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TMI Blog2022 (2) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee. - ITA No.659/Bang/2021 - - - Dated:- 31-1-2022 - Shri George George K, JM And Ms.Padmavathy S, AM For the Appellant : Sri.Sandeep Chalapathy, CA For the Respondent : Sri.Gopinath C.H., CIT-DR ORDER PER GEORGE GEORGE K, JM This appeal at the instance of the assessee is directed against CIT(A) s order dated 25.10.2021. The relevant assessment year is 2018-2019. 2. The grounds and the additional ground (ground 4) raised read as follows:- 1. That the order of the learned Commissioner of Income Tax (Appeals) NFAC, Delhi, in so far it is prejudicial to the interest of the appellant, is bad and erroneous in law and against the facts and circumstances of the case. 2. That the learned Commissioner of Income Tax (Appeals) NFAC, Delhi erred in law and on facts in confirming the addition of employees contribution towards provident fund of ₹ 7,65,661/- without considering the fact that the appellant was made within the due date of filing the return of income. 3. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees contribution to PF and ESI held that only employer s contribution to the PF and ESI is entitled to deduction u/s 43B of the I.T.Act, if the payments are made prior to the due date of filing of the return u/s 139(1) of the I.T.Act. Further, by placing reliance on the judgment of the Hon ble Apex Court in the case of CIT Vs. Gold Coin Health Food Pvt. Ltd., reported in 304 ITR 308 (SC), the CIT(A) concluded that amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021, is clarificatory and has got retrospective operation. 5. Aggrieved, assessee has filed this appeal before the Tribunal. The learned AR relied on the ITAT s Order in the case of M/s. Shakuntala Agarbathi Company Vs. DICT in ITA No.385/Bang/2021 (order dated 21.10.2021). 6. The learned Departmental Representative, on the other hand, supported the order of the CIT(A). 7. We have heard rival submissions and perused the material on record. On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra) by following the dictum laid down by the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the return of income under sub-section (1) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr.Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected. 22. With respect, we find it difficult to endorse the view taken by the Gujarat High Court. WE agree with the view taken by this Court in W.A.No.4077/2013. 23. In the result, the appeal is allowed and the substantial question of law framed by us is answered in favour of the appellant-assessee and against the respondent-revenue. There shall be no order as to costs. 7.2 The further question is whether the amendment to section 36[1][va] and 43B of the Act by Finance Act, 2021 is clarificatory and declaratory in nature. The Hon'ble Supreme Court in the recent judgment in the case of M.M.Aqua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Apex Court was considering the question of whether penalty can be imposed u/s.271(1)(c) of the Act for concealment of income where returned losses were reduced in assessment and there was no tax payable by the assessee. Earlier, the Hon'ble Apex Court in the case of Virtual Soft Systems in 289 ITR 83 [SC] had taken the view that no penalty could be levied on mere reduction in loss as there would be no tax payable by the assessee, which was a sine-quo-non for imposition of penalty. Amendments were made by the Finance Act, 2002, to Section 271(1)(iii) of the Act by incorporating the expression if any and also in Explanation 4 setting out the meaning of the phrase amount of tax sought to be evaded . The Hon'ble Apex Court in the case of CIT Vs. Gold Coin Health Food [P] Ltd., [2008] 304 ITR 308 [SC], held that the Parliament clarified the position by using the expression if any , which was not a substantive amendment creating penalty for the first time. It was held that income always included loss and even the unamended provisions would have to be interpreted in the manner that right from 01.06.1976 penalty would have been leviable. Hence, the Hon'ble A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistible conclusion that income also includes Losses. Explanation 4 (a) as it stood during the period 1.4.1976 to 1.4.2003 has to be considered in the background. 8. It appears that what the Finance Act intended was to make the position explicit which otherwise was implied. The recommendations of the Wanchoo Committee pursuant to which Explanation 4(a) was inserted w.e.f. 1.4.1976 needs to be noted. At para 2.74 it was noted as follows: 2.74 We are not unaware that linking concealment penalty to tax sought to be evaded can, at times, lead to anomalies. We would recommend that, in cases where the concealed income is to be, set off against Losses incurred by an assessee under other heads of income or against losses brought forward from earlier years, and the total income thus, gets reduced to a figure smaller than the concealed income or even to a minus figure, the tax sought to be evaded should be calculated as if the concealed income were the total income. 9. Reference to the Department Circular No.204 dated 24.7.1976 reported in 1977 (110) ITR 21 (St.) has also substantial relevance. Same reads as follows: New Explanation 4 defines 'the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable because in such a case the tax sought to be evaded will be tax chargeable on concealed income as if it is total income . 7.2 Thus, the judgment of the Hon'ble Apex Court in CIT Vs. Gold Coin Health Food [P] Ltd., [2008] 304 ITR 308 [SC], took into consideration the evolved jurisprudence on the point of whether income includes loss and has interpreted that even before the amendment with effect from 01.04.2003, there was liability to penalty. Hence, it was concluded by the Hon'ble Apex Court that the clarificatory nature of the amendment cannot be a ground to hold that earlier no penalty could be levied. However, the position in this case quite different as the Hon'ble jurisdictional High Court in the case of Essae Teraoka [P] Ltd., Vs. DCIT, reported in [2014] 366 ITR 408 [Kar] has considered the concept of 'due date' as appearing in 36[1][va] and section 43B of the Act and has taken the view that the assessee is entitled to the relief having regard to the use of the expression contribution under the Provident Fund Act. Now it has been provided that the due date in section 43B is of no consequence to judge the applicability of provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today rind in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should 'not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips vs. Eyre', a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of fairness, which must be the basis of every legal rule as was observed in the decision reported in L 'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra Et Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here 7.4 The Hon'ble Apex Court in the case of CIT v. Essar Teleholdings Ltd. (2018) 401 ITR 445 (SC) considered the judgment of the Hon'ble Apex Court in the case of CIT v. Gold Coins Health Foods (P.) Ltd. (supra) and also the judgment of the Larger Bench of the Hon'ble Apex Court in the case of CIT v. Vatika Township P. Ltd. (supra). The Hon'ble Apex Court in the case of CIT v. Essar Teleholdings Ltd. (supra), held that judgment in the case of CIT v. Gold Coins Health Foods (P.) Ltd. (supra) is distinguishable and not applicable for the reason that Parliament clarified the position of law by changing the expression `any' by `if any' which was not a substantive amendment creating penalty for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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