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Facts
The Revenue filed an appeal against the CIT(A)'s deletion of an Rs. 6,23,78,655/- addition on closing stock. The assessee filed a cross-objection against the CIT(A)'s upholding of an Rs. 27,95,682/- addition made by the AO for denying deduction u/s 36(1)(va) due to delayed employee contributions. The assessee's cross-objection was time-barred by 206 days, but the delay was condoned.
Held
The Tribunal remanded the issue of closing stock back to the Assessing Officer for detailed examination, setting aside the CIT(A)'s finding. Regarding the disallowance under section 36(1)(va) for delayed employee contributions, the Tribunal dismissed the assessee's cross-objection, upholding the CIT(A)'s decision and reiterating that such contributions are deductible only if deposited within statutory due dates, as per the Supreme Court's decision in Checkmate Services Pvt. Ltd.
Key Issues
1. Whether the CIT(A) erred in deleting the addition on account of closing stock when the assessee failed to provide details and books of accounts were not formally rejected. 2. Whether the disallowance of employee contributions under section 36(1)(va) for delayed payment is justified, considering the retrospective applicability of judicial precedents.
Sections Cited
250, 36(1)(va), 142(1), 145, 43B, 139(1), 254(2), 143(1), 143(1)(a), 143(3), 2(24)(x), 154, 254(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “DB” BENCH, PATNA
Appearances by: Assessee represented by : Shri Sudipta Sannigrahi, C.A. Department represented by : Shri Rajat Datta, CIT (DR) Date of concluding the hearing : 19.05.2025 Date of pronouncing the order : 03.06.2025 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER 1. These are a batch of two appeals bearing and CO No. 1/Pat/2025. It is seen that the CO is time barred by 206 days, for which an application has been filed as under:
CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 “We, Technoculture Building Centre Private Limited hereby submit this application seeking condonation of delay in filing the appeal against the order of CIT(A) order u/s 250 dated 12/12/2024 for A.Y 2020-21 There is delay of 20 days in filing this appeal occurred due to the time taken in appointing a legal consultant and gathering the necessary documents related to the matter. Since the appeal pertains to an earlier assessment year, additional efforts were required to retrieve records and ensure that all relevant facts were appropriately presented. The delay was unintentional and caused due to genuine procedural difficulties. We sincerely regret the delay and assure that it was not deliberate. Enclosed are supporting documents substantiating our explanation, including correspondence related to the appointment of legal counsel. In light of the above, we request your kind consideration and humbly pray that the delay in filing this appeal be condoned in the interest of justice.” 1.1 Considering the reasons given for condonation of the said delay, we hereby admit this appeal for adjudication after condoning the delay. Since both the appeals have inter-connected issues hence, they are being heard together for simultaneous adjudication.
These appeals arise from the order u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”), passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi vide order dated 12.12.2024.
2.1 In this case, the Revenue has filed the present appeal. The issues involved may be discussed in brief. An addition on account of closing stock has been made of Rs. 6,23,78,655/-. Admittedly, this addition has been made after the Ld. AO failed to elicit a satisfactory response from the assessee with regard to the break up and other details of the closing stock. On this issue, the Ld. CIT(A) has given relief on the ground that the impugned adhoc disallowance was made without rejecting the books of accounts. Secondly, the Ld. AO also made an addition of Rs. 27,95,682/- by denying the deduction u/s 36(1)(va) of the Act. This addition was made since the payment was made by the assessee after the due date prescribed in the relevant act. On this issue, the Ld. CIT(A) has upheld the action of Ld. AO following the case of Checkmate Services Pvt. Ltd. reported in 448 CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 ITR 518 (SC). It is these two issues which are respectively the subject matter of the main appeal and the cross objection.
