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Facts
The assessee's appeal concerns an order by the NFAC Delhi for AY 2017-18. The core issue revolves around an addition of Rs. 2,76,953/- made by the AO under section 154 of the Act. The AO found that the employees' contribution to provident fund and ESI fund were not paid before the due date, and invoked section 154 to rectify the assessment order.
Held
The Tribunal held that the AO erred in rectifying the assessment order under section 154 of the Act. The crucial point was that at the time of framing the original assessment order, there were judgments in favour of the assessee regarding the delay in deposit of EPF & ESI. The subsequent Supreme Court judgment in 'Checkmate Services Pvt. Ltd. vs. CIT' was relied upon by the AO for rectification, but the Tribunal found this reliance to be improper as it was not available at the time of the original assessment.
Key Issues
Whether the AO can invoke Section 154 of the Act to rectify an assessment order based on a subsequent Supreme Court judgment when the original assessment order was passed in favour of the assessee based on prevailing judicial opinion at that time.
Sections Cited
154, 36(1)(va), 143(3)
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI SUNIL KUMAR SINGH, HON’BLE
O R D E R
PER NARENDRA KUMAR BILLAIYA, AM :
This appeal by the assessee is preferred against the order dated 14/05/2024 by NFAC Delhi [in short ‘ld. CIT(A)] pertaining to AY 2017- 18.
The sum and substance of the grievance of the assessee is that, the ld. CIT(A) erred in confirming the action of the AO in passing the order u/s 154 of the Act thereby confirming the addition of Rs.2,76,953/- made by the AO u/s 36(1)(va) of the Act. 3. Briefly stated the facts of the case are that the assessment was framed u/s 143(3) of the Act vide order dt. 25/12/2019 wherein the returned Nil income was assessed as Nil income.
2 3.1. Subsequently, on perusal of Form 3CD report, the AO found that the employees’ contribution to provident fund and ESI fund were not paid before the due date. According to the AO since the mistake was apparent from the records, invoking the provisions of Section 154 of the Act and drawing support from the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT reported in [2022] 143 taxmann.com 178 (SC), the AO rectified the alleged mistake apparent from record and made addition of Rs. 2,76,953/-. 3.2. The assessee carried the matter before the ld. CIT(A) but without any success.
Before us, the ld. Counsel for the assessee stated that while framing the original assessment order, the AO was well aware of the decision in favour of the assessee, insofar as there was delay in deposit of EPF & ESI and after verifying the claim, the AO allowed it. Subsequently, when the Hon’ble Supreme Court reversed the decision which were in favour of the assessee, the AO initiated rectification proceedings. It is the say of the ld. Counsel that at the time of passing the assessment order, there was no mistake apparent from record. Hence the assumption of jurisdiction u/s 154 of the Act is bad in law. Per contra, the ld. D/R strongly supported the findings of the AO.
We have given a thoughtful consideration to the orders of the authorities below. We are of the considered view that the quarrel is not much in respect of the merits of the addition but whether the AO can exercise powers u/s 154 of the Act drawing support from the subsequent judgment of the Hon’ble Supreme Court when, at the time of framing the assessment order, there were judgments galore in favour