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TMI Blog2023 (6) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee against the separate orders both dated 09.12.2021 of the National Faceless Appeal Centre [hereinafter referred to as CIT(A) ] passed u/s 250 of the Income Tax Act (hereinafter referred to as the Act ). 2. The sole and common issue involved in both the appeals is relating to the disallowance made by the Assessing Officer/Central Processing Centre (CPC) u/s 36(1)(va) r.w.s. 2(24)(x) of the Act on account of delayed deposit of employees contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments. 3. An Application for adjournment has been received from the ld. Counsel for the assessee stating therein that he had sought instructions from the assessee in view of the developments subsequent to the filing of the appeal when the notice fixing the hearing was received. That however he has not received any instructions from the assessee as he is presently stated to be out of station and that he has further instructed him to take adjournment for fifteen days. 4. A perusal of the adjournment application shows that on the one hand, the counsel for the assessee namely Shri Uttam Kumar Borthakur, is well aware of the fixing of the date of hearing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Electrographite Ltd. (2000) 243 ITR 48 (SC) (2000) 109 Taxman 342 (SC) b) Modern Fibotex India Ltd. Vs. DCIT (1995) 212 ITR 496 (Cal) c) Samtel Color Ltd. Vs. UOI (2002) 258 ITR 1 (Del) (2002) 125 Taxman 1002 (Delhi) d) ITO Vs. Gujarat Power Corpn. Ltd. (2002) 254 ITR 217 (Gujarat) (2002) 122 Taxman 367 (Gujarat) e) CIT Vs. Vijayshree Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 High Court in CIT vs. Vijayshree Ltd. (supra) was holding field which held that employees contribution if deposited within the due date of filing of ITR is not to be disallowed u/s 36(1)(va) of the Act. Therefore, the Assessing Officer was not justified in making adjustment u/s 143(1)(a) of the Act. Before proceeding further, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the provisions of section 43B would also include employees contribution along with employer s contribution. However, since the hon ble High Court in the concluding para mentioned Employees contribution, while holding about the retrospective application of section 43B of the Act, therefore, it was taken that the aforesaid decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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. The said decision deals with the retrospective amendment of the statutory provision, and not relating to the interpretation of the provisions already existing in the Statute. The facts of the said case were that the assessee had received during the prevision year relevant to assessment year 1988-89 certain amount by way of cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Assessing Officer did not have any power or jurisdiction to disallow the aforesaid amount while processing the return u/s 143(1)(a) of the Act. The ld. Counsel for the assessee, in this respect, has relied upon the recent decision of the Coordinate Mumbai Bench of the Tribunal in the case of M/s P R Packaging Service vs. ACIT in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 from tax audit report and sought to disallow the same while processing the return under section 143(1) of the Act, apparently by applying the provisions of section 143(1)(a)(iv) of the Act. For the sake of convenience, the relevant provisions is reproduced hereunder:- 143(1) Where a return has been made under section 139, or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 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; A perusal of clause (iv) to section 143(1)(a) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 the information in respect of nature of fund, sum receipts from employee, due date for payment, the actual amount paid and the actual date of payment to the concerned authorities. This information is available to the CPC/Assessing Officer for processing the return of the assessee and this information itself indicates the allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal passed in bunch of appeals with the title case of M/s Electrical India vs. ADIT, CPC in ITA No. 789/Chny/2022 and Ors vide order dated 04.11.2022, wherein, on the identical issue as to the jurisdiction of the Assessing Officer/CPC to make adjustment while processing the return u/s 143(1) of the Act in respect of late depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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's income. A proper audit would, inter-alia, ensure that the claims for deduction are correctly made. The report is required to be furnished by the assessee along with return of income to enable revenue to make correct computation of income. The reporting made therein could certainly be available to CPC to make the adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 DCIT (ITA No. 332/Chd/2021 dated 30.08.2022) relates with adjustment u/s 143(1)(a)(v) which is not the case here. The case law of Visakhapatnam Tribunal in S.V. Engineering Constructions India (P.) Ltd. vs DCIT (ITA No. 130/Viz/2021 dated 23.09.2021) relies on another decision of Tribunal in Andhra Trade Development Corp. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 read as, for example, subject to the rider except in a situation in which the audit report has taken a stand contrary to the law laid down by Hon'ble Courts above . 22. The crux of the entire decision of the Tribunal in the case of Kalpesh Synthetics Pvt. Ltd. vs. DCIT (supra) is that even when the factual information give ..... X X X X Extracts X X X X X X X X Extracts X X X X
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