2022 (1) TMI 991 - AT - Income Tax

Delay in deposit of employees' contribution towards ESI and PF - delay of few days from the due date mentioned in the respective Statutes, but the same was deposited well before the due date of filing of return of income u/s. 139(1) - HELD THAT - CIT(A) has referred to the amendment brought in by the Finance Act, 2021 wherein an explanation has been introduced to Sections 36(1)(va) and u/s. 43B of the Income Tax Act. It is a consistent position across various Benches of the Tribunal including Chandigarh Benches that the amendment which has been brought in by the Finance Act, 2021 shall apply w.e.f. assessment year 2021-22 and subsequent assessment years and the impugned assessment year being assessment year 2018-19, the said amendment cannot be applied in the instant case. Therefore, considering all the addition made by way of adjustment while processing the return of income u/s. 143(1) of the Act so made by the CPC towards the deposit of employees' contribution towards ESI and PF paid before the due date of filing of the return of income u/s. 139(1) of the Act, is hereby directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Appeal against order of Learned Commissioner of Income Tax (Appeals) regarding disallowance of employees' contribution to ESI & PF made late.

Analysis:

Issue 1: Appeal against Ld. CIT(A) Order
The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, under section 250 of the Income Tax Act, 1961 for the assessment year 2018-19. The assessee challenged the order on grounds of being contrary to law and facts of the case. The grounds included not following judgments of High Court and Income Tax Appellate Tribunal, Chandigarh, and upholding the action of the Assessing Officer for late payments of ESI/PF contributions, despite being made before the due date of filing the Income Tax Return.

Issue 2: Disallowance of ESI & PF Contributions
The assessee filed its return declaring income, which was processed, making a disallowance towards late deposit of employees' contribution to ESI & PF. The Ld. CIT(A), NFAC confirmed the disallowance. During the hearing, the assessee argued that the contributions were made before the due date of filing the return of income, citing relevant case laws. The Ld. CIT(A) referred to an amendment by the Finance Act, 2021, but the Tribunal held that the amendment applies prospectively from 2021-22 onwards and cannot be applied retrospectively to the assessment year 2018-19. The Tribunal directed the deletion of the disallowance amount.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the Ld. CIT(A) and directing the Assessing Officer to delete the disallowance of employees' contribution towards ESI and PF paid before the due date of filing the return of income. The decision was based on the legal position, various High Court decisions, and consistent Tribunal rulings regarding the applicability of the Finance Act, 2021 amendment.