M/S. GANESHBARI TEA CO. (P) LTD.,KOLKATA vs. ACIT, CENTRAL CIRCLE - 2, GUWAHATI

1. That the order dated 31-10-2022 passed by the CIT(A) u/s 250 of the Act is bad in law and liable to be quashed.

That on the facts and in the circumstances of the case, The Learned CIT(Appeals) erred in confirming the addition of Rs. 31,68,446/- u/s 36(1)(va) of the Act on account of delay in deposit of PF/ ESI.

That on the facts and in the circumstances of the case, the Learned CIT(Appeals) failed to appreciate that the PF/ ESI contributions were duly deposited before the due date of filing of income tax return for the impugned assessment year.

That on the facts and circumstances of the case CIT(A) has dismissed the non-Exclusion of exempt income on account of sale of green leaves [Rs. 5,96,726/-] 5. That the appellant craves leave to add to and to alter, amend, rescind or modify the grounds raised

Though the ld. Counsel for the assessee has fairly admitted that the issue on merits is covered against the assessee by the decision of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022, wherein, it has been held that “deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF cannot be claimed even though deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961. However, the ld. Counsel for the assessee has contended that earlier the disallowance on account of delayed deposit of employees’ contribution Assessment Year: 2019-20 Goneshbari Tea Company Pvt. Ltd. to ESI/PF was made by the Assessing Officer/ CPC while processing the return of the assessee u/s 143(1) of the Act vide intimation order dated 29.07.2020. The assessee preferred an appeal before the CIT(A) against the said order. In the meantime, scrutiny proceedings u/s 143(3) were initiated against the assessee and the impugned assessment order u/s 143(3) was passed on 11.09.2021, whereby the Assessing Officer reaffirmed the aforesaid disallowance on account of delayed deposit of employees’ contribution to ESI/PF. Further the ld. CIT(A) vide order dated 31.05.2022 has decided the appeal of the assessee against the intimation order passed u/s 143(1) of the Act and has deleted the additions so made by the Assessing Officer in relation to the disallowance on account of delayed deposit of employees’ contribution to ESI/PF. The ld. Counsel has further submitted that the said order of the CIT(A) dated 31.05.2022 was brought to the knowledge of the Commissioner of Income Tax (Appeals) during the hearing of the appeal of the assessee against the assessment order dated 11.09.2021 passed u/s 143(3) of the Act. However, the ld. CIT(A) vide impugned order dated 31.10.2022 has confirmed the additions on this issue totally ignoring the earlier decision of the CIT(A) on the same issue in respect of same assessee and for the same assessment year. He, therefore, has submitted that the impugned order of the CIT(A) confirming the addition was not sustainable.

We have considered the above contentions of the assessee. In this case, the intimation order u/s 143(1) of the Act was passed on 29.07.2020 against which the assessee preferred appeal before the CIT(A). However, before passing of decision/order of the CIT(A) on the said appeal of the assessee, the case of the assessee was selected for Assessment Year: 2019-20 Goneshbari Tea Company Pvt. Ltd. scrutiny assessment u/s 143(3) of the Act and thereafter the order u/s 143(3) of the Act was passed on 11.09.2021. Under such circumstances, the intimation order dated 29.07.2020 passed u/s 143(1) of the Act got merged with the scrutiny assessment order dated 11.09.21 passed u/s 143(3) of the Act. The appeal of the assessee against intimation order passed u/s 143(1) of the Act was not decided by the said date. Therefore, under the circumstances, when the order passed u/s 143(1) of the Act dated 29.07.2020 had already got merged with the scrutiny assessment order u/s 143(3) of the Act dated 11.09.2021, therefore, there was no valid subsisting order u/s 143(1) of the Act, the same being merged with the order u/s 143(3) of the Act. Therefore, the appellate proceedings pending against the said non- existent/merged order u/s 143(1) of the Act become infructuous and any order passed by the CIT(A) against the said intimation order passed u/s 143(1) of the Act is liable to be treated as non-est. Therefore, no cognizance of the said order could have been taken by the CIT(A) in the appellate proceedings against the order passed u/s 143(3) of the Act. The ld. CIT(A) therefore rightly decided the issue against the assessee in the light of the decision of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (supra), wherein, the Hon’ble Supreme Court has held that by virtue of section 2(24)(x) of the Act, the amounts received or deducted by an employer u/s 36(1)(va), it retains its character as an income (albeit deemed) by virtue of section 2(24)(x), unless the condition stipulated by Explanation to section 36(1)(va) are satisfied i.e. depositing such amount received or deducted from the employee on or before the due date. The Hon’ble Supreme Court held that there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out Assessment Year: 2019-20 Goneshbari Tea Company Pvt. Ltd. of its income, whereas, the second is deemed an income, by definition, since it is the deduction from the employee’s income and held in trust by the employer. The Hon’ble Supreme Court thus held that the conditions of section 43B prescribing the due date as the date of filing of return of income in case the employers’ contribution towards ESI/PF would not be applicable in case the employees’ contribution as provided u/s 36(1)(va) of the Act and that the due date in respect of deposit of employees’ contribution would be such as prescribed u/s 36(1)(va) of the Act.

It has been held time and again that law declared by a court will have retrospective effect, if not otherwise stated to be so specifically. It is also well settled proposition that whenever, a previous decision is overruled by a larger bench of the Supreme Court, the previous decision is completely wiped out and Article 141 will have no application to the decision which has already been overruled and the court would have to decide the cases according to the law laid down by the latest decision of the Hon’ble Supreme Court and not by the decision which has been expressly overruled. The above reasoning stems from the principle that when a court decides a matter, it is not as if it is making any new law but it is as if it is only restating what the law has always been. The reliance in this respect can be placed on the decision of the Hon’ble Supreme Court in the case of “Ramdas Bhikaji and Choudhary vs. Sadananda” (1980) 1 SCC 550 and on the recent decision of the Hon’ble Supreme Court in the case of “Manoj Parihar and Ors. Vs. State of Jammu & Kashmir and Ors” SLP(C) No.11039 of 2022 vide order dated 27.06.2022; “PV Goerge vs. State of Kerala” (2007) 3 SCC 557; Assistant Commissioner vs. Saurashtra Kutch Stock Exchange Ltd. Assessment Year: 2019-20 Goneshbari Tea Company Pvt. Ltd. (2008) 14 SCC 171, wherein, the Hon’ble Supreme Court has held that judges do not make law, they only discover and find the correct law. Even, that where an earlier decision of the court operate for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which were earlier not correctly understood.