2022 (10) TMI 974 - AT - Income Tax

Rectification of mistake u/s 154 - Delayed Employees contribution to the Employee Provident Fund and Employee State Insurance Fund - addition u/s 2(24)(x) r/w s. 36(1)(va) - amount being deposited before the due date of filing the return of income u/s. 139 (1) - scope of amendment - HELD THAT - In view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon'ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified. See SAURASHTRA KUTCH STOCK EXCHANGE LTD 2008 (9) TMI 11 - SUPREME COURT and SMT. ARUNA LUTHRA. 2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine 2021 (11) TMI 927 - ITAT JABALPUR any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee. The impugned additions, therefore, could not have been made under the given facts and circumstances of the case, and are directed for deletion. Decided in favour of assessee.

Summary

Issues:
Appeal against Commissioner of Income Tax (Appeals) order dismissing assessee's appeal contesting processing of return of income under section 143(1) for AY 2018-19 due to addition of employee's contribution to welfare funds deposited beyond due date specified in section 36(1)(va).

Analysis:
1. Issue of Addition of Employee's Contribution to Welfare Funds:
The primary issue in this case revolves around the addition of the employee's contribution to the employee welfare funds beyond the due date specified in section 36(1)(va) of the Income Tax Act, 1961. The appellant argued that the addition was debatable and could not have been made under section 143(1), citing the Tribunal's decision in Nikhil Mohine v. Dy. CIT. The Tribunal held that due to conflicting judicial opinions and the limited scope of adjustment under section 143(1), the addition could not be decided on merits. The Tribunal emphasized that the employee's contribution should be deposited by the due date of filing the return of income under section 139(1) and not necessarily by the due date specified in section 36(1)(va).

2. Tribunals' Decision in Nikhil Mohine:
The Tribunal in Nikhil Mohine case addressed the conflicting opinions on the treatment of employee's contribution to welfare funds under section 36(1)(va) and section 43B(b). It concluded that the Explanations inserted by Finance Act, 2021, clarified that the employee's contribution should be governed by section 43B(b) retrospectively. The Tribunal highlighted that the legislative intent was clear in giving retrospective effect to the Explanations, despite their proposed prospective nature. The Tribunal's decision emphasized the need to respect the statutory clarifications provided by the Explanations, which aimed to resolve the conflict of judicial opinions.

3. Decision on Impugned Addition:
The Tribunal in the present case analyzed the merits of the impugned addition in light of the conflicting judicial opinions and the proposed amendments by the Explanations. It noted that the limited scope of adjustment under section 143(1) prevented a detailed examination of the addition on merits. The Tribunal emphasized the absence of a decision by the jurisdictional High Court justifying the addition, which rendered the impugned addition unjustified. The Tribunal concluded that in the absence of a High Court decision and considering the proposed prospective nature of the Explanations, the addition could not be sustained.

4. Final Decision and Outcome:
Ultimately, the Tribunal allowed the assessee's appeal, directing the deletion of the impugned addition related to the employee's contribution to welfare funds. The Tribunal's decision was based on the lack of a High Court decision justifying the addition and the proposed prospective nature of the Explanations. The Tribunal highlighted the importance of statutory clarity provided by the Explanations to resolve the conflicting judicial opinions on the treatment of the employee's contribution, ensuring a fair and consistent application of the tax laws.

In conclusion, the Tribunal's detailed analysis and decision in this case underscore the significance of legislative intent, statutory clarifications, and the need for uniformity in interpreting tax provisions to ensure fair treatment for taxpayers.