2022 (8) TMI 257 - AT - Income Tax

Late deposit of employee s contribution to P.F. and E.S.I. - Addition on account of deemed income u/s 36(1)(va) r.w.s. 2(24)(x) - scope of amendment - as per revenue amendment is curative in nature and retrospective in application - HELD THAT - On this issue jurisdictional ITAT and various coordinated benches held that the amendment made by the finance Act 2021 to sec 36(1)(va) and section 43B are prospective in nature, effective from assessment year 2022-23. See M/S CRESCENT ROADWAYS PRIVATE LIMITED 2021 (7) TMI 1265 - ITAT HYDERABAD Following judgements of PNGS India Pvt Ltd 2022 (6) TMI 1052 - ITAT MUMBAI AND M/s Vishal Enterprises 2022 (2) TMI 1272 - ITAT BANGALORE A.O. and first appellant authority are duty bound to follow the decisions of jurisdictional high Court otherwise it makes their decision unsustainable in so far as applicability of amendment by the finance act 2021, the same is effective from assessment year 2022-23 thus in the light of above, we hold that the C.P.C and Ld. CIT (A) has erred in applying amended provisions of sec 36(1)(va) r.w.s 43B to disallow assesses claim of deduction. - Decided in favour of assessee.

Issues:
1. Appeal against the order of National Faceless Appeal Centre under section 250 of the Income Tax Act for AY 2017-18.
2. Disallowance of employees' contribution to Provident Fund, late payment of contributions to ESIC and labour welfare fund.
3. Disallowance under Section 36(1)(va) on a debatable issue.
4. Failure to consider timely payment of ESIC and labour welfare fund contributions.
5. Ignoring binding decisions of the jurisdictional Bombay High Court.
6. Deletion of disallowance of Rs. 38,18,955.

Analysis:
1. The appellant challenged the order of the National Faceless Appeal Centre (NFAC) for AY 2017-18, citing lack of opportunity for a hearing. The appellant contended that the employees' contribution to Provident Fund was deposited within the extended due date, disputing the disallowance of Rs. 38,18,955 by both lower authorities.

2. The dispute centered on the disallowance under Section 36(1)(va) for late payment of employees' contributions. The appellant argued that the tax audit report did not authorize disallowance if payments were made within the due date for filing the return under Section 139(1) of the Income Tax Act.

3. The Tribunal reviewed the details of actual payments under various welfare acts and found the issue to be debatable. It emphasized that no debatable issue should be considered under Section 143(1)(a) adjustments. The Tribunal referred to relevant decisions of the jurisdictional Bombay High Court and Supreme Court.

4. The Tribunal considered the retrospective amendment to Section 36(1)(va) and Section 43B by the Finance Act, 2021. It noted that the amendment was curative and retrospective according to the lower authorities, but held that it was prospective from AY 2022-23 based on precedents from the Hyderabad Bench of the ITAT.

5. Relying on judgments from various ITAT benches, the Tribunal concluded that the AO and the first appellate authority must follow decisions of the jurisdictional High Court. Consequently, it found in favor of the appellant, setting aside the order of the CIT (A) and allowing the appellant's grounds.

6. Ultimately, the Tribunal allowed the appeal filed by the assessee, holding that the disallowance was not justified based on the applicable legal provisions and precedents. The decision was pronounced in open court on August 3, 2022.

This detailed analysis outlines the key legal arguments, precedents, and findings of the Tribunal regarding the issues raised in the appeal against the NFAC order for AY 2017-18.

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