2022 (5) TMI 946 - AT - Income Tax

Belated deposits of PF and ESIC contributions - Addition under section 36(1)(va) r/w section 2(24) - intimation under section 143(1) - HELD THAT - As relying on KALPESH SYNTHETICS PVT LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CPC BENGALURU. 2022 (5) TMI 461 - ITAT MUMBAI when the due date under Explanation to Section 36(1)(va) is judicially held to be not decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is indicative of the disallowance of expenditure in question. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. Adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. As we hold so, we make it clear that our observations remain confined to the peculiar facts before us, that our adjudication is confined to the limited scope of adjustments which can be carried out under section 143(1) and that we see no need to deal with the question, which is rather academic in the present context, as to whether if such an adjustment was to be permissible in the scheme of Section 143(1), whether the insertion of Explanation 2 to Section 36(1)(va), with effect from 1st April 2021, must mean that so far as the assessment years prior to the assessment years 2021-22 are concerned, the provisions of Section 43B cannot be applied for determining the due date under Explanation (now Explanation 1) to Section 36(1)(va). That question, in our humble understanding, can be relevant, for example, when a call is required to be taken on merits in respect of an assessment under section 143(3) or under section 143(3) r.w.s. 147 of the Act, or when no findings were to be given on the scope of permissible adjustments under section 143(1)(a)(iv). That is not the situation before us. - Decided in favour of assessee.

Summary

Issues:
Appeals against orders of Commissioner of Income-tax (Appeals) under section 143(1) and 250 of the Income-tax Act, 1961.

Analysis:
1. The appeals were clubbed since the issues were common and identical. The lead case was ITA No.1968/Mum/2021 for A.Y. 2018-19.
2. The assessee contested the disallowance of Rs. 10,58,135 towards employee contributions to Provident Fund and ESIC under various sections of the Income-tax Act, 1961.
3. Additional grounds of appeal were raised during the hearing, challenging the DCIT's order and the invocation of section 143(l)(a)(iv) by the revenue.
4. The assessee company, engaged in manufacturing laser machines, filed its return for A.Y. 2018-19, which was processed under section 143(1). Disallowances were made for delayed deposits of employee contributions to PF and ESIC.
5. The CIT(A) confirmed the additions but granted relief on other grounds, partially allowing the appeal, leading to the appeal before the Tribunal.
6. During the hearing, the AR argued for considering the law applicable to the assessment year and relied on judicial decisions to support the appeal.
7. The DR supported the CIT(A)'s order, citing the retrospective applicability of an amendment introduced in the Finance Act 2021.
8. The Tribunal considered the submissions, emphasizing the timely deposit of employee contributions before the due date of filing the return under section 139(1) of the Act.
9. Referring to a Co-ordinate Bench decision, the Tribunal highlighted that the tax auditor's report does not bind the auditee and that the due date for contributions is crucial, concluding that the adjustment made under section 143(1) was vitiated in law.
10. Given the judicial decision's ratio and the absence of relevant law amendments in the assessment year, the Tribunal held that the amendment to section 36(1)(va) would not apply. Consequently, the disallowance was set aside, and the appeal was allowed in favor of the assessee.
11. The decision in ITA No.1968/Mum/2021 for A.Y. 2018-19 was deemed applicable mutatis mutandis to ITA 1967/Mum/2021 for A.Y. 2019-20, resulting in both appeals being allowed.

This detailed analysis of the judgment highlights the issues, arguments, and conclusions reached by the Tribunal in the context of the appeals filed by the assessee against the orders of the Commissioner of Income-tax (Appeals).