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2023 (6) TMI 168 - AT - Income Tax


Issues Involved:
1. Disallowance of employees' contribution to PF/ESI u/s 36(1)(va) read with section 2(24)(x) of the Income Tax Act.
2. Applicability of the amendment to section 36(1)(va) from 1st April 2022.
3. Jurisdiction of the Assessing Officer to disallow the amount while processing the return u/s 143(1)(a) of the Act.

Summary:

1. Disallowance of Employees' Contribution to PF/ESI:
The assessee challenged the disallowance of employees' contribution to PF/ESI under section 36(1)(va) read with section 2(24)(x) of the Act. The Tribunal noted that the issue has been settled by the Supreme Court in 'Checkmate Services Pvt. Ltd vs. CIT', which held that the due date for depositing employees' contributions is as prescribed under section 36(1)(va) and not the extended date under section 43B. The Supreme Court clarified that employees' contributions retain their character as income unless deposited on or before the due date under the relevant statutes.

2. Applicability of Amendment to Section 36(1)(va):
The assessee argued that the amendment to section 36(1)(va) by the Finance Bill, 2021, applicable from 1st April 2022, should not be applied retrospectively to AY 2018-19. The Tribunal, referencing the Supreme Court's decision, emphasized that law declared by the court has retrospective effect unless stated otherwise. The Tribunal concluded that the amendment's prospective application does not affect the retrospective applicability of the Supreme Court's interpretation of the existing provisions.

3. Jurisdiction of Assessing Officer under Section 143(1)(a):
The assessee contended that the disallowance should have been made during an assessment under section 143(3) and not while processing the return under section 143(1)(a). The Tribunal referred to the Mumbai Bench's decision in 'M/s P R Packaging Service vs. ACIT', which held that disallowance of expenditure indicated in the audit report but not considered in the return can be made under section 143(1)(a)(iv). The Tribunal also cited the Chennai Bench's decision in 'M/s Electrical India vs. ADIT, CPC', which upheld such adjustments, emphasizing that the audit report's information enables the revenue to make correct income computations.

The Tribunal concluded that the Assessing Officer/CPC was justified in making the adjustment for disallowance of expenditure on account of late deposit of employees' contributions to PF/ESI while processing the return under section 143(1) of the Act.

Conclusion:
The appeal of the assessee was dismissed, affirming the disallowance of employees' contribution to PF/ESI under section 36(1)(va) and the jurisdiction of the Assessing Officer to make such adjustments under section 143(1)(a).

 

 

 

 

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