2021 (11) TMI 370 - AT - Income Tax

Late deposit of employees share of PF ESI which were deposited after the due date but before the due date of filing of return of income - AO made the additions of the impugned amounts for the reasons that the assessee did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - HELD THAT - As relying on RIDHI SIDHI MILLS (INDIA) PVT. LTD. 2021 (11) TMI 363 - ITAT JODHPUR it is not in dispute that the assessee deposited the contribution of PF ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s 139(1). As relying on HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA 2021 (7) TMI 942 - ITAT KOLKATA and MOHANGARH ENGINEERS AND CONSTRUCTION COMPANY 2021 (8) TMI 563 - ITAT JODHPUR the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.

Issues Involved:
1. Adjustment under Section 143(1) for delayed deposit of employer's contribution to Provident Fund (PF) and Employees' State Insurance (ESI).
2. Application of Explanation 2 under Section 36(1)(va) retrospectively.
3. Examination of facts, pleadings, and principles of law.
4. Mistake in the tax audit report by the Chartered Accountant.
5. Grant of consequential relief and legal claims.

Detailed Analysis:

1. Adjustment under Section 143(1) for delayed deposit of employer's contribution to Provident Fund (PF) and Employees' State Insurance (ESI):
The primary issue in these appeals was the adjustment under Section 143(1) amounting to ?3,80,079 for delayed deposit of employer's contribution to PF and ESI. The assessees argued that the deposits were made before the due date of filing the return of income under Section 139(1) and thus should not be disallowed. The ITAT noted that an identical issue had been adjudicated in various cases, including the ITAT Jodhpur Bench in the case of M/s Ridhi Sidhi Mills (India) Pvt Ltd. vs. DCIT, where it was held that contributions made before the due date of filing the return are allowable.

2. Application of Explanation 2 under Section 36(1)(va) retrospectively:
The assessees contended that Explanation 2 to Section 36(1)(va), inserted by the Finance Act, 2021, was wrongly applied retrospectively to the assessment year 2017-18. The Tribunal referred to the decision in Harendra Nath Biswas vs. DCIT, where it was held that Explanation 2 is applicable prospectively from 01.04.2021 and not retrospectively. The Tribunal followed this reasoning, concluding that the retrospective application of the amendment was incorrect.

3. Examination of facts, pleadings, and principles of law:
The assessees argued that the authorities below did not examine the facts, pleadings, and principles of law in accordance with legal obligations. The Tribunal reviewed the material on record and found that the authorities had not properly considered the facts and legal principles, which led to an inapposite conclusion.

4. Mistake in the tax audit report by the Chartered Accountant:
The assessees claimed that the disallowance was due to a mistake in the tax audit report by the Chartered Accountant and that they should not be penalized for this error. The Tribunal noted the argument but focused on the substantive issue of whether the deposits were made before the due date of filing the return, which they were, and thus the disallowance was not justified.

5. Grant of consequential relief and legal claims:
The Tribunal allowed the appeals of the assessees, granting consequential relief by deleting the disallowances made on account of delayed deposits of PF and ESI contributions. The Tribunal emphasized that the deposits were made before the due date of filing the return under Section 139(1), and thus, the disallowances were not sustainable.

Conclusion:
The Tribunal concluded that the disallowances made by the Assessing Officer and sustained by the CIT(A) were not justified since the contributions were deposited before the due date of filing the return. The appeals were allowed, and the disallowances were deleted. The judgment emphasized the prospective application of Explanation 2 to Section 36(1)(va) and followed the precedents set by various ITAT Benches and High Courts.

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