2.2 Both the revenue and the assessee are aggrieved and have filed the appeals with the following grounds:
The Revenue has raised following grounds of appeal: i) Whether on the facts and circumstances of the case, the Ld. CIT(A), NFAC has erred in allowing the ground of appeal related to disallowance of Rs.6.23,78.655/- to closing stock and deleted the addition on account of Closing Stock despite the fact that as per records, the assessee has not submitted specific details of closing stock project wise called for vide notice u/s 142(1) of the Income tax Act, 1961 dated 02 11 2021 ii) Whether on the facts and circumstances of the case, the Ld. CIT(A), NFAC has erred in allowing the ground of appeal related to disallowance of Rs 6,23,78,655/- to closing stock and deleted the addition on account of Closing Stock on the basis of AO has neither given any proper justification for under valuation of closing stock by assessee despite the fact that the assessee did not provide the specific details of closing stock and hence AO could not verify the entries in the books of account. iii) Whether on the facts and circumstances of the case, the Ld. CIT(A), NFAC was justified in saying that the AO would have rejected the books of account by invoking the provisions of section 145 of the Act before making the disallowance as after rejection of books of account no addition can be made on account of disallowance. Closing stock was not verified at the time of assessment and hence AO disallowed a certain percentage on account of under valuation of stock. iv) Whether on the facts and circumstances of the case, the Ld CIT(A), NFAC has erred in allowing the ground of appeal related to disallowance of Rs.6,23,78,655/- to closing stock stating that there are no defects found by the Assessing Officer in books of accounts submitted by the appellant. While as per records, the assessee did not submitted specific details as called for during assessment proceedings and hence AO did not get the opportunity to point out the defects in books of accounts. It is well settled rule that entries in books of account should be supported with bills/vouchers and without the same there is no meaning of entries made in books of account.” 3.1 The assessee has raised following grounds of cross objection:
“1. For that, on the fact and circumstances of the case, the order under section 250 by making certain arbitrary addition is bad in law and facts and also the procedure of assessment.
2. For that, on the fact and circumstances of the case, the learned Assessing Officer has erred in making wrong addition of Employee Provident Fund and ESI Contribution Rs. 27,95,682/- under section 36(1)(va) of the act without following the legal provisions in this regard. The addition is totally arbitrary and is not legal, proper and justified and hence such addition of Rs. 27,95,682/- is liable to be deleted.”
CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 4. Before us, right at the outset, the Ld. DR pointed out that a number of opportunities were given to the assessee to file details regarding the additions proposed to be made, especially the addition pertaining to the closing stock. The Ld. DR pointed out the details mentioned on page 2 of the Ld. AO’s order in which it is seen that either no response was given to notice u/s 142(1) of the Act or the SCNs or only part response was given. The Ld. DR took us through the findings of Ld. AO on page 6 at para 4.8 whereby it is mentioned that after several opportunities the assessee merely furnished the branch wise break-up of closing stock. It was pointed out that the assessee did not submit specific details of closing stock for each project called for vide notice u/s 142(1) of the Act dated 02.11.2021 and SCN dated 01.09.2022. It was pointed out by the Ld. DR that in the face of such non- compliance, the Ld. AO had no option but to resort to an estimation. In conclusion, the Ld. DR stated that while the assessee may have the details available with him, but the same were certainly not provided to the Ld. AO. Thereafter, the Ld. DR assailed the action of Ld. CIT(A) in deleting the impugned addition on account of the fact that the provision of section 145 of the Act were not invoked before making the addition. The Ld. DR stated that no remand report was called for by the Ld. CIT(A).
4.1 The Ld. AR, on the other hand, supported the action of Ld. CIT(A) and stated that the assessee was a Private Limited Company and had got the accounts audited statutorily. Thereafter, there was no reason for of the Ld. AO to doubt the veracity of the claim of the assessee in terms of the value of closing stock. The Ld. AR read out from para 4.19 at page 13 of the impugned order and stated that the action of Ld. CIT(A) was very much in line with the law and facts.
4.2 Regarding the CO 1/Pat/2025, the Ld. AR stated that the order of Ld. AO was dated 19.09.2022 whereas the case of Checkmate Services Pvt. Ltd. (supra) was dated 12.10.2022. The Ld. AR vehemently argued that prior to the Checkmate Services Pvt. Ltd. (supra), the issue was debatable at best CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 and in fact, he pointed out that there was a case of the Hon’ble Jharkhand High Court [Southern Construction Company Vs. ITO, Ward – 3(1), Jamshedpur] which was in favour of the assessee. The Ld. DR, on the other hand, was content to rely on the Checkmate Services case (supra) in this regard.
