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TMI Blog2024 (1) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the assessee on the contention so raised. Decided against assessee. - Shri Rajpal Yadav, Vice President And Shri Girish Agrawal, Accountant Member For the Appellant : Shri N. S. Saini, Advocate Shri Sonu Agarwal, FCA. For the Respondent : Shri Loviesh Shelley, JCIT, DR. ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. Addl. JCIT(A)-12, Mumbai vide order no. ITBA/APL/S/250/2023- 24/1056879426(1) dated 09.10.2023 passed against the Intimation by Centralized Processing Centre, Bengaluru u/s. 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), dated 06.03.2020, for AY 2019-20. 2. Grounds taken by the assessee are as under: 1. For that on the facts and in the circumstances of the case, JCIT(A)-12, Mumbai (NFAC) was not justified in not allowing the grounds raised by the appellant for delayed payment of PF ESI without considering the submissions filed before it on 13.09.2023. 2. For that on the facts and in the circumstances of the case, the JCIT(A)-12, Mumbai (NFAC) was not justified in confirming the disallowance of employees' contribution to PF and ESI u/s 36(1)(va) of the Act of Rs. 26,05,843/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04-1988. Through the same amendment, by Section 3(b), Section 2(24) which defines various kinds of income inserted clause (x). This is a significant amendment, because Parliament intended that amounts not earned by the assessee, but received by it, - whether in the form of deductions, or otherwise, as receipts, were to be treated as income. The inclusion of a class of receipt, i.e., amounts received (or deducted from the employees) were to be part of the employer/assessee's income. Since these amounts were not receipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. Section 36(1)(va) was hedged with the condition that the amounts/receipts had to be deposited by the employer, with the EPF/ESI, on or before the due date. The last expression due date was dealt with in the explanation as the date by which such amounts had to be credited by the employer, in the concerned enactments such as EPF/ESI Acts. Importantly, such a condition (i.e., depositing the amount on or before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988-89, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The sig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1: The prima facie adjustment u/s. 143(1)(a) of the Income tax Act, 1961 (Act) in respect of an issue is allowable with reference to the interpretation of law which was prevailing as on the date of filing of subject Income tax Return (ITR) and any subsequent pronouncement of law or retrospective amendment on the concerned issue is not to be considered for such purpose. Accordingly, the subsequent pronouncement of law by Hon'ble Supreme Court judgement in Checkmate Services (P) Ltd. Vs. CIT (2022) 448 ITR 518 (SC) is not to be considered for prima facie adjustment u/s. 143(1)(a) for asst. yr. 2020-21 for disallowing payment of employees' contribution to PF/ESI beyond the due date prescribed in respective statute because on the date of filing of ITR by appellant on 30.03.2021, Hon'ble Calcutta High Court (Jurisdictional High Court) judgement in the case of CIT Vs. Vijay Shree Ltd. (2014) 43 taxmann.Com 396 (Calcutta High Court) was holding field which held that such employees contribution, if deposited within due date of filing ITR (which in the instant case of appellant was 15.02.2021) is not to be disallowed u/s. 36(1)(va) of the Act. a) CIT Vs. Hindustan Electrographi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracter as an income (albeit deemed) by virtue of section 2(24)(x), unless the condition stipulated by Explanation to section 36(1)(va) are satisfied i.e. depositing such amount received or deducted from the employee on or before the due date. The Hon ble Supreme Court held that there is a marked distinction between the nature and character of the two amounts the employer s liability is to be paid out of its income, whereas, the second is deemed an income, by definition, since it is the deduction from the employee s income and held in trust by the employer. The Hon ble Supreme Court thus held that the conditions of section 43B prescribing the due date as the date of filing of return of income in case the employers contribution towards ESI/PF would not be applicable in case the employees contribution as provided u/s 36(1)(va) of the Act and that the due date in respect of deposit of employees contribution would be such as prescribed u/s 36(1)(va) of the Act. 7. Now the contention raised by the ld. counsel for the assessee is that before the decision of the Hon ble Supreme Court in the case of Checkmate Services (P) Ltd. vs. CIT (supra), the judgement of the jurisdictional Calcutta H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e position, the deletion of the amount paid by the Employees Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. 7. