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2022 (6) TMI 727 - AT - Income TaxDelayed payments made towards EPF and ESI - intimation order passed u/s. 143(1) - scope of amendment - HELD THAT - A perusal of the record shows that in the facts of the present case, the assessee admittedly deposited the PF/ESI before filing of the return. No doubt there was a delay in terms of the specific Act. As observed earlier, the issue is no longer res-integra and has been addressed thread bare in various orders of the ITAT. As seen that the year under consideration is 2018-19 assessment year and considering the judicial position wherein the amendments held to be prospective in nature and shall come into play from 2020-21 assessment year, the appeal of the assessee, accordingly, is allowed.
Issues Involved:
1. Legality and correctness of the CIT(A) order. 2. Disallowance of payments towards EPF and ESI under Section 143(1). 3. Retrospective application of amendments by the Finance Act, 2021. 4. Jurisdiction and procedural fairness of the intimation order under Section 143(1). 5. Deduction of legitimate business expenditure under Section 37 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Legality and correctness of the CIT(A) order: The assessee challenged the legality and correctness of the CIT(A) order dated 22.12.2021. The CIT(A) upheld the disallowance of Rs. 10,75,897/- made by the AO, CPC, Bangalore, under Section 143(1) concerning payments towards EPF and ESI. The CIT(A) considered the amendments by the Finance Act, 2021, to be retrospective. However, the tribunal noted that the issue of retrospective application of these amendments is well-settled by various High Courts and the Apex Court, which have consistently held that the amendments are prospective. 2. Disallowance of payments towards EPF and ESI under Section 143(1): The assessee contended that the disallowance of EPF and ESI payments was contrary to statutory provisions and established law. The tribunal observed that the assessee had deposited the PF/ESI before filing the return, albeit with a delay. The tribunal referenced multiple ITAT orders and judicial precedents which concluded that amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021, are prospective, effective from the assessment year 2020-21. 3. Retrospective application of amendments by the Finance Act, 2021: The CIT(A) applied the amendments retrospectively, which was contested by the assessee. The tribunal clarified that the amendments are prospective, citing consistent orders from various ITAT benches and High Courts, including the jurisdictional High Court. The tribunal highlighted the Notes on Clauses from the Finance Bill, 2021, which explicitly state that the amendments are effective from 1st April 2021, applicable to the assessment year 2021-22 and subsequent years. 4. Jurisdiction and procedural fairness of the intimation order under Section 143(1): The assessee argued that the intimation order under Section 143(1) was issued without proper jurisdiction and without providing a reasonable opportunity to be heard. The tribunal did not address this procedural aspect in detail but focused on the substantive issue of the retrospective application of amendments, ultimately deciding in favor of the assessee based on established legal positions. 5. Deduction of legitimate business expenditure under Section 37 of the Income Tax Act: The assessee raised an alternative ground for the deduction of genuine and legitimate business expenditures under Section 37. The tribunal's decision to allow the appeal implicitly addressed this ground by concluding that the disallowance of EPF and ESI payments was not sustainable, thereby implying that these payments should be considered legitimate business expenditures. Conclusion: The tribunal allowed the appeal of the assessee, holding that the disallowance of EPF and ESI payments was not sustainable as the amendments by the Finance Act, 2021, are prospective and not retrospective. The tribunal emphasized that the payments were made before the due date for filing the return under Section 139(1) of the Income Tax Act. The decision was pronounced in the Open Court on 20th May, 2022.
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