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2022 (2) TMI 585 - AT - Income TaxLate payments towards EPF and ESI u/s 36(1)(va) - Deposits before furnishing the return of income under section 139(1) - HELD THAT - As relying on RAJA RAM VERSUS THE ITO, WARD 3 AND SANCHI MANAGEMENT SERVICES PRIVATE LIMITED 2021 (11) TMI 370 - ITAT CHANDIGARH the 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. Disallowance of delayed deposit of employees' share of Provident Fund (PF) and Employees' State Insurance (ESI) under section 36(1)(va) of the Income Tax Act, 1961. 2. Whether the amendment to section 36(1) and 43B by the Finance Act, 2021 has retrospective effect. 3. Prima facie adjustment to the returned income by the Centralized Processing Centre (CPC). Detailed Analysis: 1. Disallowance of Delayed Deposit of Employees' Share of PF and ESI: The primary issue in all the appeals is the disallowance of amounts deposited late towards employees' share of PF and ESI under section 36(1)(va) of the Income Tax Act, 1961. The assessees argued that these contributions were deposited before the due date for filing the return of income under section 139(1). The CIT(A) sustained these disallowances, which were challenged by the assessees. The ITAT considered previous judgments, including those from the ITAT, Chandigarh Bench, and ITAT, Jodhpur Bench, which had adjudicated similar issues. The ITAT referred to decisions like Raja Ram Vs. ITO, Yamunanagar, and Sanchi Management Services Private Limited Vs. ITO, Chandigarh, where it was held that if the contributions were deposited before the due date for filing the return of income, the disallowance under section 36(1)(va) should not be sustained. The ITAT also referenced various High Court decisions, including the Calcutta High Court in the case of Vijayshree Ltd., which held that the deletion of the amount paid by the employees' contribution beyond the due date was deductible by invoking the amended provisions of section 43(B) of the Act. 2. Retrospective Effect of Amendment by Finance Act, 2021: The CIT(A) had sustained the disallowance on the ground that the amendment to section 36(1) and 43B by the Finance Act, 2021, had retrospective effect. However, the ITAT noted that the amendment was applicable from the assessment year 2021-22 and subsequent assessment years, as clarified in the Notes to Clauses explaining the amendments. The ITAT emphasized that the amendment was not retrospective and should not apply to the assessment years under consideration. This view was supported by various ITAT decisions, including the ITAT Kolkata Bench in the case of Harendra Nath Biswas vs. DCIT Kolkata. 3. Prima Facie Adjustment by CPC: The assessees contended that the prima facie adjustment to the returned income by the CPC was erroneous, especially in light of several judgments in favor of the assessee. The ITAT agreed with this contention, noting that the CPC's adjustments were not sustainable given the binding judicial precedents. Conclusion: The ITAT concluded that the disallowances made by the Assessing Officer and sustained by the CIT(A) on account of delayed deposits of employees' contributions to PF and ESI, prior to the amendment made by the Finance Act, 2021, were not justified. The ITAT allowed the appeals of the assessees, deleting the impugned disallowances. Order: The appeals of the assessees were allowed, and the disallowances sustained by the CIT(A) were deleted. The order was pronounced on 18/01/2022.
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