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal. A perusal of the above observations of the hon ble Calcutta High Court would reveal that in the case of CIT vs. Vijayshree Ltd. (supra), though the issues before the Hon ble Calcutta High Court was relating to the disallowance on account of delayed deposit of employees contribution to ESI and PF, however, the aforesaid decision would show that the Hon ble Calcutta High Court referred to the provisions of section 43B of the Act to hold that the said section 43B introduced by Finance Act 2003, was curative in nature and was required to be applied retrospectively w.e.f. 01.04.1988. It was not brought to knowledge of the Hon ble High Court that the provisions of section 43B do not prescribe the due date of deposit of employees contribution, rather, the same refers to only the employer s contribution. There is no discussion in the said decision of the Hon ble Calcutta High Court that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court will be retrospectively applicable and it will be treated that earlier decisions of different High Court favouring the assessee would be of no benefit of assessee at this stage as the said decisions of the High Courts are treated to be never existed or to say are wiped out by the aforesaid decision of the Hon ble Supreme Court. Therefore, I do not find any merit in the first contention raised by the assessee. Even otherwise, it was not a case of amendment of provisions, the assessee was banking upon the interpretation given by the hon ble High Court on the already existing provisions, which were subject to appeal to hon ble Supreme Court. If the assessee has chosen to reap the fruits of the interpretation given by the hon ble High Court, the assessee is also liable to face the consequences, if such an interpretation given by the hon ble High Court is reversed or modified by the Apex Court of the country. So far as the reliance of the ld. counsel on the decision of the Hon ble Supreme Court in the case of CIT vs. Hindustan Electrographite Ltd. (supra) is concerned, I find that the said decision is not applicable to the facts and circumstances of the present case. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibotex India Ltd. vs. DCIT (supra), the other case laws of different High Courts relied by the ld. counsel, are not applicable in view of the settled proposition of law by the Hon ble Supreme Court in the various case laws as discussed above. 10. Contention -2 Upto asst. yr. 2020-21, despite Hon'ble Supreme Court judgement in Checkmate Services (P) Ltd. Vs. CIT (2022) 448 ITR 518 (SC), prima facie adjustment u/s. 143(1)(a) of the Act cannot be made to disallow u/s. 36(1)(va) the employees' contribution to PF/ESI deposited belatedly after due date prescribed under relevant statute if deposited within due date of filing ITR which in the instant case of appellant was 15.02.2021. a) M/S P.R. Packaging Service Vs. ACIT (2022) 66 CCH 0378 Mum. Trib b) A Infrastructure Ltd. Vs. DCIT (2023) 37 NYPTTJ 165 (Jd) c) Paris Elysees India Private Limited Vs. DCIT Order dated 20.02.2023 in ITA No. 357/JPR/2022 11. The contention as canvassed by the ld. counsel is that the Assessing Officer could have disallowed the aforesaid employees contribution to ESI/PF being deposited after the due date under the relevant statute, only in an assessment carried out u/s 143(3) of the Act. That the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R Packaging Service (supra), for the sake of ready reference, is reproduced as under: 3. We have heard the rival submissions and perused the materials available on record. It is not in dispute that assessee had remitted the employees contribution to Provident Fund beyond the due date prescribed under the Provident Fund Act, but had duly remitted the same before the due date of filing the return of income under section 139(1) of the Act. This fact of remittance made by the assessee with delay had been reported by the Tax Auditor in the Tax Audit Report. The copy of the Tax Audit Report is placed on record by the Ld.AR before us together with its annexures. On perusal of the same, we find that the Tax Auditor had merely mentioned the due date for remittance of Provident Fund as per the Provident Fund Act and the actual date of payment made by the assessee. The Tax Auditor had not even contemplated to disallow the employees contribution to Provident Fund wherever it is remitted beyond the due date prescribed under the Provident Fund Act. Hence, it is merely recording of facts and a mere statement made by the Tax Auditor in his audit report. The Ld.CPC Bangalore had taken up this data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure indicated in the audit report but not taken into account 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: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:] ... Explanation. For the purposes of this sub-section, (a) an incorrect claim apparent from any information in the return shall mean 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z. The results are indicated in Table. Further, the word indication has been explained as remark or sign that shows something happening or what somebody is thinking or feeling. Further the indicative has been explained as showing or suggesting something. 16. In the light of the above meaning or expression of the word indicate , when I look into the facts of the case, I note that there is a prescribed form for furnishing of audit report and the auditor is supposed to furnish the information as per the prescribed columns of the Form 3CD. Under section 44AB of the Act, if the sales/turnover or the gross receipts, as the case may be, of an assessee carrying on business exceeds the prescribed threshold, it has been made mandatory for him to get his books of account audited. The object is to get a clear picture of the assessee s accounts so as to enable the Income Tax authorities to assess true and correct income of the assessee. The information furnished by the auditor in the prescribed form enable the Assessing Officer/CPC to make the required adjustments into the returned income of the assessee. I note that under clause 20B of the prescribed form, the auditor is supposed to furnish th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CPC would give intimation to the assessee of such proposed adjustments and whereupon the assessee has the right to file