We have carefully considered the rival submissions and have also diligently perused the documents before us. Regarding the addition on account of closing stock. It is seen that the Ld. AO persistently requested for details from the assessee regarding the closing stock. It is a matter of record that the assessee did not file the details correctly and promptly. While it is true that the assessee being a Private Limited Company would have got his accounts audited but it is a trite position of law that the Ld. AO is well within his rights to test the veracity of the accounts through his own examination. Even at the expenses of emphasizing this point we need to mention that the mere statement that audited accounts exists does not mean much until and unless such accounts have been verified and tested in case there is a requirement to do so by the Ld. AO. In this case, there is no indication that the assessee presented the books of accounts or even the bills, vouchers etc. underlying the same for any kind of examination by the Ld. AO. Considering the facts and circumstances of the case, we are unable to be persuaded by the reasoning adopted by the Ld. CIT(A) in terms of deleting the addition merely on the ground that the books of accounts have not been rejected even when the details forming such books of accounts were not presented before the Ld. AO. Thus, it would be in the fitness of things to remand this matter back to the file of Ld. AO for examining the issue of closing stock in detail and thereby tallying the same with the books of accounts and only thereafter arriving at a just and reasonable conclusion. The assessee would do well to present the entire material in this regard for the Ld. AO to examine. To this extent, we set aside the finding of Ld. CIT(A) in this regard, in regard to the impugned addition on account of closing stock.
CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 5.1 Regarding the ground raised by the assessee with respect to the CO 1/Pat/2025, it deserves to be held that the issue under consideration is no longer res integra. It is noticed that the Ld. AR had not filed a copy of the order in the case of M/s Southern Construction Company Vs. ITO, Ward- 3(1), Jamshedpur, but we have been able to locate the full text of the order as per Tax Appeal case No. 56 of 2010, order dated 10.08.2016 (Hon’ble Jharkhand High Court). The text of this order, which pre-dates the Checkmate Services case (supra), has been perused also. It is felt that the impugned issue is no longer res integra and very recently an order of the coordinate Bench of Patna ITAT in the case of SIS Cash Services Pvt. Ltd., dated 26.05.2025, has been passed, where one of us was the author. This issue has been discussed at some length. We may refer to the same for deciding the present matter:
“3. We have carefully considered the documents before us, the case laws relied upon by the Ld. AR and heard the rival submissions. We have also carefully gone through the case of Checkmate Services (supra). We feel that after a combined reading of the cases cited before us and the and a perusal of the legislative history of the sections of the Act under consideration in the present adjudication, there is a requirement of discussion as to how, purportedly, the issue has been clarified post the Checkmate Services case (supra). 3.1 Before the Supreme Court's decision in the Checkmate Services Pvt. Ltd. v. CIT [2022] 448 ITR 518 (SC) case, there was considerable judicial debate on whether delayed employee contributions to PF and ESI could be allowed as deductions under Section 43B, provided they were paid before the due date of filing the return of income (ROI). In Checkmate Services case (supra) the Supreme Court provided much needed clarity on the interpretation of Sections 43B and 36(1)(va) of the Act. The Hon’ble Apex Court held that employee contributions to PF and ESI are governed exclusively by Section 36(1)(va) of the Act, and not by Section 43B of the Act. The court emphasized that employee contributions must be deposited within the due dates specified under the relevant statutes. Failure to do so would result in disallowance of the deduction, even if the payment was made before the due date for filing the ROI. We need to remind ourselves that this is exactly the case in the present appeal. The judgment reinforced the distinction between employer and employee contributions. While an employer’s contributions could be governed by section 43B of the Act, employees’ contributions are strictly under Section 36(1)(va) of the Act. This ruling overturned many High Court decisions that allowed deductions for delayed employee contributions under Section 43B of the Act, setting a precedent for stricter compliance. The court focused on the basic principle that whenever a special law exists for any particular situation it would be covered under the special law and not the general law. The Latin phrase of the same being "lex specialis derogat legi generali". Thus, as special provisions were existing in the Act by virtue of 36(1)(va) for the employee contributions, thereby