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TMI Blog2022 (5) TMI 1565X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act by the Central Processing Centre (CPC). 3. We have heard rival submissions and perused the materials available on record. It is not in dispute that assessee had remitted the employees' contribution of PF & ESI with much before the due date of filing of return u/s. 139(1) of the Act, though the same has been remitted belatedly beyond the due dates specified under the respective PF & ESI Acts. We find that this issue is no longer res integra in view of the recent decision of the Co-ordinate Bench of this Tribunal in the case of Kalpesh Synthetics Pvt. Ltd., vs. DCIT, CPC, Bangalore reported in 137 taxmann.com 475 dated 27/04/2022. For the sake of convenience, the entire order is reproduced hereunder:- "By way of this appeal, the assessee-appellant has challenged the correctness of the order dated 31st March 2021, passed by the learned CIT(A) in the matter of the processing of income tax returns u/s. 143 (1) of the Income Tax Act, 1961(hereinafter referred to as 'the Act') for the assessment year 2018-19. Grievance of the assessee, as requiring our adjudication in this appeal, is that the learned CIT(A) was not justified in upholding the adjustment, made by the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act. The judicial precedents in support of the said contention were pointed out. None of these arguments, however, impressed the Assessing Officer- CPC. The disposal of this objection, as per the standard template text embedded in the impugned intimation, was that "As there has been no response/the response given is not acceptable, the adjustment(s) as mentioned below are being made to the total income as per provisions of Section 143(1)(a)". Leave aside giving reasons for not agreeing with the submissions of the assessee, no efforts were made even to strike out the inapplicable clause (i.e. whether the reply was not given or whether the reply was found unacceptable). The efforts to get the intimation under section 143(1) rectified under section 154 did not yield results either. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is aggrieved and is in appeal before us. 3. Learned counsel for the assessee, has a three-fold submission. His first plea is that in the light of law laid down by Hon'ble jurisdictional High Court, in the case of Khatau Junkar Ltd. v. K S Pathania [(1992) 196 ITR 55 (Bom)] t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(1) must stand deleted. Shri Chourasia, the learned Senior Departmental Representative, on the other hand, invites our attention to the fact that there is a significant difference between the earlier legal position, i.e. when judgments as in the case of Khatau Junkar (supra)were delivered vis-à-vis the law as it stood at the material point of time. It is submitted that the scope of expression 'an incorrect claim, if such claim is apparent from any information in the return' appearing in Section 143(1)(a) is now statutorily defined under Explanation to Section 143(1) and it means a claim, on the basis of an entry, in the return,-(i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction. It is submitted that when the audit report itself points out the delay in payment of provident fund dues, the claim of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion "shall never be deemed to have been applied". It is suggested that while the amendment is to take effect from the date specified, that is 1st April 2021, once that amendment takes effect, it has to apply also on pending cases as it provides covering the earlier cases as is clearly discernible from the peculiar expressions employed therein. We are thus urged to confirm the impugned adjustments and decline to interfere in the matter. In a brief rejoinder, it is submitted that the tax auditor is an independent professional and, even though the tax auditor is appointed by the assessee, the views of the assessee need not be the same as that of the tax auditor and that a statement by the tax auditor cannot be binding on the assessee. It is submitted that in any event the tax auditors in question had subsequently revised the tax audit report and corrected the due dates of payment. It is also reiterated that the settled legal position, as binding on the Assessing Officer CPC in view of the situs of the jurisdictional Assessing Officer and in view of the judgment of Hon'ble jurisdictional High Court, is that the payments made beyond the due date under the relevant statute but befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80- IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return". So far as the first point is concerned, it must be noted that the expression "incorrect claim apparent from any information in the return", for the purpose of Section 143(1)(a), is further defined, under Explanation to Section 143(1), and it means that a claim, on the basis of an entry, in the return,-(i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction. On the second point, it is useful to bear in mind the fact that the scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond proviso to Section 143(1), is indeed permissible. It is, however, important to take note of the fact that unlike the old scheme of 'prima facie adjustments' under section 143(1)(a), the scheme of present section 143(1) does not involve a unilateral exercise. The very fact that an opportunity of the assessee being provided with an intimation of 'such adjustments' [as proposed under section 143(1)], in writing or by electronic mode, and "the response received from the assessee, if any" to be "considered before making any adjustment" makes the process of making adjustments under section 143(1), under the present legal position, an interactive and cerebral process. When an assessee raises objections to proposed adjustments under section 143(1), the Assessing Officer CPC has to dispose of such objections before proceeding further in the matter- one way or the other, and such disposal of objections is a quasi-judicial function. Clearly, the Assessing Officer CPC has the discretion to go ahead with the proposed adjustment or to drop the same. The call that the Assessing Officer CPC has to take on such objections has to be essentially a judicious call, appropriate to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the soul of a quasi-judicial decision making is in the reasoning for coming to the decision taken by the quasi-judicial officer. While on this aspect of the matter, we may usefully refer to the observations made by the Hon'ble Supreme Court, in the case of Union Public Service Commission v. Bibhu Prasad Sarangi and Ors., [2021] 4 SCC 516. While these observations are in the context of the judicial officers, these observations will be equally applicable to the decisions by the quasi-judicial officers like us as indeed the Assessing Officer CPC. In the inimitable words of Hon'ble Justice Chandrachud, Hon'ble Supreme Court has made the following observations: ..... Reasons constitute the soul of a judicial decision. Without them, one is left with a shell. The shell provides neither solace nor satisfaction to the litigant. We are constrained to make these observations since what we have encountered in this case is no longer an isolated aberration. This has become a recurring phenomenon. .........How judges communicate in their judgments is a defining characteristic of the judicial process. While it is important to keep an eye on the statistics on disposal, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CAG audits, the audit observations are seldom taken an accepted position by the auditee- even when the auditor is appointed by the auditee himself. These are mere opinions and at best these opinions flag the issues which are required to be considered by the stakeholders. On such fine point of law, as the nuances about the manner in which Hon'ble Courts have interpreted the legal provisions of the Income Tax Act in one way or the other, these audit reports are inherently even less relevant- more so when the related audit report requires reporting of a factual position rather than express an opinion about legal implication of that position. In the light of this ground reality, an auditee being presumed to have accepted, and concurred with, the audit observations, just because the appointment of auditor is done by the assessee himself, is too unrealistic and incompatible with the very conceptual foundation of independence of an auditor. On the one hand, the position of the auditor is treated so subservient to the assessee that the views expressed by the auditor are treated as a reflection of the stand of the assessee, and, on the other hand, the views of the auditor are treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the territories in relation to which it exercises jurisdiction. It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that Court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate Courts can equally do so, for there is no specific provision, just like in the case of the Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working: otherwise, there would be confusion in the administration of law and respect for law would irretrievably suffer 8. When the law enacted by the legislature has been construed in a particular manner by the Hon'ble jurisdictional High Court, it cannot be open to anyone in the jurisdiction of that Hon'ble High Court to read it in any other manner than as read by the Hon'ble jurisdictional High Court. The views expressed by the tax auditor, in such a situation, cannot be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be 'due date' in column 20 (b) in respect of contributions received from employees for various funds as referred to in Section 36(1)(va) and the fact that the expression 'due date' has been defined under Explanation (now Explanation 1)to Section 36(1)(va) provides that "For the purposes of this clause, 'due date' means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise", one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just a factual report about the fact of payments and the fact of the due date as per the Explanation to Section 36(1)(va). This due date, however, has not been found to be decisive in the light of the law laid down by Hon'ble Courts above, and it cannot, therefore, be said that the reporting of payment beyond this due date in the tax audit report constituted "disallowance of expenditure indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We, therefore, see no need to deal with that aspect of the matter at this stage. 11. In a result, this appeal is allowed. Pronounced in the open court today on the 27th day of April 2022. 3.1. We also find that in the case before us, the ld. DR filed his written submissions as under:- 1. Circular 22/2015 of CBDT clearly states that employee's contribution to welfare funds are governed by Section 36(l)(va) of the Act. It is stated that the said disallowances are clearly covered by Section 36(1)(va) of the Income tax Act, 1961. 1.1 With reference to payment of employees dues to ESIC/PF dues, it is pertinent to note that the EPF GBP MP Act 1952 speaks of two types of contributions, namely -the Employer's share, and -the Employee's share. As a precautionary measure under the Income Tax Act, Section 2(24)(x) makes the employees' share as a deemed income in the hands of the employer; however, the employer gets a deduction from its taxable income when it transmits over the employees' shares to the respective Funds within the due date under respective act. Thus, in order to curb any tendency on the part of the employers to delay the deposit of the employees&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, Ahmedabad v. Gold Coin Health Food (P.) Ltd [2008] 172 Taxman 386 (SC). The issue before the Hon'ble Court was whether the amendments to Explanation 4 to Section 271(l)[c) made applicable from 01/04/2003 by Finance Act had retrospective applicability or not and the Hon'ble Court held that the said amendments are clarificatory and applicable even retrospectively. The relevant paragraphs are Para 14, 15,16 & 17. 2.2 Also, Hon'ble ITAT, Delhi in the order of Vedvan Consultants Pvt Ltd Vs DCIT in ITA no 1312/Del/2020 dated 26/08/2021 has held in Para 12 of the order that these amendments are retrospective. 3. Therefore, it is humbly prayed that the additions made by the Assessing Officer rejecting the claim of deduction towards employee's contribution deposited in PF/ESIC account after the due date under the respective Act may be upheld." 3.2. We find that the amendment has been brought in the statute only from A.Y.2021-22 and onwards which is very clear from Explanatory Memorandum of Finance Act, 2021 issued by the CBDT. Hence, we hold that the amendment brought in Section 36(1)(va) of the Act is to be construed only as prospective in operation and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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