2021 (12) TMI 942 - AT - Income Tax

Rectification of mistake u/s 154 - Delayed Employees contribution to the Employee Provident Fund and Employee State Insurance Fund - addition u/s 2(24)(x) r/w s. 36(1)(va) - scope of amendment - HELD THAT - In the Tribunals decision in Nikhil Mohine 2021 (11) TMI 927 - ITAT JABALPUR while confirming the Explanations under reference to be explanatory of the law, even as signified by the clear, unambiguous language employed therein, are yet stated to be prospective inasmuch as they are applicable assessment year 2021-22 onwards. Lastly, no decision by Hon'ble jurisdictional High Court in the matter has been either cited before me, or found, which, where so, would, irrespective of the view expressed therein, hold for the relevant years, being prior to the year of applicability of the Explanations under reference. No adjustment, in view of the conflicting judicial opinion could, accordingly, be made to the returned income u/s. 143(1)/154, which sections admit only issues on which there could be conceivably no two views, rampant, irrespective of merits thereof, in the instant case, which aspect, as explained therein, has been given cognizance to in making the provision applicable not retrospectively. The assessee, accordingly, succeeds in his challenge to the impugned adjustments, which are held as bad in law and directed for deletion. Explanations themselves had been proposed as prospective amendments, as stated in the Notes on the Clauses to, and the Memorandum explaining the Provisions of, the Finance Bill, 2021, with a view to, as explained, settle the controversy arising due to the contrary view expressed by some High Courts, for which reference may be made to para 5.4 of the Tribunal s order (also refer paras 3.1 3.2 above). There is, accordingly, no question of the same being given a retrospective effect. There is, in view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified - See SAURASHTRA KUTCH STOCK EXCHANGE LTD 2008 (9) TMI 11 - SUPREME COURT and SMT. ARUNA LUTHRA. 2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine (supra). Any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee. The impugned additions, therefore, could not have been made under the given facts and circumstances of the case, and are directed for deletion. Assessee appeal allowed.

Summary

Issues:
Appeal against the Commissioner of Income Tax (Appeals) order partly allowing the assessee's appeal contesting the amendment under section 154 of the Income Tax Act, 1961 for the Assessment Year 2018-19.

Detailed Analysis:

1. Addition of Employee's Contribution to Welfare Funds:
The primary issue in the appeal was the addition of the employee's contribution to the employee welfare funds, deposited beyond the due date specified under section 36(1)(va) of the Income Tax Act. The Tribunal referred to its decision in Nikhil Mohine v. Dy. CIT, where it was held that due to conflicting judicial opinions and the limited scope of adjustment under section 143(1)(a), such additions could not be made under sections 143(1) or 154. The Tribunal emphasized that the employee's contribution should be governed by section 43B(b) and not section 36(1)(va) based on the legislative intent and the retrospective effect of the Explanations inserted by the Finance Act, 2021. The Tribunal concluded that the Explanations were clarificatory and retrospective in nature, resolving the conflict of judicial opinions.

2. Retrospective Effect of Explanations:
The Tribunal further discussed the retrospective nature of the Explanations, noting that they were proposed as prospective amendments. The Explanations to section 36(1)(va) and section 43B were intended to take effect from the Assessment Year 2021-22 based on the Finance Bill, 2021. The Tribunal clarified that there was no basis for giving the Explanations retrospective effect for the relevant year, as they were proposed as prospective amendments.

3. Impugned Additions and Decision:
The Tribunal emphasized that the impugned additions could not be justified under the given facts and circumstances of the case. It highlighted the absence of any decision by the Hon'ble jurisdictional High Court supporting the additions. The Tribunal ruled in favor of the assessee, allowing the appeal and directing the deletion of the impugned additions. The decision was pronounced in the Open Court on December 20, 2021.

In conclusion, the Tribunal's judgment in this case focused on the interpretation of provisions related to employee contributions to welfare funds, the retrospective effect of legislative amendments, and the absence of supporting decisions by the jurisdictional High Court. The Tribunal's decision favored the assessee, leading to the allowance of the appeal and the deletion of the disputed additions.