2022 (11) TMI 1126 - AT - Income Tax

Validity of order u/s 143 (1) - Disallowance of late payment of provident fund and employees scheme insurance u/s 36 (1) (va) which are not paid before the due date prescribed Under the respective act - HELD THAT - Now the issue squarely covered against the assessee by the decision of the Honourable Supreme Court in case of Checkmate Services (P.) Ltd . 2022 (10) TMI 617 - SUPREME COURT The decisions relied upon by the learned authorized representative of coordinate bench in Kalpesh Synthetics Pvt Ltd 2022 (5) TMI 461 - ITAT MUMBAI and host of other decisions are no longer valid as the claim of the reduction of the assessee becomes an error apparent from the return of income filed and therefore correctly adjusted u/s 143 (1) of the act. Appeal filed by the assessee is dismissed

Issues:
1. Disallowance of employer's contribution to Provident Fund.
2. Denial of principles of natural justice.
3. Non-allowance of employer's contribution based on amendments.
4. Interpretation of Sections 36(1)(va) and 43B(b).
5. Applicability of Supreme Court judgment on deductibility.
6. Distinction between employer's and employees' contributions.
7. Impact of Finance Act amendments.
8. Obligation of assessee under Section 43B.
9. Validity of previous decisions.
10. Dismissal of the appeal.

Analysis:
1. The primary issue in this case revolves around the disallowance of the employer's contribution to Provident Fund by the Assessing Officer (AO) under Section 36(1)(va) for not being paid before the due date. The appellant contested this disallowance based on the claim that the contribution was paid before the income tax return due date.

2. The appellant raised a concern regarding the violation of principles of natural justice as they were not provided with a proper hearing by either the CIT(A) or the AO. This lack of opportunity for a fair hearing was highlighted as a ground for appeal.

3. Another contention was the non-allowance of the employer's contribution based on amendments to Section 36(1)(va) and Section 43B(b). The appellant argued that the amendments were presumed to be retrospective, but they were not given an opportunity to present their case on this matter.

4. The judgment extensively analyzed the interpretation of Sections 36(1)(va) and 43B(b) in light of the Supreme Court decision in the case of Checkmate Services (P.) Ltd. The Court clarified the applicability of due dates for deductibility and the distinction between employer and employee contributions.

5. The Court emphasized that the due date under Section 36(1)(va) is crucial for deductibility, even for assessment years before 2021-22. It differentiated between employer's contributions and employees' contributions, highlighting the statutory classification under the Income Tax Act.

6. The judgment delved into the historical context of the legislative amendments, emphasizing the intent behind the separate treatment of employer and employee contributions. It underscored the significance of timely payments and the conditions for deductions under Section 36(1)(va).

7. The impact of Finance Act amendments, especially the insertion of Explanation 2 in Section 36(1)(va) and Explanation 5 in Section 43B, was discussed to clarify the obligations of the assessee regarding contributions to provident funds and related schemes.

8. The Court elucidated the obligation of the assessee under Section 43B, highlighting the importance of timely payments for certain liabilities and the conditions for deductions based on statutory requirements.

9. Previous decisions cited by the appellant were deemed invalid in light of the current interpretation of the law, leading to the dismissal of the appeal based on the error apparent from the return of income filed.

10. Ultimately, the appeal filed by the assessee was dismissed, and the order was pronounced in open court on 31.10.2022, upholding the disallowance of the employer's contribution to Provident Fund based on the due date criteria specified in the relevant provisions.

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