2022 (6) TMI 512 - AT - Income Tax

Delay in deposit of PF and ESIC - payment before due date of return of income u/s 139(1) - Scope of amendment - HELD THAT - The amendment was brought in finance Act 2021 w.e.f. 1-4-2021. The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee shall be applicable prospectively. We considering the overall facts, we are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to assessment year 2018-19. The assessee has deposited the employee's contribution of Provident fund ESIC before the due date of return of income U/s. 139(1) of the Act. Accordingly, we set-aside the order of the CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal in favour of the assessee.

Summary

Issues:
1. Disallowance of employees' contribution to provident fund and ESIC under section 36(1)(va) of the Income Tax Act, 1961.
2. Applicability of the amendment introduced in the Finance Act 2021 to the assessment year 2018-19.

Issue 1: Disallowance of employees' contribution to provident fund and ESIC under section 36(1)(va):

The appeal was filed against the order of the Ld. Commissioner of Income Tax National Faceless Appeal Centre (NAFC) under sections 143(1) and 250 of the Income Tax Act, 1961. The assessee had initially declared a total income of Rs. 13,02,910, but the DCIT recalculated it to be Rs. 35,65,170, adding the income of Rs. 22,62,260 due to late payment of Employees' Contribution Provident Fund. The CIT(A) confirmed this addition, leading to the appeal before the Tribunal.

The assessee, engaged in business, had filed the return of income for the assessment year 2018-19, disclosing the total income. The intimation disallowing the employees' contribution to provident fund and ESIC was issued due to a delay in deposit under section 36(1)(va). The CIT(A) upheld this addition, prompting the appeal. During the hearing, the Ld. DR argued for the applicability of Explanation 2 to Sec. 36(1)(va) introduced in the Finance Act 2021, supporting the CIT(A)'s order.

The Tribunal noted that the assessee had deposited the contributions before the due date of filing the return of income under section 139(1) of the Act. Referring to a similar case, the Tribunal observed that the tax auditor's opinion cannot bind the auditee, and the due date under Explanation to Section 36(1)(va) was not decisive for determining disallowance. Therefore, the impugned adjustment was deemed vitiated in law, and the Tribunal directed the assessing officer to delete the disallowance, allowing the appeal in favor of the assessee.

Issue 2: Applicability of the amendment introduced in the Finance Act 2021:

The Tribunal analyzed the retrospective applicability of the amendment introduced in the Finance Act 2021 to the assessment year 2018-19. It was observed that any legal proposition imposing additional burden on the assessee should be applicable prospectively. Considering the facts, judicial decisions, and the absence of relevant amendments in the assessment year, the Tribunal concluded that the amendment to section 36(1)(va) would not apply to the said assessment year. As the assessee had deposited the employees' contribution before the due date of the return of income, the Tribunal set aside the CIT(A)'s order and directed the deletion of the disallowance, ultimately allowing the appeal.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the timely deposit of employees' contribution to provident fund and ESIC before the due date of filing the return of income and rejecting the retrospective applicability of the amendment introduced in the Finance Act 2021 to the assessment year 2018-19.