they would prevail over general provisions of Section 43B of the Act. Most importantly, the Supreme Court's decision in Checkmate Services (supra) raised concerns regarding its retrospective application. But it is a settled position that the Supreme Court case laws have CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 a retrospective effect on the interpretation of statutes, meaning that they apply to past events as well as future ones, unless the judgment itself explicitly states it should only apply prospectively. It is a settled position that the Hon’ble Supreme Court's role is to interpret existing laws, and its decisions are seen as clarifying the true meaning of those laws, not creating new ones. Therefore, the Court's interpretation has to be considered to be the correct interpretation of law as it existed from the outset, making it applicable retrospectively. 3.2 We may also discuss some other relevant cases (a) In the case of Saurashtra Kutch Stock Exchange Ltd 305 ITR 225 (SC), some relevant portions need to be extracted: “In the instant case, miscellaneous application came to be filed by the assessee under sub-section (2) of section 254 stating therein that a decision of the 'Jurisdictional Court', i.e., the High Court of Gujarat in Hiralal Bhagwati's case [246 ITR 188 (Guj)], was not brought to the notice of the Tribunal and, thus, there was a 'mistake apparent from record' which required rectification. [Para 39] The core issue, therefore, is whether non-consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a 'mistake apparent from the record'? Both, the Tribunal and the High Court were right in holding that such a mistake can be said to be a 'mistake apparent from the record' which can be rectified under section 254(2). [Para 40] It is also well - settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, the Judges do not make law; they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make a new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect, clarifying the legal position which was earlier not correctly understood. [Para 42] In the instant case, according to the assessee, the Tribunal had decided the matter on 27-10-2000. Hiralal Bhagwati's case (supra) was decided few months prior to that decision, but it was not brought to the attention of the Tribunal. In the circumstances, the Tribunal had not committed any error of law or of jurisdiction in exercising power under sub-section (2) of section 254 and in rectifying 'mistake apparent from the record'. Since no error was committed by the Tribunal in rectifying the mistake, the High Court was not wrong in confirming the said order. Both the orders, therefore, were strictly in consonance with law and no interference was called for. [Para 47]” (b) In the case of Rohan Korgaonkar 298 Taxman 159 (Bom), the following extracts are relevant for the issue at hand: “The ITAT, in this case, has noted that the Assessee failed to deposit contributions to ESI and PF in the employees' accounts for the relevant assessment year before the due date under the PF/ESI Acts. However, such contributions were deposited before the Assessee filed returns under Section 139 (1) of the IT Act. The ITAT relying upon the decision of the Hon'ble Supreme Court in Checkmate Services (P.) Ltd. v. CIT held that based upon such delayed deposits, no adjustments or deductions could be claimed”.[Para 3]”
CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 “In Checkmate Services (P.) Ltd. (supra), the Hon'ble Supreme Court considered the conflicting decisions on the subject and finally held that deductions or adjustments could be claimed only when the Assessee deposits the contribution before the due date provided under the Employees Provident Fund/Employee State Insurance Act. If the employees' contributions are deposited after the due date set out under the said Act, there is no question of deduction or adjustment on the ground that such contributions were deposited before the filing of returns under section 139(1) of the IT Act.” [Para 4].” “The ITAT has relied upon Chekmate Services (P.) Ltd. (Supra), and its reasoning is entirely consistent with the law laid down in Checkmate Services (P.) Ltd. (supra). Therefore, no case is made to interfere with the AO, CIT(Appeals), and ITAT decisions.” [Para 5] “However, Ms Kamat submitted that Checkmate Services (P.) Ltd. (Supra)was a matter where the assessment was made under section 143(3) of the IT Act and not under section 143 (1) (a) as in the present case. She also relied upon P.R. Packaging Service v. Asstt. CIT [2023] 148 taxmann.com 153 (Mum. - Trib) decided by the ITAT 07/12/2022 to support her contention.” [Para 6]. “Though the decision cited was that of the ITAT, we have considered the same. In our judgment, however, the fact that the assessment order in Checkmate Services (P.) Ltd. (supra) was incidentally under section 143(3) and the assessment order in the present case is under section 143(1)(a) of the IT Act, makes no difference to the principle involved in this matter. The ITAT decision does not discuss why