2022 (11) TMI 271 - AT - Income Tax

Delayed employees as contribution to any PF or ESIC Fund - addition in respect of any Sum received from employees as contribution to any PF or ESIC Fund to the extent not credited to the employees account on or before the due date, including the extended date as mentioned in respective legislation) - Scope of amendment - 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. VISHAL ENTERPRISES 2022 (2) TMI 1272 - ITAT BANGALORE and PMGS INDIA PVT. LTD 2022 (6) TMI 1052 - ITAT MUMBAI We are of the considered view that 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. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Disallowance of club expenses under section 143(1)(a) of the Income Tax Act, 1961.
2. Addition of sums received from employees as contributions to PF or ESIC, not credited to employees' accounts on or before the due date, under section 143(1)(a) of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Disallowance of Club Expenses:
The assessee raised a ground of appeal against the disallowance of Rs. 1,24,862/- in respect of club expenses made by the Assessing Officer under section 143(1)(a) of the Income Tax Act, 1961. However, this ground was not pressed by the assessee during the proceedings, and therefore, it was not adjudicated upon by the Tribunal.

2. Addition of Sums Received from Employees as Contributions to PF or ESIC:
The primary contention involved the addition of Rs. 4,74,405/- made by the Assessing Officer under section 143(1)(a) of the Income Tax Act, 1961, for sums received from employees as contributions to PF or ESIC that were not credited to employees' accounts on or before the due date.

The Tribunal noted that the issue was interrelated with another ground of appeal and addressed them simultaneously. The Tribunal reviewed the intimation processed under section 143(1)(a) and the order passed by the CIT(A) under section 250 of the Act. The CIT(A) had relied on the tax auditor's report, which detailed the due dates of payment under PF, ESIC, and other funds vis-à-vis the actual dates of payment as per Form No. 3CD. The tax audit report did not suggest or authorize the department to make a disallowance if the payments were made within the due date for filing the return under section 139(1) of the Income Tax Act.

The Tribunal examined the details filed by the appellant regarding the amounts and actual dates of payments under the respective due dates for various employee welfare-related acts. The CIT(A) had admitted that the issue was debatable, and it is an established position of law that no debatable issue can be considered while making adjustments under section 143(1)(a).

The Tribunal referred to various judicial precedents, including decisions of the Hon'ble Jurisdictional High Court in the cases of Ghatge Patil Transport and Hindustan Organics Ltd., and the Hon'ble Delhi High Court in CIT vs. AIMIL Ltd., which supported the assessee's contention.

The Tribunal also considered the amendment made by the Finance Act, 2021, to section 36(1)(va) and section 43B and noted that the amendment is prospective in nature, effective from the assessment year 2022-23, as held by various ITAT benches, including the Hyderabad Bench in Crescent Roadways Pvt. Ltd. vs. DCIT.

The Tribunal concluded that the Assessing Officer and the first appellate authority are duty-bound to follow the decisions of the jurisdictional High Court. The application of the amended provisions of section 36(1)(va) read with section 43B by the CPC and CIT(A) was erroneous. Consequently, the Tribunal found merit in the grounds of appeal raised by the assessee, set aside the impugned order of the CIT(A), and allowed the grounds of the assessee.

Conclusion:
The appeal filed by the assessee was allowed, and the Tribunal set aside the order of the CIT(A), confirming that the adjustments made under section 143(1)(a) were not sustainable. The Tribunal pronounced the order in the open court on the 7th day of October, 2022.