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Judgment
PER: SUNIL KUMAR SINGH, JM.
This appeal has been preferred against the impugned order dated 31.01.2026 passed in Appeal No NFAC/2016-17/10175923 by the ld Commissioner of Income Tax/ ADDL/JCIT(A) PANAJI [hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act), for the A.Y. 2017-18, wherein ld CIT(A) has dismissed assessee’s appeal.
The brief facts of the case are that the assessing officer initiated the process of rectification u/s 154 of the Act, in the assessment order dated 29.12.2019 passed u/s 143(3) of the Act, by issuance of notice dated 04.02.2022, stating therein that the assessment order u/s 143(3) for A.Y. 2016-17 (correct A.Y. is 2017-18) requires to be amended as there is a mistake apparent from record, further stating that the late deposit of EPF of Rs. 9,52,75,777/- was not disallowed during the assessment proceedings, which was mistake apparent on record. The assessee, through its reply dated 10.02.2022 submitted that the figure adopted in the impugned notice was incorrect, the EPF contribution was Rs. 79,48,153/- as against Rs. 9,52,75,477/- proposed in the notice. After considering assessee’s submissions, the assessing officer found the submissions though tenable, however, added Rs. 95,25,477/- in the total income of the assessee.
Assessee preferred an appeal before ld CIT(A), who dismissed assessee’s appeal.
Appellant assessee has preferred this second appeal on the following grounds:
“1.That on facts and in law the CIT(A) has erred in upholding disallowance of Rs 95,25,477/- made by AO on account of late deposit of Employee Provident Fund.
2.That on facts and in law the CIT(A) has erred in upholding the jurisdiction of the AO in making the above disallowance invoking powers u/s 154 of the Act.
2.1That on facts and in law the CIT(A) has erred in not appreciating that there was no mistake apparent from record in assessment order dated 29th December 2019 passed by the AO u/s 143(3) of the Act and hence the AO had erroneously invoked provisions of section 154 for rectification.
3.That on facts and in law the CIT(A) / AO have erred in not appreciating that the amount of Employees Contribution to Provident Fund was deposited by the appellant before due date for filing of return u/s 139(1) of the Act.
4.Without Prejudice, that in facts and in law the CIT(A) / AO have erred in not appreciating that payments of Employee Contribution to Provided Fund were made within time allowed under the relevant parent statute.
5.Without Prejudice, that on facts and in law the CIT(A) and AO have erred in not appreciating that the figure adopted for making disallowance of Rs 95,25,477/- is incorrect as the correct amount of employee contribution to Provident Fund is Rs 79,48,153/-. ……………..”
Perused the records and heard ld representative for the appellant assessee and ld Sr DR for the respondent revenue.
On the basis of grounds raised under appeal, the main point for determination is, as to whether ld CIT(A) has erred in upholding the disallowance of Rs. 95,25,477/- on account of late deposit of employees’ provident fund dues made by the assessing officer by invoking powers u/s 154 of the Act, further ignoring the fact that the employees’ contribution to EPF was deposited to the appellant before due date of filing return u/s 139(1) of the Act, which was in time under the relevant parent statute?
Ld representative for the appellant assessee has submitted that the correct amount of contribution received from employees EFP was Rs. 79,48,153/- as against the addition of Rs. 95,25,477/- which was also accepted by the assessing officer, however, added Rs. 95,25,477/-. Ld AR has further submitted that a chart indicating the contribution of Rs. 79,48,153/- was submitted before both the revenue authorities and is part of the impugned order. Ld AR has submitted that the appellant had claimed the said deduction relying on the judgment of various High Courts and more particularly the judgment of jurisdictional Delhi High Court in CIT v. Aimil India, 321 ITR 508 (Del), wherein, it was held that the assessee can get the benefit, if the actual payment is made before the return is filed as per the principle laid down by the Supreme Court in CIT v. Vinay Cement Ltd. (2007) 213 CTR (SC) 268. Ld AR has further submitted that the issue was highly debatable and has referred the decision of Hon’ble High Courts, having decided in favour of the assessee:
CIT Vs. Sabari Enterprises (2008) 298 ITR 141 (Karn), affirmed in (2009) 319 ITR 306 (SC).
CIT Vs. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP).
CIT Vs. Mark Auto Industries Ltd. - (2013) 358 ITR 43 (Punj).
CIT Vs. State Bank of Bikaner & Jaipur : Jaipur Vidyut Vitaran Nigam Ltd. - (2014) 363 ITR 70 (Raj).
CIT Vs. Jaipur Vidyut Vitaran Nigam Ltd. : Rajasthan Rajya Vidyut Utpadan Nigam Ltd. - (2014) 363 ITR 307 (Raj).
CIT VS. Kichha Sugar Co.Ltd. (2013) 356 ITR 351 (Uttarakhand).