this circumstance constitutes a distinguishing feature based on which the ratio of Checkmate Services (P.) Ltd. (supra) could be departed from.” [Para 7]. “Checkmate Services (P.) Ltd. (Supra)holds that the deductions can be claimed or adjustments can be made under section I4l(l)(a)(iv), read with section 36(1)(va) only when the employer deposits the contributions in the employees' accounts on or before the due date prescribed under the Employees Provident Fund /Employees State Insurance Act. In this case, admittedly, the contributions were deposited in the employees' accounts beyond the due date. The circumstance that the assessment order was made under section 143(1)(a) of the IT Act can make no difference.” [Para 8]. (c) Furthermore, in the case of Diversified Services 293 Taxman 48 (Guj)- 2023, the matter was u/s 143(1) of the Act and it is illuminating to read the questions of law before the Hon’ble Court and the decision thereon. In this regard question ‘c’ is of importance. Some relevant extracts are as under: “ The appellant has framed and proposed following questions of law as substantial questions of law for this Appeal, urging to admit the Appeal for consideration of the said questions, reproduced below, "(a) Whether the Income-tax Appellate Tribunal erred in law and in facts in not appreciating that payment of employee's contribution to PF/ESI having already been done by the appellant before due date of filing of return, the same ought to have been allowed as deduction under section 36(1)(va) read with section 43B of the IT Act? (b) Whether the Income-tax Appellate Tribunal erred in law and in facts in not appreciating that jurisdiction under section 143(1)(a) of the IT Act is limited in nature and when different High Courts have taken different view on allowance of deduction under section 36(1)(va) read with section 43B of the IT Act with respect to payment of employee's contribution to PF/ESI having already been done by the appellant before due date of filing of return, the same cannot be termed as apparently incorrect claims CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 from the information in the return? (c) Whether the Income-tax Appellate Tribunal erred in law and in facts in holding that amendment made section 36(1)(va) and section 43B of the Income-tax Act vide Finance Act, 2021 (No.13 of 2021) is applicable retrospectively?"[Para 2.1] “In view of the law emerging from the decision of the Supreme Court in Checkmate Services (P.) Ltd. (supra), the contentions and the questions raised by the appellant could be said to be no longer res integra. The law as holding the field operates against the appellant.” [Para 6]. 3.3 At this stage we also need to discuss the proposition advanced by the Ld. AR that on the date of the order by Ld AO there was no judgement of the Hon’ble Apex Court and hence the issue was debatable at best. On this issue it needs to be pointed out that it is well settled that any interpretation of a statute by the Hon’ble Supreme Court imparts a meaning to it from the date on which a particular provision was brought on the statute book. Thus, this line of argument does not help the assessee. There was another argument that the amendments to sections 36(1)(va) and 43B of the Act were introduced with effect from AY 2021-22 only, whereas this case pertains to AY 2020-21. On this point it needs to be mentioned that the Hon’ble Apex Court was aware of these amendments as we can see from para 5 of the Checkmate (supra) order. Therefore, the said judgement considers the impact of such amendments and it is not for us to take any view other than the ratio decidendi of the Checkmate (supra) judgement. Also, the cases of Mumbai Tribunal relied upon [P R Packaging 148 taxmann.com 153 and ANI Integrated Services Ltd 162 taxmann.com 889] both are seen to put forth a proposition which may not be consistent with the law as laid down in Checkmate Services case (supra), considering that the case of P R Packaging (supra) was cited before the Hon’ble Bombay High Court and probably did not find favour with the Hon’ble Bench. We may draw our own conclusions from relevant extracts from the case of Rohan Korgaonkar 298 Taxman 159 (Bom) (referred to earlier): “However, Ms Kamat submitted that Checkmate Services (P.) Ltd. (Supra)was a matter where the assessment was made under section 143(3) of the IT Act and not under section 143 (1) (a) as in the present case. She also relied upon P.R. Packaging Service v. Asstt. CIT [2023] 148 taxmann.com 153/199 ITD 724 (Mum. - Trib) decided by the ITAT 07/12/2022 to support her contention.” [Para 6] “Though the decision cited was that of the ITAT, we have considered the same. In our judgment, however, the fact that the assessment order in Checkmate Services (P.) Ltd. (supra) was incidentally under section 143(3) and the assessment order in the present case is under section 143(1)(a) of the IT Act, makes no difference to the principle involved in this matter. The ITAT decision does not discuss why this circumstance constitutes a distinguishing feature based on which the ratio of Checkmate Services (P.) Ltd. (supra) could be departed from.” [Para 7] Both of the Mumbai Tribunal cases are on somewhat similar premise and cannot help the assessee here. Regarding the other authorities (High Court decisions, mentioned elsewhere in the body of this order) relied upon by the Ld. AR, it needs to be pointed out that all of them are before the date of the Checkmate case (supra) and we see that the starting point of the Checkmate case (supra) is the statement that various High Courts have interpreted the impugned provisions differently, requiring a final interpretation by the Hon’ble Apex Court. 