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2022 (6) TMI 399 - AT - Income TaxAddition u/s. 36(1)(va) - Delayed employees' contribution to ESI/Provident Fund were deposited by the assessee after the specified date prescribed under the relevant laws governing ESI and Provident Fund - adjustments and intimation u/s. 143(1) - debatable and controversial issues - HELD THAT - Payments by way of employees contribution to provident fund and ESI were made by the assessee after stipulated date prescribed under the relevant laws governing provident fund and ESI, but before the due date of filing of return of income prescribed u/s. 139(1) of Income Tax Act; is not in dispute. Whether the aforesaid amendments to Income Tax Act by way of Finance Act, 2021 are retrospective or prospective, is debatable and controversial. Adjustments made by Revenue u/s. 143(1) of Income Tax Act, whereby aforesaid additions were made, were unfair, unjust and bad in law. Addition by way of adjustment and intimation u/s. 143(1) of Income Tax Act on debatable and controversial issues is beyond the scope of Section 143(1) of Income Tax Act. Revenue was clearly in error in making the aforesaid adjustments.Addition by way of adjustment and intimation u/s. 143(1) of Income Tax Act, on the basis of retrospective amendment to Income Tax Act is beyond the scope of Section 143(1) of Income Tax Act. In the present appeal before us, addition of aforesaid amount of Rs. 8,28,211/- has been made by way of adjustments and intimation u/s. 143(1) of Income Tax Act, on a debatable and controversial issue, and Ld. CIT(A) did err in law, in not deleting this addition. Additions by way of adjustment and intimation u/s. 143 were beyond the scope of Section 143(1) of Income Tax Act; and further, that the Ld. CIT(A) erred in law in confirming the aforesaid addition on a debatable and controversial issue.
Issues Involved:
1. Sustaining the addition of Rs. 8,28,211 under Section 36(1)(va) of the Income Tax Act. 2. Applicability of amendments to Section 36(1)(va) and Section 43B of the Income Tax Act brought by Finance Act, 2021. 3. Legality of adjustments made under Section 143(1) of the Income Tax Act on a debatable and controversial issue. Detailed Analysis: 1. Sustaining the Addition of Rs. 8,28,211 under Section 36(1)(va): The primary issue in this appeal was the addition of Rs. 8,28,211 made under Section 36(1)(va) of the Income Tax Act. The assessee deposited employees' contributions to ESI/Provident Fund after the specified dates under the respective laws but before the due date for filing the income tax return under Section 139(1). The addition was made through adjustments under Section 143(1) and confirmed by the Ld. CIT(A). 2. Applicability of Amendments by Finance Act, 2021: The amendments to Section 36(1)(va) and Section 43B of the Income Tax Act by Finance Act, 2021, were considered. The key question was whether these amendments are prospective (effective from 01.04.2021) or retrospective. The Tribunal acknowledged various ITAT decisions favoring the view that these amendments are prospective and not applicable to periods before 01.04.2021. The Tribunal cited several cases supporting this perspective, including Digiqal Solution Services Pvt. Ltd. vs. Assistant Director of Income Tax and others. 3. Legality of Adjustments under Section 143(1): The Tribunal examined whether adjustments under Section 143(1) on a debatable and controversial issue were permissible. It was established that adjustments on such issues are beyond the scope of Section 143(1). The Tribunal referenced the Delhi High Court's decisions in CIT vs. AIMIL Ltd. and CIT vs. P.M. Electronics Ltd., which held that delayed payments of employees' contributions to provident fund and ESI, made before the due date of filing the return, do not constitute the assessee's income. The Tribunal concluded that the adjustments made by Revenue on 12.05.2020 were unfair, unjust, and bad in law, as the amendments had not been enacted by that date. Conclusion: The Tribunal concluded that: - The additions of Rs. 8,28,211 were made on a debatable and controversial issue. - Adjustments under Section 143(1) on such issues are beyond the scope of the section. - Retrospective amendments cannot be invoked for adjustments under Section 143(1). The Tribunal set aside the impugned appellate order of the Ld. CIT(A) and directed the Assessing Officer to delete the addition of Rs. 8,28,211. The Tribunal also clarified that it did not express any view on whether the amendments by Finance Act, 2021, are prospective or retrospective, as the issue was academic in nature for this decision. The appeal of the assessee was partly allowed for statistical purposes.
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