITR 548 (SC), the Hon`ble Supreme Court held that the doctrine of binding precedent has merit of promoting certainty and consistency in judicial decisions. As per the doctrine of precedent, all lower Courts, Tribunals and authorities exercising judicial or quasi-judicial functions are bound by the decisions of the High Court
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. within whose territorial jurisdiction these Courts, Tribunals & authorities functions. In the case of State of Orissa & Ors. v, M.D. Illyos, [2006] 1 SCC 275 the Hon`ble Supreme Court held that a decision is a precedent on its own facts and that for a judgment to be a precedent it must contain the three basic postulates: (i)A finding of material facts, direct and inferential. An inferential finding of fact is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the individual effect of the above. In the case of CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297 (SC), the Hon`ble Supreme Court held that it is neither desirable nor permissible to pick out a word or a sentence from the judgment, divorced from the context of the question under consideration and treat it to be the complete "law". The judgment must be read as a whole and observations from the judgment have to be considered in the light of the questions which were before the court. 20. From the above it is vivid that we have to follow the judgment of the Hon`ble Jurisdictional High Court of Gujarat in the case of Gujarat State Road Transport Corporation(supra).The mere fact, that further appeal (SLP) has been filed, before the Hon`ble Supreme Court against the judgment of Hon`ble Gujarat High Court, in no way, means that Gujarat High Court`s decision under consideration is not operational and effective. Unless and until the decision of Gujarat High Court is reversed by Hon`ble Supreme Court, the same has to be given due effect. Thus, judicial discipline demands that order of the Hon`ble Gujarat High Court should be followed by the Surat Income Tax Appellate Tribunal. 21. We have already noted that against the order of the Hon'ble Gujarat High Court, in the case of Gujarat State Road Transport Corporation (supra), the SLP has been filed by the assessee, which has not been adjudicated yet therefore we are of the view that the issue may be remitted back to the file of the Ld. CIT(A) to decide the matter after taking into account the judgment of the Hon'ble Supreme Court as and when will be passed by the Hon'ble Supreme Court. Page | 15
ITA.147,234,150,160,201,202,224,225,226&236/SRT/2021 Assessment Years: 2018-19 & 2019-20 Zenith and Ors. Therefore these appeals at this stage are dismissed. However, if the Supreme Court reverses the judgment in the case of the Hon`ble Gujarat High Court in the case of CIT vs. GSRTC [Supra], it would be open for the assessees to revive these appeals by filing an application for such purpose within three months from the date of the judgment.
In the result, all appeals filed by the assessee, are allowed for statistical purposes.
Registry is directed to place one copy of this order in all appeals folder / case file (s).
Order is pronounced in the open court on 31/03/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat �दनांक/ Date: 31/03/2022 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat