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TMI Blog2023 (7) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Hon ble Madras High Court in the case of AA520 Veerappalayam Primary Agricultural Cooperative Credit Society Ltd [ 2021 (4) TMI 1169 - MADRAS HIGH COURT] and held that the adjustments made by the CPC U/s. 143(1) are valid. Thus, no hesitation to come to a conclusion that the adjustments made by the CPC U/s. 143(1) are valid and therefore we set-aside the order of the Ld. CIT(A) and allow the grounds raised by the Revenue. - SHRI DUVVURU RL REDDY, HON BLE JUDICIAL MEMBER AND SHRI S BALAKRISHNAN, HON BLE ACCOUNTANT MEMBER For the Appellant : Sri I. Kama Sastry, AR For the Respondent : Sri ON Hari Prasada Rao, Sr. AR. ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: Out of the captioned appeals, ITA No. 226 227/Viz/2022 (AY: 2018-19 and 2019-20) are filed by the Revenue; CO No. 15 16/Viz/2023 (AY: 2018-19 and 2019-20) and ITA No. 97/Viz/2023 (AY: 2020-21) are filed by the assessee. Since the issues raised in Revenue s appeals, Cross Objections of the assessee as well as the assessee s appeal are inter-connected, for the sake of convenience, all these appeals are clubbed, heard together and disposed off in this consolidated order. Appeal wise adjudication is given in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised the identical grounds, we shall take up ITA No. 226/Viz/2022 as a lead appeal. The Revenue has raised the following grounds in its appeal for the AY 2018-19. 1. The order of the Ld. CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in deleting the addition of Rs. 2,34,33,370/- for the AY 2018-19 which is not allowable U/s. 36(1)(va) of the Act. 3. The Ld. CIT(A) erred in observing the Board s Circular No. 22/2015 and 17/12/2015 wherein the claim of deduction relating to employee s contribution to welfare funds which are governed by section 36(1)(va) of the Act does not apply. 4. The Ld. CIT(A) erred in considering the amendment had been brought in the recent Finance Act that the delayed payment cannot be allowed U/s. 43B of the Act. 5. The Hon ble Supreme Court in the case of Checkmate Services (P) Ltd vs. Commissioner of Income Tax in Civil Appeal No. 2833 of 2016 has decided the issue in favour of the Department, wherein it was held that it is an essential condition for the deduction that such amounts are deposited on or before the due date and that the non obstante clause under section 43B or anything contained in that provisions would not absolve the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that the disallowance U/s. 36(1)(va) has been made while processing the return U/s. 143(1) of the Act claiming it to be an incorrect claim as defined U/s. 143(1)(a)(ii) of the Act. The Ld. AR further submitted that the Explanation to section 143(1) defines an incorrect claim apparent from any information in the return comprises of three items as mentioned in the Explanation. The Ld. AR further pleaded that it does not cover the disallowance of deduction as envisaged U/s. 36(1)(va) of the Act. The Ld. AR also submitted that in the intimation, the reasons for disallowance state that in Schedule-BP Sl No. 14 the amount of expenditure disallowed is not in consistent with the amount shown in Schedule OI . The Ld. AR further submitted that it is not the expenditure claimed by the assessee it is income and hence disallowance of expenditure suo motto made by the Ld. DCIT, CPC is not valid. The Ld. AO also referred to the CBDT Circular mentioned in para 35 of the Hon ble Supreme Court judgment in the case of Checkmate Services P. Ltd Ors vs. CIT Ors in Civil Appeal No. 2833 of 2016, dated 12/10/2022. The Ld. AR further submitted that the disallowance U/s. 143(1) of the Act with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the Ld. Revenue Authorities. This issue with regard to late remittance of the employee s contribution under PF and ESI is settled by the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. mentioned supra. With regard to the Ld. AR s argument that it is not the expenditure claimed by the assessee it is income and hence disallowance of expenditure suo motto made by the Ld. DCIT, CPC is not valid, the Apex Court in the case of Checkmate Services Pvt. Ltd. mentioned supra have dealt with this issue and their Lordships have held as under: 54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer s obligation to deposit the amounts retained by it or deducted by it from the employee s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed u/s 143(1)(a)(ii) of the Act i.e. an incorrect claim, if such claim is apparent from any information in the return or not. The Memorandum of Finance Bill, 2008 as well as Finance Bill, 2016 explaining the provisions of section 143(1)(a)(ii) of the Act will explain the situation, which is reproduced as under : Memorandum to Finance Bill, 2008 Correction of arithmetical mistakes and adjustment of incorrect claim under section 143(1) through Centralised Processing of Returns. Generally, tax administrations across countries adopt a two-stage procedure of assessment as part of risk management strategy. In the first stage, all tax returns are processed to correct arithmetical mistakes, internal inconsistency, tax calculation and verification of tax payment. At this stage, no verification of the income is undertaken. in the second stage, a certain percentage of the tax returns are selected for scrutiny/audit on the basis of the probability of detecting tax evasion. At this stage, the tax administration is concerned with the verification of the income. In India, the scheme of summary assessment being in force since the l day of June, 1999 does not contain any provision allowing for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h notification is issued. Along with the notification, the scheme referred above is also required to be laid before each House of Parliament. Similar amendment has also been proposed in section 1 I5WE of the Income-tax Act, relating to fringe benefits. These amendments will take effect from 1st April, 2008. Memorandum to Finance Bill 2016 Legislative framework to enable and expand the scope of electronic processing of information In order to expeditiously remove the mismatch between the return and the information available with the Department, it is proposed to expand the scope of adjustments (emphasis supplied) that can be made at the time of Processing of returns under sub-section (1) of section 143. It is proposed that such adjustments can be made based on the data available with the Department in the form of audit report filed by the assessee, returns of earlier years of the assessee, 26AS statement, Form 16, and Form 16A. (emphasis supplied) However, before making any such adjustments, in the interest of natural justice, an intimation shall be given to the assessee either in writing or through electronic mode requiring him to respond to such adjustments. The response received, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adras), wherein, it was categorically held that if there is any incorrect claim made in the return, the disallowance made by the CPC is valid. Therefore, we are of the view that the decisions relied on by the Ld.AR has no application, in view of the decision of Hon ble High Court of Madras. The Hon ble High Court of Madras held that: The scope of an intimation under section 143(1)(a) of the Act, extends to the making of adjustments based upon errors apparent from the return of income and patent from the record. Thus to say that the scope of incorrect claim should be circumscribed and restricted by the Explanation which employees the term entry would, in my view, not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purpose of section 143(1)(a) of the Act. 12. It is also pertinent to mention that the coordinate bench of ITAT, Chennai in the case of Sree Gokulam Chit and Finance Co.P.Ltd. Vs. DCIT, Chennai vide I.T.A. No. 765/CHNY/2022 dated 21.12.2022 has also taken a view that if the information gives the details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 2019-20. While adjudicating the Revenue s appeals for the AYs 2018-19 and 2019-20, since we have allowed the grounds raised by the Revenue for both the AYs, the grounds raised by the assessee in its Cross Objections have no legs to stand and the adjudication of the COs become infructuous. Thus, the Cross Objections raised by the assessee are dismissed as infructuous. 17. In the result, both the Cross Objections raised by the assessee are dismissed as infructuous. ITA No. 97/Viz/2023 (AY: 2020-21) (By Assessee) 18. This appeal filed by the assessee against the order of the Ld. CIT (A)-NFAC in DIN Order No. ITBA/NFAC/S/250/202223/1050033252(1), dated 23/02/2023 arising out of the order passed U/s. 143(1) of the Act for the AY 2020-21. 19. Brief facts of the case are that the assessee filed his return of income for the AY 2020-21 on 08/02/2021 declaring total income of Rs. 2,79,20,960/-. The return was processed U/s. 143(1) of the Act and made disallowance of expenditure U/s. 36(1)(va) at Rs. 4,99,01,746/- (towards PF of Rs. 4,56,10,147 + Rs. 42,91,599/- towards ESI) and made adjustment U/s. 143(1)(a) of the Act. Aggrieved by the order of the CPC, dated 16/12/2021 the assessee filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the considered view that the adjustments made by the CPC U/s. 143(1) are valid. Therefore, since the issue is identical in the Revenue s appeals and that of the issue raised in the assessee s appeal for the AY 2020-21, our decision given in the Revenue s appeals mutatis mutandis applies to the assessee s appeal also. 21. At this juncture, it is pertinent to mention about the decision of the Ld. CIT(A)-NFAC. While dismissing the appeal of the assessee, the Ld. CIT(A)-NFAC has held as under: 5.1.5. In view of the aforesaid, it is amply clear that even prior to insertion of Explanation 2 in section 36(1)(va) and Explanation 5 in Section 43B by the Finance Act, 2021 w.e.f 1/4/2021, section 43B will not apply to employees contributions to PF, ESI etc., as claimed by the appellant. In case contributions collected from the salaries of the employees are not deposited within the due date prescribed under the respective EPF/ESI Act., then the addition of the said amount as income of the employer U/s. 2(24)(x) read with section 36(1)(va) of the Act is automatic and mandatory. The case laws cited byt eh appellant of jurisdictional appellate Tribunal lost relevance. 5.1.6. Therefore I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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