response/objection to such adjustment and the Assessing Officer/CPC is required to consider such response/objection before making the adjustments. Therefore, the word indicate does not mean that the auditor is required to specifically mention that such and such disallowance is required to be made in the case of the assessee, rather, correct view would be that the auditor is required to furnish the information and that information can be compared and considered by the Assessing Officer/CPC in the light of the relevant statutory provisions as well as relevant laws and if such information is suggestive of any adjustment of disallowance, the Assessing Officer will make such disallowance after giving opportunity to the assessee to rebut the same. 18. Identical view has been taken by the Coordinate Ranchi Bench of the Tribunal in the case of Nepal Chandra Dey vs. ACIT in ITA No. 63/Ran/2022 order dated 15.05.23 (The said decision also authored by the undersigned Judicial Member). 19. I have come across of the another decision of the Coordinate Chennai Bench of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction to the assessee since the assessee did not fulfil the mandate of Sec. 36(1)(va). It could also be seen that this is not an increase in income but disallowance of expenditure, the adjustment of which is covered u/s 143(1)(a)(iv) which provide that the disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return could be made while processing the return of income. The amendment made w.e.f. 01.04.2021 by insertion of words 'increase in income' would have no impact on such disallowance since it is only a disallowance of expenditure and the revenue is very well entitled to make such an adjustment u/s 143(1)(a)(iv). 8. The impugned adjustment, in our opinion, would also fall u/s 143(1)(a)(ii) since it is an incorrect claim which is apparent from any information in the return. The adjustment made by CPC flows from reporting made by Tax Auditor in Tax Audit Report in Form 3CD. As per statutory mandate, the assessee is required by law to get its accounts audited u/s 44AB if its turnover crosses threshold turnover. The purpose of the audit is to enable the revenue to make correct computation of assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law was always like that. 11. The case law of Hon'ble Supreme Court in Kvaverner John Brown Engg. (India) P. Ltd. V/s ACIT (305 ITR 103), as referred on behalf of assessee, deal with deduction u/s 80-O for which two interpretations were possible viz. the deduction could be computed at gross value or the same could be computed on net value. The same is not the case here. The action of revenue is in accordance with the law laid down by Hon'ble Supreme Court in the cited decision. In fact, Hon'ble High Court of Madras in Tamilnadu Magnesite Ltd. vs DCIT (303 ITR 71) held that where the amount was inadmissible in view of Sec. 43B which overrides section 36(1) of the Act, the revenue was well within its power to make a prima facie adjustment in the computation of taxable total income while processing return of income under Section 143(1)(a) of the Act. The aforesaid decision supports our view. 12. The decision of Hon'ble High Court of Bombay in Bajaj Auto Finance Ltd. vs. CIT (93 Taxmann.com 63) as referred before us deals with case of debatable issue and hence distinguishable. The case law of Chandigarh Tribunal in Lanjani Co-operative Agri Service Society Ltd. vs D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e binding on the auditee; that the tax audit reports are mere opinions and these opinions flag the issues which are required to be considered by the stakeholders; that these audit reports are inherently even less relevant, more so, when the reports require reporting of a factual position rather than express an opinion about legal implication of that position. The Coordinate Mumbai Bench further goes on to hold that 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. That, hence, the views expressed by the tax auditor in such a situation, cannot be the reason enough to disregard the binding views of the Jurisdictional High Court. The Coordinate bench, therefore, goes on to read down provisions to section 143(1)(a)(iv) and to hold that what essentially follows is the adjustments under section 143(1)(a) in respect of disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return is to be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same are accordingly dismissed. 6. In the grounds taken by the assessee, reference has been made to the decision of Coordinate Bench of ITAT, Mumbai in the case of P R Packaging Services Vs. ACIT in ITA No. 2376/Mum/2022 and it has been claimed that the Ld. JCIT(A) has erred in not following the binding judicial precedent. This decision by the Coordinate Bench of Mumbai has been dealt by the Coordinate Bench of ITAT Guwahati in the case of Harendra Nath Deka Vs. ACIT (supra) which in turn has considered the decision by Coordinate Bench of ITAT Kolkata in the case of Siddhi Vinayaka Graphics Pvt. Ltd. (supra) and does not need any further elaboration by us. 6.1. Also, ld. Counsel placed reliance on the decision of Coordinate Bench of ITAT, Raipur in the case of Pradeep Kumar Dhurve Vs. DCIT in ITA No. 302/RPR/2023 dated 23.11.2023 to assert the claim that disallowance towards delayed deposit of PF ESI is not a permissible adjustment u/s. 143(1) of the Act. The issue dealt by ITAT Raipur Bench also has already been dealt by the Coordinate Bench of ITAT, Kolkata and Guwahati in the cases of Harendra Nath Deka Vs. ACIT (supra) and Siddhi Vinayaka Graphics Pvt. Ltd. (supra) respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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