2022 (5) TMI 1025 - AT - Income Tax

Delayed employees contribution towards PF/ESI - payment made well within the due date of filing of the return - Scope of amendments carried by the Finance Act, 2021 in section 36(i)(va) and 43B - HELD THAT - As it is seen that unanimously considering the decisions of various High Courts including the jurisdictional High Court it has been held that the amendments were prospective in nature and will kick in from 2020-21 Assessment Year. Accordingly on facts the prayer of the assessee has to be allowed - disallowance sustained in the present appeal by the CIT(A) qua the employees' contribution despite late payment qua the specific Act cannot be made. Admittedly, in the facts of the present case the payment has been made well within the time line as set out under the Income Tax Act u/s.139(1) of the Income Tax Act. Thus, admittedly the return of income was filed well within time after making the specific payments - Decided in favour of assessee.

Issues Involved:
1. Disallowance of Rs. 31,00,186/- under Section 36(1)(va) for late payment of employees' contributions.
2. Prospective vs. retrospective application of the Finance Act, 2021 amendments.
3. Legality of adjustments made under Section 143(1) for debatable issues.
4. CIT(A)'s failure to address case laws and contentions raised by the assessee.
5. Denial of personal hearing through video conferencing despite requests.

Detailed Analysis:

1. Disallowance of Rs. 31,00,186/- under Section 36(1)(va):
The assessee contested the disallowance of Rs. 31,00,186/- under Section 36(1)(va) for late payment of employees' contributions to PF/ESI. The CIT(A) upheld the AO's decision, but the assessee argued that the payments were made within the due date for filing the return, and thus should be allowed. The ITAT noted that consistent orders from various benches, including the jurisdictional High Court, have held that such payments are allowable if made before the due date for filing the return under Section 139(1).

2. Prospective vs. Retrospective Application of Finance Act, 2021 Amendments:
The assessee argued that the amendments introduced by the Finance Act, 2021 to Section 36(1)(va) and Section 43B are prospective and not retrospective. The ITAT confirmed this position, citing multiple decisions from various benches, including the jurisdictional High Court, which have consistently held that the amendments apply from the Assessment Year 2020-21 onwards. The Tribunal emphasized that the amendments were intended to be prospective as clarified in the Notes on Clauses of the Finance Bill, 2021.

3. Legality of Adjustments Made Under Section 143(1) for Debatable Issues:
The assessee contended that the adjustment made by the AO under Section 143(1) was out of the ambit of the provisions, as the issue was debatable. The ITAT agreed, noting that it is a settled principle of law that no adjustment can be made under Section 143(1) in cases involving debatable issues. The Tribunal referenced multiple decisions supporting this view, thereby invalidating the AO's adjustment.

4. CIT(A)'s Failure to Address Case Laws and Contentions:
The assessee argued that the CIT(A) dismissed the appeal without addressing the case laws and contentions raised during the appellate proceedings. The ITAT found merit in this argument, noting that the CIT(A) did not adequately rebut the case laws presented by the assessee. The Tribunal emphasized the importance of judicial consistency and the need for CIT(A) to consider relevant case laws and precedents.

5. Denial of Personal Hearing Through Video Conferencing:
The assessee claimed that the CIT(A) did not provide a personal hearing through video conferencing despite a request, which is contrary to the Ministry of Finance's notification allowing such hearings. The ITAT acknowledged this procedural lapse, underscoring the necessity for CIT(A) to adhere to procedural fairness and provide opportunities for personal hearings as requested by the appellant.

Conclusion:
The ITAT allowed the appeal of the assessee, directing the deletion of the disallowance of Rs. 31,00,186/-. The Tribunal confirmed that the amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021 are prospective and not retrospective. The ITAT also held that adjustments under Section 143(1) cannot be made for debatable issues and emphasized the need for CIT(A) to address all case laws and contentions raised by the assessee. Furthermore, the Tribunal highlighted the procedural requirement for providing personal hearings through video conferencing when requested. The order was pronounced in the open court on 28th April, 2022.

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