CIT Vs. Hemla Embroidery Mills (P) Ltd. - (2014) 366 ITR 167, 169 (Punj).
Ld AR, thus, submits that such a highly debatable issue could not have been treated as error apparent on record despite the EPF contribution having been allowed under the dictum of the decision of Hon’ble Delhi High Court in Aimil India(supra).
Ld AR has also referred that the following High Courts have decided the issue in favour of the revenue:
CIT VS. Gujarat State Road Transport Corporation - (2014) 366 ITR 170, 186 (Guj).
CIT VS. Merchem Ltd. - (2015) 378 ITR 443, 461 (Ker).
Popular Vehicles & Services Pvt.Ltd. Vs. CIT - (2018) 406 ITR 150 (Ker).
CIT Vs. Harrisons Malayalam Ltd. - (2019) 414 ITR 718 (Ker).
Ld Sr DR for the respondent revenue has relied on the impugned order and prayed to dismiss assessee’s appeal.
The following facts are undisputed in the case in hand, the return of income was filed by the assessee for A.Y. 2017-18 on 31 October, 2017, the assessment order u/s 143(3) of the Act was passed on 29th of December, 2019, wherein, the case was selected for scrutiny under CASS only to the extent of appellant’s claim of deduction u/s 80IA(4) of the Act only and the additions of R.s 16,09,70,977/- was made disallowing the assessee’s claim u/s 80IA(4) of the Act. It is pertinent to mention that the assessing officer did not make any disallowance of the EPF contribution u/s 36(1)(va). It is only after a gap of about 3 years, the assessing officer initiated the proceedings u/s 154 of the Act by issuance of notice for rectification u/s 154 dated 04.02.2022 and rectified the assessment order u/s 143(3) dated 09.09.2022 making the addition of Rs. 95,25,477/- on 09.09.2022.
It is pertinent to mention that even the Supreme Court’s decision in case of Checkmates Services (P) (Ltd) v. CIT, 448 ITR 518 (SC), was awaited which was pronounced by the Supreme Court on 12.10.2022. It is worth noting that there was a debate between the various High Courts as to whether the deleted payments beyond the due date provided under the relevant statutes is the due date of making payment of PF and ESI or the due date of filing of return of income under explanation 2 to section 139(1) of the Act.
The co-ordinate bench of ITAT Delhi in MA No. 378/Del/2022(in ITA 1187/Del/2021, A.Y. 2018-19) has observed as under:
“5.……….. on this preposition since the issue became highly debatable and Calcutta High Court in Jiyajeerao Cotton Mills Ltd v ITO, (1981) 130 ITR 710, 731 (Cal) has narrated that the principle of retrospective legislation is not applicable to the decisions of the Supreme Court declaring the law or interpreting the provision in the statute. The law is laid down or a provision in the statue is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on a provision of a statue between the different high Court of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate or doubt or a conflict of judicial opinion is resolved and settled by the Supreme Court, yet still that does not obliterate the existence of such debate or doubt or conflict that existed prior to the decision of the Supreme Court setting at rest such debate or doubt or conflict.
6.In view of the aforesaid legal position, we are of the view that only a glaring and obvious mistake of law apparent on record can be corrected u/s 254(2) of the Act, but a discussion on a debatable point of law cannot be corrected by way of rectification, if the rectification was made at a time when the issue was highly debatable. It cannot be supplied by referring to the Supreme Court’s decision settling the issue which is rendered after the rectification……”
Hon’ble Bombay High Court, vide order dated 03.02.2024, in Infantry Security and Facilities v ITO, (2026) 185 taxmann.com 539 (Bom) has held that the change in law or subsequent decision/ judgement of coordinate or larger bench by itself cannot be regarded as a ground for review or in exercise of rectificatory jurisdiction to amend its order on the basis of said subsequent decision. The SLP (Civil) Diary No. 1954 of 2026, ITO v. Infantry Security and Facilities (2026) 187 taxmann.com 46 (SC), was dismissed by the Hon’ble Supreme Court filed against the aforesaid order dated 03.12.2024 passed by Hon’ble Bombay High Court.
In view of the above, the assessment order dated 29.12.2019 passed u/s 143(3) of the Act, legal position could not be rectified u/s 154 as the issue was highly debatable at that point of time. It is worth mentioning that assessing officer, while issuing notice dated 04.02.2022 for rectification u/s 154 has mentioned the A.Y. 2016-17 as against the correct A.Y. 2017-18 and despite having accepted assessee’s explanation in respect of the corrected figure of employees’ contribution to PF, has not made the corrected figures in the rectification order. The impugned order passed in ignorance of above legal position is thus unsustainable. The aforesaid point is accordingly determined in positive in favour of the appellant assessee and against the respondent revenue.
In the result, the assessee’s appeal is allowed.