3.4 It also deserves to be mentioned that in the case of Dasari Bujji vs ITO [ITA No. 20/Viz/2022], fairly placed on record by the Ld. AR, which is authored by one of us, the issue of making adjustments to the returned income of the assessee following the Checkmate case (supra) was held to be valid (reference para 7 of this order). The issue was decided against the assessee and in favour of Revenue. Some relevant portions of para 7 may be extracted for reference:
CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 “We have heard both the parties and perused the material available on record. At the outset, as rightly pointed out by the Ld. DR, the issue with regard to late remittance of the contribution under PF and ESI is settled by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. mentioned supra. Now, the only contention of the Ld.AR is that the CPC has no power to make any adjustment u/s 143(1) intimation and it is applicable w.e.f. 01.04.2021. The Ld.AR further contended that the assessee never claimed any incorrect claim or there is no audit objection etc. which is mentioned u/s 143(1) of the Act. For the sake of clarity and convenience, we extract section 143(1) of the Act as under :…” “In the case on hand before me, the adjustments u/s 143(1)(a) has been made on the basis of information contained in the tax audit report with respect to the belated payments of employees contribution of EPF and ESI paid beyond the due dates prescribed under the respective Act and these funds are referred in section 36(1)(va) of the Act. The information gives the details of due date of payment, actual date of payment to the concerned authorities and these payments have been made beyond the due dates specified in the respective Acts i.e. Provident Fund Act & ESI Act, which attracts the provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Act, leading to disallowance of this sum to the extent not paid on or before the due date stipulated in the respective PF and ESI Act. The above view has been taken by the coordinate bench of ITAT, Chennai in the case of Sree Gokulam Chit and Finance Co.P.Ltd. Vs. DCIT, Chennai vide I.T.A.No.765/CHNY/2022 dated 21.12.2022 and also the ratio laid down by the Hon’ble Madras High Court in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. Deputy Commissioner of Income Tax [2022] 138 taxmann.com 571 (Madras) , wherein, it was categorically held that if there is any incorrect claim made in the return, the disallowance made by the CPC is valid. Therefore, I am of the view that the decisions relied on by the Ld.AR has no application, in view of the decision of Hon’ble High Court of Madras…” 3.5 We are also conscious that one of the limbs of several arguments advanced by the Ld. AR pertained to the Checkmate Services case (supra) being pronounced after the date of the Ld. AO’s order, rendering it as a debatable issue, beyond the pale of section 154 of the Act. In this regard we draw sustenance from the order of the Hon’ble Gujrat High Court in the case of Saurashtra Kutch Stock Exchange Ltd, reported in 262 ITR 146 (Gujarat). A relevant portion from this case deserves to be extracted: “Whether the judgment of jurisdictional Court would constitute a mistake apparent from the record or not is no longer res intergra. In the case of Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO [1975] 100 ITR 651 (Guj.) facts before the Court were that the petitioner-company claimed deduction of certain amount in respect of the provision for taxation while computing its net wealth. The said claim was disallowed by the Assessing Officer as according to him the provision for tax liability did not constitute a ‘debt owed’ on the valuation date. Though the said assessment was not challenged by way of appeal, when the petitioner came to know subsequently about a decision of the Tribunal allowing such a claim in some other case, the petitioner applied to the Assessing Officer for rectifying the assessment order under section 35 of the Wealth-tax Act, 1957. The said application came to be rejected on the ground that there was no mistake apparent on the face of the record. The petitioner filed revision application before the Commissioner of Wealth-tax but did not succeed. Thereupon the petitioner applied to the High Court for exercising writ jurisdiction to quash the order and for direction to rectify the assessment order. The High Court after referring to earlier decision of this Court in the case of CWT