2022 (5) TMI 606 - AT - Income Tax

Disallowance of employee s contribution of PF and ESI deposited after the due date under the specified act but before due date of filing of return of income u/s 139(1) - HELD THAT - As relying on case of Vinod Kumar Sharma 2022 (3) TMI 617 - ITAT JAIPUR the disallowance made on account of employees contribution towards PF ESI deposited before due date of filing of return of income u/s 139(1) of the Act is deleted - Decided in favour of assessee.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of employee’s contribution to PF/ESIC deposited after the due date under the specified act but before the due date of filing the return of income under Section 139(1) of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was delayed by 233 days. The assessee filed an application for condonation of delay, citing the Covid-19 pandemic as the reason for the delay. The Supreme Court had extended the limitation period during the pandemic, which the assessee relied upon. The Revenue did not object to the condonation. The Tribunal found that there was sufficient cause for the delay and condoned it, allowing the appeal to be heard on its merits.

2. Disallowance of Employee’s Contribution to PF/ESIC:
The primary issue was the disallowance of Rs. 1,25,496/- related to the late deposit of employee’s contributions to PF/ESIC, which were deposited after the due date specified under the respective acts but before the due date of filing the return of income under Section 139(1) of the Income Tax Act, 1961.

- Assessee's Argument:
The assessee argued that as per binding precedents, if the payment is made before the due date of filing the return of income under Section 139(1), no disallowance should be made under Section 43B of the Act. The assessee contended that the amendment to Section 36(1)(va) and Section 43B by the Finance Act, 2021, which inserted explanations clarifying that the provisions of Section 43B shall not apply to employee contributions, should not be applied retrospectively.

- Revenue's Argument:
The Revenue supported the disallowance, arguing that the amendments to Sections 36(1)(va) and 43B by the Finance Act, 2021, clarified that employee contributions should be disallowed if not deposited by the due date under the respective acts, irrespective of the date of filing the return of income.

- Tribunal's Decision:
The Tribunal noted that various High Courts, including the Rajasthan High Court, had consistently held that employee contributions deposited before the due date of filing the return of income under Section 139(1) should not be disallowed under Section 43B. The Tribunal also observed that the amendments by the Finance Act, 2021, were applicable from assessment year 2021-22 and subsequent years, and not retrospectively.

The Tribunal referred to its own previous decisions and other High Court rulings, concluding that the disallowance was not justified for the assessment year in question (2018-19). It was held that the amendments introduced by the Finance Act, 2021, did not apply to the assessment year under consideration. Therefore, the disallowance of Rs. 1,25,496/- was deleted.

Conclusion:
The appeal was allowed, with the Tribunal condoning the delay in filing and deleting the disallowance of Rs. 1,25,496/- related to the late deposit of employee contributions to PF/ESIC, as the payments were made before the due date of filing the return of income under Section 139(1). The amendments by the Finance Act, 2021, were held to be applicable prospectively from assessment year 2021-22.

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