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2022 (12) TMI 281 - AT - Income TaxRectification of mistake u/s 154 - Delayed employee s contribution to the employee welfare funds - sum deposited beyond the due date specified in its respect u/s. 36(1)(va), even as the same stand deposited by the due date of filing the return of income u/s. 139(1) of the Act for the relevant year - 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.
Issues:
- Addition of employee's contribution to employee welfare funds beyond due date specified in section 36(1)(va). - Interpretation of section 143(1) of the Income Tax Act, 1961 regarding debatable additions. - Application of Explanations to sections 36(1)(va) and 43B by Finance Act, 2021 retrospectively. - Prospective vs. retrospective effect of Explanations on additions for Assessment Years 2018-19 & 2019-20. Issue 1: Addition of Employee's Contribution to Employee Welfare Funds The primary issue in the appeals was the addition of the employee's contribution to the employee welfare funds beyond the due date specified in section 36(1)(va). The Tribunal referred to the decision in Nikhil Mohine where it was held that due to the cleavage of judicial opinion and the limited scope of adjustment under section 143(1), such additions could not be decided on merits. The Tribunal emphasized that the employee's contribution should be governed by section 36(1)(va) and not added to the total income under the Act. The Tribunal also discussed the retrospective application of Explanations introduced by the Finance Act, 2021 to resolve the issue, clarifying that the Explanations were clarificatory and retrospective in nature. Issue 2: Interpretation of Section 143(1) regarding Debatable Additions The Tribunal reiterated that the scope of an adjustment under section 143(1)(a) is limited and based on factual information rather than judicial opinions. It highlighted that processing a return of income under section 143(1)(a) is not an assessment and does not involve hearing the assessee or deciding debatable issues. The Tribunal emphasized the need for a decision by the Hon'ble jurisdictional High Court to justify such additions, which was not present in this case. Issue 3: Retrospective Application of Explanations by Finance Act, 2021 The Tribunal analyzed the prospective vs. retrospective effect of the Explanations introduced by the Finance Act, 2021. It noted that the Explanations were proposed as prospective amendments and should take effect from Assessment Year 2021-22. The Tribunal concluded that there was no basis for giving the Explanations retrospective effect for the relevant years, as they were intended to settle the controversy arising from conflicting High Court views. Issue 4: Prospective vs. Retrospective Effect of Explanations on Additions The Tribunal ultimately ruled in favor of the assessee, allowing the appeals and directing the deletion of the impugned additions. It emphasized that without a decision by the Hon'ble jurisdictional High Court justifying the additions, the Explanations could not be read retrospectively to sustain the additions. The Tribunal highlighted the possibility of amending the order in case of a subsequent decision by the High Court, ensuring a fair hearing for the assessee. In conclusion, the Tribunal's judgment in the appeals focused on the addition of the employee's contribution to employee welfare funds, the interpretation of section 143(1) regarding debatable additions, the retrospective application of Explanations by the Finance Act, 2021, and the prospective vs. retrospective effect of the Explanations on the additions for the relevant assessment years. The Tribunal ruled in favor of the assessee, emphasizing the need for a decision by the Hon'ble jurisdictional High Court to justify such additions and clarifying the application of the Explanations as prospective rather than retrospective.
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