v. Raipur Mfg. Co. Ltd. [1964] 52 ITR 482 and CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 of the Supreme Court in the case of Kesoram Industries Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 held that the provision of taxation was ‘debt owed’ and was deductible while computing the net wealth of the assessee. Therefore, the High Court held that there was clearly an error of law apparent on face of the record and the assessment order was erroneous. Repelling the contention of the revenue that the aforesaid judicial pronouncements were subsequent to the date of the assessment order it is laid down that the said decisions merely stated what the law had always been and must always be understood to have been. The fact that the said decisions were not before the Assessing Officer when he made the assessment order had not material bearing on the question whether the said order discloses any mistake apparent from the record and was liable to be rectified under section 35 of the Wealth-tax Act, 1957. It was further held that the decision in the case of Raipur Mfg. Co. Ltd. (supra) had been brought to the attention of the Commissioner during the course of hearing of revision petition and as he failed to apply the said decision there was an error of law apparent on the face of the record. That non-preferring of appeal against the assessment could not disentitle the assessee to seek rectification once patent error of law appeared on face of the record.” [Para 27] “The aforesaid principle has been reiterated by this Court in the case of Suhrid Geigy Ltd. v. CST [1999] 237 ITR 834 wherein one of us (Hon’ble Mr. Justice A.R. Dave) was a party to the decision. It is laid down in the said decisions that: "Section 13 of the Companies (Profits) Surtax Act, 1964 provides for rectification of mistake apparent from the record. A point which is debatable cannot be termed a mistake. But when the point is covered by a decision of the Supreme Court or concerned High Court, either rendered prior to or subsequent to the order proposed to be rectified, then the point ceases to be a debatable point and it also ceases to be a point requiring elaborate arguments or detailed investigation/inquiry. The subsequent decisions of the jurisdictional High Court do not enact the law but declare the law as it always was. . ." (emphasis added) [Para 28] Hence, it is well settled that a decision of the jurisdictional High Court, even if rendered subsequently, would constitute a mistake apparent from the record investing an authority with jurisdiction to rectify the mistake…..” [Para 29] We may also refer to the judgement in the case of Quality Steel Tubes Ltd reported in 33 taxmann.com 571 (Allahabad) [2012]. In this case, the Lordships of the Hon’ble Allahabad High Court have followed the Saurashtra Kutch case (supra) and concluded as under: “The Division Bench dealt with the contention canvassed by the Revenue that the Tribunal cannot obliterate its earlier finding/reasoning/order and the original order cannot be wiped out and came to hold as follows: '(a) The Tribunal has power to rectify a mistake apparent from the record on its own motion or on an application by a party under s. 254(2) of the Act; (b) An order on appeal would consist of an order made under s. 254(1) of the Act or it could be an order made under sub-s. (1) as amended by an order under sub-s. (2) of s. 254 of the Act; (c) The power of rectification is to be exercised to remove an error or correct a mistake and not for disturbing finality, the fundamental principle being, that power of rectification is for justice and fair play; (d) that power of rectification can be exercised even if a mistake is committed by the Tribunal or even if a mistake has occurred at the instance of party to the appeal; CO No. 1/Pat/2025 Technoculture Building Centre Private Ltd.; AY 2020-21 (e) A mistake apparent from record should be self-evident, should not be a debatable issue, but this test might breakdown, because judicial opinions differ, and what is a mistake apparent from the record cannot be defined precisely and must be left to be determined judicially on the facts of each case; (f) Non-consideration of a judgment of the jurisdictional High Court would always constitute a mistake apparent from the record, regardless of the judgment being rendered prior to or subsequent to the order proposed to be rectified; (emphasis added) (g) After the mistake is corrected, consequential order must follow, and the Tribunal has power to pass all necessary consequential orders.' [Para 10] 4. In light of the discussion above it is held that the findings in the impugned order do not deserve to be disturbed, and accordingly the same are upheld. The assessee’s appeal is hereby dismissed.” Considering the findings given in the above mentioned case of ITAT, Patna, it is held that the Ld. CIT(A) has applied the law correctly in terms of denying relief to the assessee.
In the result, appeal of the Revenue is allowed for statistical purposes and Cross Objection filed by the assessee is dismissed.
Order pronounced on 03.06.2025