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2022 (3) TMI 1344 - AT - Income TaxDelayed employee s contribution to ESI PF - assessee filed complete details of the entire payments i.e. employee s PF ESI contribution paid before the due date of filing of return of income - Scope of amendment - HELD THAT - There are series of decisions of various Hon ble High Courts M/S. INDUSTRIAL SECURITY INTELLIGENCE INDIA PVT. LTD 2015 (7) TMI 1063 - MADRAS HIGH COURT on this issue and held that the payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B of the Act. See M/S MOHANLAL KHATRI VERSUS A.C.I.T., CIRCLE-2 AJMER 2021 (11) TMI 1035 - ITAT JAIPUR We are of the view that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee s appeal is allowed.
Issues Involved:
1. Violation of the principle of faceless appeal. 2. Disallowance of late deposit of Employees' Contribution to ESIC and PF under Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961. 3. Retrospective application of amendments made in the Finance Act, 2021. 4. Violation of the principle of natural justice. Detailed Analysis: 1. Violation of the Principle of Faceless Appeal: The assessee argued that the CIT(A), NFAC, Delhi, violated the principle of faceless appeal, which aims to ensure justice for honest taxpayers and to avoid unnecessary litigation. The principle of faceless appeal was intended to provide transparency, efficiency, and accountability in the tax administration process. 2. Disallowance of Late Deposit of Employees' Contribution to ESIC and PF: The assessee contested the disallowance of ?86,905/- made by the AO for the late deposit of Employees' Contribution to ESIC and PF under Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961. The assessee argued that the contributions were deposited before the due date of filing the return of income under Section 139(1) of the Act. The assessee relied on various judicial pronouncements, including decisions of the Rajasthan High Court and other High Courts, which held that no disallowance can be made if the contributions are deposited before the due date of filing the return of income. 3. Retrospective Application of Amendments Made in the Finance Act, 2021: The assessee contended that the amendments made in the Finance Act, 2021, to Section 36(1)(va) of the Act should not be applied retrospectively. The CIT(A) held that the amendments were retrospective in nature, but the assessee argued that the amendments should apply prospectively from the assessment year 2021-22 onwards. The assessee relied on the memorandum explaining the provisions of the Finance Bill, 2021, which stated that the amendments would take effect from 1st April 2021 and apply to the assessment year 2021-22 and subsequent years. 4. Violation of the Principle of Natural Justice: The assessee argued that the principle of natural justice was violated as the CIT(A) and the AO did not provide the appellant with the last opportunity to explain its case before passing the assessment order. The assessee claimed that this denial of opportunity resulted in prejudice against the appellant. Judgment: The Tribunal considered the rival contentions and the material available on record. It noted that the payments of PF and ESI contributions relating to employees' contribution were made before the due date of filing the return of income under Section 139(1) of the Act. The Tribunal referred to various judicial pronouncements, including decisions of the Coordinate Bench and the Hon'ble Rajasthan High Court, which held that no disallowance can be made if the contributions are deposited before the due date of filing the return of income. The Tribunal also considered the amendments made in the Finance Act, 2021, and the memorandum explaining the provisions, which stated that the amendments would take effect from 1st April 2021 and apply to the assessment year 2021-22 and subsequent years. The Tribunal held that the amendments were prospective and not retrospective. Based on the above findings, the Tribunal allowed the appeal of the assessee, holding that the disallowance of ?86,905/- was not justified as the contributions were deposited before the due date of filing the return of income. The Tribunal also held that the amendments made in the Finance Act, 2021, were prospective and not applicable for the assessment year under consideration (2018-19). Conclusion: The appeal of the assessee was allowed, and the disallowance made by the AO was deleted. The Tribunal held that the amendments made in the Finance Act, 2021, were prospective and not applicable for the assessment year 2018-19. The Tribunal also emphasized the importance of adhering to the principles of natural justice and providing the appellant with an opportunity to explain its case.
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