2022 (1) TMI 229 - AT - Income Tax

Disallowance on account of late payments towards EPF and ESI u/s 36(1)(va) - payment before furnishing the return of income under section 139(1) - HELD THAT - Since the facts involved in the present case are identical to the facts involved in the case of Mohangarh Engineers and Construction Company Vs. DCIT 2021 (8) TMI 563 - ITAT JODHPUR and in the case of Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bangaluru 2021 (9) TMI 1319 - ITAT JODHPUR So respectfully following the aforesaid referred to order, the disallowances sustained by the Ld. CIT(A) are deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of adjustments made under Section 143(1) of the Income Tax Act.
2. Disallowance of ?2,17,360/- in respect of ESIC and PF under Section 36(1)(va) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of Adjustments Made Under Section 143(1):
The assessee contended that the adjustments made by the Assessing Officer (A.O.) in the intimation under Section 143(1) were outside the purview of Section 143(1)(a). The CIT(A) confirmed the A.O.'s action, which the assessee argued was "illegal, unjustified, arbitrary and against the facts of the case." The Tribunal considered the submissions and noted that the issue was covered by the ITAT Jodhpur Bench's order in similar cases, specifically citing the cases of Mohangarh Engineers and Construction Company Vs. DCIT and Bikaner Ceramics Private Limited Vs. ADIT. The Tribunal found that the adjustments made under Section 143(1) were not sustainable as they were not within the scope of the section.

2. Disallowance of ?2,17,360/- in Respect of ESIC and PF Under Section 36(1)(va):
The assessee argued that the disallowance of ?2,17,360/- for late payments towards EPF and ESI under Section 36(1)(va) was unjustified since the payments were made before the filing of the return under Section 139(1). The CIT(A) had sustained the disallowance, but the Tribunal referenced several ITAT decisions, including those of the Jodhpur Bench and the Kolkata Bench, which had ruled in favor of the assessee in similar circumstances. The Tribunal highlighted that the contributions were deposited before the due date of filing the return, and thus, the disallowance was not warranted. The Tribunal also noted that the amendment introduced by the Finance Act, 2021, which provided for disallowance of such contributions if paid after the due date under the respective statutes, was not applicable retrospectively.

Conclusion:
The Tribunal concluded that the disallowances made by the A.O. and sustained by the CIT(A) were not justified. The Tribunal followed the precedent set by various ITAT benches and the jurisdictional High Court, which held that contributions made before the due date of filing the return should not be disallowed. Consequently, the Tribunal allowed the appeals of the assessee, deleting the disallowances made on account of late payments towards EPF and ESI.