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2021 (12) TMI 1322 - AT - Income TaxLate payments towards EPF and ESI u/s 36(1)(va) - payment before furnishing the return of income under section 139(1) - HELD THAT - As relying on Mohangarh Engineers and Construction Company 2021 (9) TMI 1319 - ITAT JODHPUR since assessee had deposited the employees contribution before filing of Return of Income. Therefore the assessee succeeds. Impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act in both the years under consideration prior to the amendment made by the Finance Act 2021 w.e.f. 1.4.2021 vide Explanation 5 are deleted. - Decided in favour of assessee.
Issues Involved:
1. Adjustment under Section 143(1) beyond its purview. 2. Disallowance of Rs. 6,26,353 for late payments towards EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Adjustment under Section 143(1): The assessee contended that the adjustments made by the Assessing Officer (AO) in the intimation under Section 143(1) were outside the purview of Section 143(1)(a). The CIT(A) confirmed the AO's action, which the assessee argued was illegal, unjustified, and arbitrary. The Tribunal noted that the only grievance related to the disallowance of Rs. 6,26,353 made by the AO on account of late payments towards EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961. The Tribunal's decision was influenced by previous rulings where similar issues were adjudicated, particularly referencing the ITAT Jodhpur Bench's decisions in the cases of Mohangarh Engineers and Construction Company Vs. DCIT and Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bangalore. 2. Disallowance under Section 36(1)(va): The primary contention was whether the disallowance of Rs. 6,26,353 for late payments towards EPF and ESI under Section 36(1)(va) was justified when the payments were made before filing the return of income under Section 139(1). The Tribunal referenced multiple cases where similar issues were adjudicated, including: - Harendra Nath Biswas vs. DCIT Kolkata: The ITAT 'B' Bench, Kolkata, decided that the Explanation 5 inserted by the Finance Act, 2021, effective from 01.04.2021, does not apply retrospectively. The Tribunal followed the Calcutta High Court's decision in Vijayshree Ltd., which held that deletions of amounts paid by employees' contributions beyond the due date were deductible if paid before filing the return. - Salzgitter Hydraulics Private Ltd, Hyderabad vs. ITO: The ITAT Hyderabad 'SMC' Bench held that disallowances under Sections 36(1)(va) and 43B were not sustainable if the contributions were paid before the due date of filing the return, despite being late under the respective statutes. - Mohangarh Engineers and Construction Company, Jodhpur & Others vs. CPC, Bangalore: The Tribunal reiterated that employees' contributions to ESI and PF paid before the due date of filing the return under Section 139(1) cannot be disallowed under Sections 43B or 36(1)(va), following the binding decisions of the Rajasthan High Court. The Tribunal concluded that since the facts of the present case were identical to those in the referenced cases, the disallowances made by the AO and sustained by the CIT(A) were deleted. The Tribunal allowed the appeal of the assessee, emphasizing that contributions made before the due date of filing the return should not be disallowed, even if paid after the statutory due date. Conclusion: The Tribunal allowed the appeal, deleting the disallowance of Rs. 6,26,353 for late payments towards EPF and ESI, following precedents that contributions made before the due date of filing the return are not disallowable, despite being late under the respective statutes. The decision emphasized that the adjustments made under Section 143(1) were beyond its purview and thus not justified.
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