ANAND SWAROOP MENAWAT,JODHPUR vs. CPC, BENGALURUE / ACIT/DCIT, CIRCLE, JODHPUR

O R D E R PER: SANDEEP GOSAIN, JM Both these appeals have been filed by the assessee against two different orders of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 24-12-2021 for the assessment years 2018-19 & 2019-20 respectively raising therein following grounds of appeal.

(1) That on the facts and in the circumstances of the case, the ld. CIT(A), NFAC has grossly erred in violating the principles of faceless appeal as announced for justice of honest taxpayers to avoid litigation as created unnecessary by AO.

(2) That on the facts and in the circumstances of the case the ld. CIT(A) erred in upholding the validity of order passed by the CPC u/s 154 of the Act. (3) That on the facts and in the circumstances of the case, ld. CIT(A) grossly erred in consciously and deliberately highly disregarding the decision of Hon’ble Jurisdictional High Court. (4) That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in sustaining addition of Rs.1,03,076/- in respect of employees contribution to ESI & PF. (5) That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in holding that amendment in Section 36(1)(va) and Section 43B by Finance Act, 2021 will be applicable in the case of assessee. (6) That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in recording irrelevant finding in the order and thereby sustaining arbitrary addition in a hypothetical way by putting the assessee to erroneous harassment and inconvenience.

ITA NO. 8/JODH/2022 – A.Y. 2019-20

(1) That on the facts and in the circumstances of the case, the ld. CIT(A), NFAC has grossly erred in violating the principles of faceless appeal as announced for justice of honest taxpayers to avoid litigation as created unnecessary by AO.

(2) That on the facts and in the circumstances of the case the ld. CIT(A) erred in upholding the validity of order passed by the CPC u/s 143(1) of the Act. (3) That on the facts and in the circumstances of the case, ld. CIT(A) grossly erred in consciously and deliberately highly disregarding the decision of Hon’ble Jurisdictional High Court. (4) That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in sustaining addition of Rs.96,482/- in respect of employees contribution to ESI & PF. (5) That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in holding that amendment in Section 36(1)(va) and Section 43B by Finance Act, 2021 will be applicable in the case of assessee. (6) That on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in recording irrelevant finding in the order and thereby sustaining arbitrary addition in a hypothetical way by putting the assessee to erroneous harassment and inconvenience. 2.1 First of all, we take up the appeal of the assessee for the assessment year 2018-19 for adjudication. Brief facts of the case are that the assessee is an individual who has earned the income from business during the year under consideration. Return of income was filed by the assessee on 31-10-2018 declaring total income at Rs.88,43,190/-. The rectification order u/s 154 of the Act was passed on 13-11-2019 and AO made adjustment by disallowing deduction of Rs.1,03,072/- in respect of contribution to ESI & PF u/s 36 of the Act.

4 & 8/JODH/2022 ANAND SWAROOP MENAWAT VS ACIT, CIRCLE-1, JODHPUR 2.2 In first appeal, the ld. CIT(A) confirmed the addition of Rs.1,03,072/-/- made by the AO/ CPC, Banglore in not depositing the employee’s contribution to EPF and ESI covered u/s 36(1)(va) of the Act by observing as under:-

‘’ The above explanation sets to rest the controversy pertaining to allowability of deduction in respect of employees’ contribution to PF/ESIC under section 43B of the Act. The explanation 2 inserted by Finance Act, 2021 emphasizes that section 43B was never deemed to have applied for the purposes of due dates as under section 36(1)(va) of the Act. On the issue of clarificatory amendments, the Hon’ble Supreme Court had occasion to analyse the issue in detail in teh case of CIT vs Goldcoin Health Foods Pvt. Ltd. 304 ITR 308 (2008) and it was held that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended by the legislature. In the same decision, the Hon’ble Bench refer to the principles of statutory interpretation by justice G.P. Singh wherein the language ‘’shall be deemed always to have meant’’ or ‘’shall be deemed never to have included’’ was found as declaratory and in plain terms, retrospective. In view of these discussions, I hold that the appellant is not eligible for deduction of Rs.1,03,072/- pertaining to employees contribution. Also, the AO was well within his jurisdiction u/s 154 of the Act to disallow an incorrect claim of Rs.1,03,072/- apparent from the information in Form No. 3CD attached with the return of income. Accordingly, the addition of Rs.1,03,072/- by way of disallowance u/s 36(1)(va) is hereby confirmed. In the result, grounds of appeal raised by the Appellant are hereby dismissed.’’ 2.3 During the course of hearing, the ld. AR prayed that the ld. CIT(A) erred in sustaining the addition of Rs.1,03,072/- in respect of employees contribution to PF and ESI which should be deleted. 2.4 On the other hand, the ld. DR relied on the order of the ld. CIT(A) 2.5 After hearing both the parties, it is noticed that the AO made the addition of Rs.1,03,072/- on account of late deposit of EPF & ESI contribution of the 5 & 8/JODH/2022 ANAND SWAROOP MENAWAT VS ACIT, CIRCLE-1, JODHPUR employee’s by the assessee in the light of provision of Section 2(24)(x) r.w.s. 36(1)(va) of the Act by holding it deemed income and subjected to tax in the hands of the employer which in first appeal was confirmed by the ld. CIT(A) holding that the said late payments are not covered under section 43B of the Act and thus the ld. CIT(A) dismissed this ground of the assessee. Similarly, the appeal of the Assessee for the assessment year 2019-2020 was dismissed by the ld. CIT(A) holding the same view as made in the assessment year 2018-19. Hence, the Bench noted that the assessee has deposited employees contribution towards PF & ESI before due date of filing of return. Recently, the Hon’ble Supreme Court has in the case of Checkmate Services Pvt. Ltd. Vs CIT-1, 143 Taxmann.com 178 (SC)/Civil Appeal No. 2833 of 2016 held that the provision of Section 43B of the Act shall not apply to employee’s contribution to PF/ESI and the due date specified u/s 36(1)(va) of the Act shall apply for determination of deductibility of employee’s contribution to PF/ESI. Accordingly, in view of the aforesaid judgement of Hon’ble Supreme Court (supra), the issue in both the appeals being similar in nature are remanded back to the file of ld. CIT(A) for afresh adjudication by providing adequate opportunity of being heard to the assessee and the assessee is directed to submit the necessary details/documents concerning the issue in question before the ld. CIT(A) in order to square up the case. Further, the assessee is also at liberty to take any other plea before the ld. CIT(A), if so advised. Thus both the appeals of the assessee are allowed for statistical purposes.

6 & 8/JODH/2022 ANAND SWAROOP MENAWAT VS ACIT, CIRCLE-1, JODHPUR 3.0. In the result, the appeals of the assessee are allowed for statistical purposes. Order pronounced in the open Court on 2 /11/2022 .