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TMI Blog2023 (8) TMI 1618X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Center, Bengaluru (ADIT, CPC) is without jurisdiction. 3. For that the Commissioner of Income Tax (Appeals) without affording an opportunity of being heard erred in dismissing the appeal as infructuous. 4. For that the Commissioner of Income Tax (Appeals) erred in dismissing the appeal as infructuous and non-existent merely because assessment u/s. 143(3) of the Act was completed for the impugned assessment year. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the principle of doctrine of merger would not apply to the facts and circumstances of the instant case. 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the intimation passed u/s. 143(1) is bad in law. 7. For that without prejudice to the above grounds, the Commissioner of Income Tax (Appeals) failed to appreciate that the issue of allowability of employee's contribution to PF & ESI within the due date of filing return of income is a debatable one and the disallowance on that ground cannot be made while processing return of income u/s. 143(1). For these grounds raised and such other grounds that may be raised, may be altered, amended or modified, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. v. CIT (supra), and thus, appeal filed by the assessee should be dismissed. 6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT (Civil Appeal No. 2833 of 2016 dated 12.10.2022), has considered the issue of disallowance of employees' contribution to PF & ESI beyond due date specified under respective Acts, but within due date prescribed u/s. 139(1) of the Act, and after considering relevant provisions of the Act, held that belated payment of employees' contribution to PF & ESI cannot be allowed as deduction in terms of provisions of Sec. 36(1)(va) r.w.s. 43B of the Act. The ITAT Chennai Benches in the case of Sree Gokulam Chit and Finance Co. P. Ltd., in ITA No. 765/Chny/2022 dated 21.12.2022, had considered an identical issue and by following the decision of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT (Civil Appeal No. 2833 of 2016 dated 12.10.2022) held as under: 7. We have heard rival contentions and gone through facts and circumstances of the case. The admitted facts are that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the audit report as filed by assessee along with return of income and particularly clause No. 20(b). The details are completely provided by assessee. 8. Now, the question arises whether in view of the provisions of section 143(1)(a) of the Act, while processing the return of income filed by the assessee, the total income or loss shall be computed after making the following adjustments as described u/s. 143(1)(a) (ii) of the Act i.e., an incorrect claim, if such incorrect 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 and the relevant memorandum of Finance Bill, 2008 and Finance Bill, 2016 are being reproduced as it is:- 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, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme with a view to expeditiously determine the tax payable by, or refund due to, the assessee, (b) the Central Government may issue a notification in the Official Gazette, directing that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such restrictions, modifications and adaptations as may be specified in the notification. However, such direction shall not be issued after 31st March 2009; (c) every notification shall be laid before each House of Parliament as soon as such 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 115WE 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e due dates specified in the respective acts i.e., Provident Fund Act & ESI Act, which attracted the provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Act leading to disallowance of this sum to the extent not paid on or before the due date stipulated in the respective PF Act and ESI Act. 10. Coming to another angle that this issue has been settled by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd., supra and what will be the impact of law laid down by Hon'ble Supreme Court and this has been explained by Hon'ble High Court of Madras in the case of South Industrial Corporation Ltd., (2002) 258 ITR 481, wherein it is held as "When a statutory provisions is interpreted by the apex court in a manner different from the interpretation made in the earlier decisions by a Smaller Bench, the order which does not conform to the law laid down by the Larger Bench in the later decision which decision would constitute the law of the land and is to be regarded as the law as it always was, unless declared by the court itself to be prospective in operation, would clearly suffer from a mistake which would be apparent from the record. The rectification under section 154(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of "income" amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time - by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers' contribution (Section 36(1)(iv)) and employees' contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees' liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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