AO Couldn’t Pass Rectification Order Based on Revenue’s Favoured Ruling Given by SC in Subsequent Year | ITAT

Case Details: Sanjay Kumar v. Income-tax Officer - [2023] 152 taxmann.com 594 (Delhi-Trib.)

Judiciary and Counsel Details

• • Anil Chaturvedi, Accountant Member & Anubhav Sharma, Judicial Member
  • M.R. Sahu, Adv. for the Appellant.
  • Yogesh Nair, Sr. DR for the Respondent.

Facts of the Case

Assessee deposited the employees’ contribution to EPF and ESI after the due date prescribed in the respective Acts. Assessing Officer (AO) accepted the return filed by the assessee under section 139(1) vide intimation under section 143(1).

Subsequently, by exercising powers under section 154, the AO passed a rectification order on the assessee, disallowed the employees’ contribution to EPF and ESI, and made an addition to its income.

On appeal, CIT(A) sustained the order of the AO based on the judgment of the Supreme Court in the case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178. Aggrieved-assessee filed an appeal before Delhi Tribunal.

ITAT Held

The Tribunal held that the issue involved in the instant appeal is not with regard to the merits of addition but whether the AO could make such addition by exercising powers under section 154.

The AO had accepted the return filed under section 139 vide intimation under section 143(1). The same was based on the tax audit report in Form No. 3CB and Form No. 3CD. Thus, the delay in the deposit of the employees’ contribution was very much in the assessment records upon which the intimation under section 143(1) was served upon the assessee.

As there was a law in favour of the assessee allowing such expenditure at the time, it has to be concluded that the assessee benefitted by the same and failure to follow a divergent view in favour of revenue cannot be considered an error apparent on record. Thus the AO was not justified to substitute his opinion by invoking the provision of section 154.

Therefore, the assessee’s appeal was to be allowed.

List of Cases Reviewed

• • CIT v. Mahavir Drilling Co. [2005] 142 Taxman 663/273 ITR 201 (MP) (para 6) followed.

List of Cases Referred to

• • Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178/[2023] 290 Taxman 19/[2022] 448 ITR 518 (SC) (para 3)
  • CIT v. Mahavir Drilling Co. [2005] 142 Taxman 663/273 ITR 201 (MP) (para 4)
  • CIT v. N.C. Budharaja & Co. [1993] 70 Taxman 312/204 ITR 412 (SC) (para 6).