2021 (11) TMI 1017 - AT - Income Tax

Late ESI/PF payments - Payment before filing of the return u/s 139(1) in 2018-19 assessment year - HELD THAT - As we read from the Notes on Clauses at the time of introduction of the Finance Act, 2021 and have held that the amendment is applicable in relation to the assessment year 2021-22 and subsequent years and not retrospectively. Thus, in view of this legal position as considered in the case of CIT Vs Nuchem Limited 2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT and CIT Vs Hemla Embroidery Mills Pvt. Ltd. 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT we are of the view that the additions cannot be made or sustained on the strength of the amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B of the Act as the legal position thereon is very clear. The departmental stand that it is clarificatory in nature has consistently been rejected. We find that the claim of the assessee is to be allowed in the year under consideration which is 2018-19 assessment year. The impugned order, accordingly, is set aside and the AO is directed to delete the disallowance. The appeal of the assessee is allowed.

Summary

Issues:
Challenge to disallowance of late ESI/PF payments made before filing return u/s 139(1) in 2018-19 assessment year.

Analysis:

Issue 1: Disallowance of late ESI/PF payments
The appeal challenged the correctness of the order by ld. CIT(A) sustaining a disallowance for late ESI/PF payments made before filing the return u/s 139(1) in the 2018-19 assessment year. The appellant contended that the issue was covered in their favor by the ITAT's order in a similar case and the decision of the jurisdictional High Court. The AR highlighted that the payments were made before the due date of filing the return u/s 139(1), which, according to the appellant, should be considered. The Senior DR relied on the impugned order without citing any contrary decision.

Issue 2: Applicability of amendments to Sections 36(1)(va) and 43B
The Tribunal noted that the issue was whether the disallowance of ESI & PF payments made before the due date of filing the return u/s 139(1) was valid, considering the amendments to Sections 36(1)(va) and 43B of the Income Tax Act by the Finance Act, 2021. The Tribunal referred to various ITAT Benches' consistent decisions, including Delhi and Hyderabad Benches, which held that the amendments were applicable prospectively from the assessment year 2021-22 and not retrospectively. The Tribunal also considered the decisions of the jurisdictional High Court, emphasizing that the amendments cannot be applied retrospectively. The Tribunal concluded that the legal position was clear, and the additions could not be made based on the Finance Act, 2021 amendments. Consequently, the Tribunal directed the AO to delete the disallowance and allowed the appeal of the assessee for the 2018-19 assessment year.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the Tribunal's decision and the legal reasoning behind it.