2022 (4) TMI 325 - AT - Income Tax

Employees' contribution to PF and ESI was deposited well within the due date of filing of the return - Scope of amendments - HELD THAT - The amendments carried out by the Finance Act, 2021 in Section 36(1)(va) and 43B were considered by the First Appellate Authority to be clarificatory in nature, hence, retrospective in operation. We have seen that this issue has been considered by the jurisdictional High Court in the case of CIT vs. Hemla Embroidery Mills (P) Ltd. 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT wherein it has been held that Second Proviso to Section 43B omitted by F.A, 2003 with effect from 1.4.2004 was clarificatory in nature and was to operate retrospectively. Once that is so, the respondent-assessee was entitled to deduction in respect of employer and employee's contribution to ESI and Provident Fund as the same had been deposited prior to the filing of the return u/s 139(1). - Decided in favour of assessee

Issues Involved:
1. Condonation of delay and opportunity to explain or file an affidavit.
2. Disallowance of ?116,244 on account of ESI and PF contributions.
3. Leave to add, alter, amend, and/or vary the grounds of appeal.
4. Permission to file additional evidence for proper prosecution of the case.

Issue-wise Detailed Analysis:

1. Condonation of Delay and Opportunity to Explain or File an Affidavit:
The assessee contended that the order passed under Section 250(6) of the Income Tax Act, 1961, by the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi, was against the law and facts. The assessee had already prayed for condonation of delay and argued that no further opportunities were given to explain or file an affidavit regarding the delay.

2. Disallowance of ?116,244 on Account of ESI and PF Contributions:
The primary issue in the appeal was the disallowance of ?116,244 related to employees' contributions to PF and ESI. The assessee argued that these contributions were deposited within the due date for filing the return, although there was a delay as per the specific Act. The Appellate Forum had dismissed the appeal based on the amendments to the Act, considering them clarificatory and hence retrospective. The Tribunal examined various orders, including those from the Chandigarh Bench, and noted that the jurisdictional High Court in CIT vs. Hemla Embroidery Mills (P) Ltd. (2014) had addressed similar issues. The Tribunal concluded that the amendments by the Finance Act, 2021, in Section 36(1)(va) and 43B were prospective, not retrospective. The Tribunal cited multiple cases, including Surya Resorts Pvt. Ltd. and CZAR Faucets Limited, where similar disallowances were held unsustainable. The Tribunal emphasized that the amendments were applicable from the assessment year 2021-22 onwards, not retrospectively. Therefore, the disallowance of ?116,244 was directed to be deleted.

3. Leave to Add, Alter, Amend, and/or Vary the Grounds of Appeal:
The appellant sought permission to add, alter, amend, and/or vary the grounds of appeal before or during the hearing. This request is a standard procedural right often invoked to ensure that all relevant issues are addressed comprehensively.

4. Permission to File Additional Evidence for Proper Prosecution of the Case:
The appellant also craved leave to file additional evidence if required for the proper prosecution of the case. This request was based on the assertion that proper and sufficient opportunity/time was not provided, or the need for such evidence was not appreciated by the lower authorities.

Conclusion:
The Tribunal allowed the appeal, holding that the disallowance of ?116,244 for delayed ESI and PF contributions was not sustainable. The Tribunal clarified that the amendments by the Finance Act, 2021, were prospective and applicable from the assessment year 2021-22. The Tribunal directed the deletion of the disallowance, emphasizing that the payments were made within the timeline set out under Section 139(1) of the Income Tax Act. The appeal was thus allowed in favor of the assessee.

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