2022 (8) TMI 790 - AT - Income Tax

Delayed payments of PF ESI contribution relating employee s contribution - payment before the due date of filing of return of income U/s 139(1 ) - Scope of amendment - HELD THAT - As decided in PRATAP TECHNOCRATS PRIVATE LIMITED, PRAHLAD NARAYAN BAIRWA, JAIRAJ, THE EARTH HOUSE RESORTS LLP 2022 (3) TMI 1310 - ITAT JAIPUR wherein did not accept the Ld. CIT(A) s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per section 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds - 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. Decided in favour of assessee.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legality of adjustments made under Section 143(1) of the Income Tax Act.
3. Disallowance of Rs. 35,25,527/- in respect of ESIC and PF under Section 36(1)(va) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed by the assessee with a delay of 125 days. The assessee filed a condonation application citing the lockdown as the cause for the delay, supported by the Hon'ble Supreme Court order in Misc. Application No. 21 of 2022 dated 10.01.2022. The Revenue had no objection to the condonation request. After hearing both parties and reviewing the materials on record, the Tribunal found merit in the assessee's request and condoned the delay.

2. Legality of Adjustments Made Under Section 143(1) of the Income Tax Act:
The assessee argued that the adjustments made in the intimation under Section 143(1) were outside the purview of Section 143(1)(a). The Tribunal examined the facts and noted that the adjustments were related to the disallowance of Rs. 35,25,527/- towards employee's contribution to ESI and PF, which were made due to the assessee's failure to pay within the prescribed due dates as per Section 36(1)(va). The Tribunal considered the contention of the assessee that the issue was covered by the decisions of the ITAT Jodhpur Bench and other cases where similar disallowances were deleted.

3. Disallowance of Rs. 35,25,527/- in Respect of ESIC and PF Under Section 36(1)(va) of the Income Tax Act, 1961:
The Tribunal reviewed the facts and found that the payments of PF and ESI contributions were made before the due date of filing the return of income under Section 139(1). The Tribunal referred to multiple decisions, including those from the ITAT Jodhpur Bench, ITAT Hyderabad Bench, and the Hon'ble Delhi High Court, which held that such contributions, if paid before the due date of filing the return, should not be disallowed under Section 43B read with Section 36(1)(va). The Tribunal also noted the amendment brought by the Finance Act, 2021, which clarified that the provisions of Section 43B do not apply to employee contributions under Section 36(1)(va). However, this amendment was deemed prospective, applicable from the assessment year 2021-22 onwards. Therefore, for the assessment year 2018-19, the disallowance was not justified.

Conclusion:
The Tribunal allowed the appeal, holding that the disallowance of Rs. 35,25,527/- for the assessment year 2018-19 was not sustainable as the contributions were made before the due date of filing the return. The amendment brought by the Finance Act, 2021, was held to be prospective and not applicable to the assessment year under consideration. The Tribunal's decision was based on a thorough review of the facts and multiple judicial precedents.

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