2022 (10) TMI 170 - AT - Income Tax

Disallowance under the head other current liabilities by invoking section 43B - as submitted assessee was not allowed due opportunity to explain its case before the AO as the assessee found that the disallowance has been made under intimation/order u/s 143(1) - HELD THAT - We are of the considered view that from first appellate order, it is clearly discernible that the assessee in its written submissions before the CIT(A)/NFAC placed detailed submissions on the issue of impugned disallowance made by the AO on account of disallowance under the head Other current liabilities by invoking the provisions of section 43B of the Act, but, from a vigilant and careful reading of the first appellate order, we are unable to see any adjudication by the ld.CIT(A) on ground No.1 of the appellant. Therefore, agreeing with the contentions of the ld. Sr. DR, ground No.1 of the assessee as noted in Form No.35 is restored to the file of the CIT(A) for adjudication. Accordingly, ground No.1 of the assessee is allowed for statistical purposes. Delayed payment of employees contribution to ESI and PF - HELD THAT -This issue is no more res integra. The Hon ble jurisdictional High Court of Delhi in various judgements including the recent judgement in the case of PCIT vs. TV Today Network Ltd. 2021 (8) TMI 26 - ITAT DELHI held that as per the Memorandum to Finance Act, 2021, the amendment to section 36(1)(va) of the Act and section 43B of the Act will take effect from 1st April, 2021 and it cannot apply to previous assessment years. In the present case also, it is not in dispute that the assessee made payment of employer s contribution to ESI and PF before due date of filing the return u/s 139(1) of the Act and there is no dispute that the amount stands deposited before the filing of the return. So far as the applicability of amendment to section 36(1)(va) and section 43B is concerned, this issue is covered in favour of the assessee by the judgement of the Hon ble jurisdictional High Court of Delhi in the case of PCIT vs. TV Today Network Ltd. and various other judgements. Decided in favour of assessee.

Issues Involved:
1. Disallowance under 'Other Current Liabilities' by invoking Section 43B of the Act.
2. Disallowance of employee contributions towards ESI and PF by invoking Section 2(24)(x) read with Section 36(1)(va) of the Act.
3. Adjustment in intimation under Section 143(1) on debatable issues.
4. Lack of opportunity before intimation under Section 143(1).
5. Jurisdictional validity of intimation under Section 143(1).
6. Findings and observations based on surmises and conjectures.

Detailed Analysis:

1. Disallowance under 'Other Current Liabilities' by invoking Section 43B of the Act:

The assessee contended that the CIT(A) erred in upholding the disallowance of Rs. 26,36,864/- under 'other current liabilities' by invoking Section 43B. The assessee argued that the disallowed amount had already been added back in the previous assessment year (AY 2017-18) due to non-payment by the due date and was claimed as a deduction in AY 2018-19 upon actual payment. The Revenue argued that the facts regarding the previous disallowance and subsequent payment were not presented before the authorities. The Tribunal observed that the CIT(A) did not adjudicate on this ground despite detailed submissions by the assessee. Consequently, the Tribunal restored the matter to the CIT(A) for adjudication, allowing ground No.1 for statistical purposes.

2. Disallowance of employee contributions towards ESI and PF by invoking Section 2(24)(x) read with Section 36(1)(va) of the Act:

The assessee argued that the CIT(A) wrongly upheld the disallowance of Rs. 52,21,351/- and Rs. 5,75,205/- despite the entire employee contribution towards ESI and PF being paid before the due date for filing the return under Section 139(1). The assessee relied on the jurisdictional High Court's judgments in PCIT vs. TV Today Network Ltd. and CIT vs. AIMIL Ltd., which held that amendments to Section 36(1)(va) and Section 43B by Finance Act, 2021, are prospective and not applicable to AY 2018-19. The Revenue contended that the amendments were retrospective. The Tribunal, referencing the High Court's decisions, concluded that the amendments are prospective and do not apply to previous assessment years. Therefore, the Tribunal directed the AO to delete the disallowance, allowing ground No.2.

3. Adjustment in intimation under Section 143(1) on debatable issues:

The assessee claimed that the adjustments made in the intimation under Section 143(1) involved debatable and contentious issues, which is impermissible. The Tribunal did not provide a separate detailed analysis for this ground, as it was supportive of grounds No.1 and 2.

4. Lack of opportunity before intimation under Section 143(1):

The assessee argued that the intimation dated 2.10.2019 was made without granting a fair opportunity to explain its case. This ground was also supportive of the primary grounds and did not receive separate adjudication.

5. Jurisdictional validity of intimation under Section 143(1):

The assessee contended that the intimation was made without jurisdiction and should be quashed. This ground was supportive of the primary grounds and did not receive separate adjudication.

6. Findings and observations based on surmises and conjectures:

The assessee argued that the findings and observations by the CIT(A) were based on surmises, conjectures, and suspicion, disregarding binding judgments. This ground was supportive of the primary grounds and did not receive separate adjudication.

Conclusion:

The appeal filed by the assessee was allowed. Ground No.1 was restored to the CIT(A) for adjudication, and ground No.2 was allowed, directing the AO to delete the disallowance. Other grounds were supportive of grounds No.1 and 2 and did not require separate adjudication. The Tribunal's order was pronounced in the open court on 30.09.2022.

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