M/S METLONICS INDUSTRIES PVT.LTD,MOHALI vs. DCIT,CPC/DCIT,CIRCLE-1(1), CHANDIGARH

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ITA 213/CHANDI/2021Status: DisposedITAT Chandigarh18 November 2021AY 2018-194 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the amendments made by the Finance Act 2021 to Sections 36(1)(va) and 43B are prospective. Since the EPF/ESI payments were made within the due date of filing the return under Section 139(1), the disallowance was not justified.

What were the facts?

The assessee challenged the disallowance of Rs. 30,88,200/- claimed as EPF/ESI deposits. The CIT(A) upheld the disallowance, relying on an amendment to the Act by the Finance Act 2021, treating it as retrospective.

What were the issues?

Whether the disallowance of employee's share of EPF/ESI contributions made before the due date of filing the return is valid, considering the retrospective or prospective nature of the Finance Act 2021 amendments.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 43B,Section 139(1),Section 143(1),Section 154,Section 250

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, CHANDIGARH

Before: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM

For Appellant: Shri Anil Batra, Advocate
Hearing: 10.11.2021

ORDER आदेश आदेश PER DIVA SINGH In the present appeal, the assessee assails the correctness of the order dated 18.09.2021 passed u/s 250 of the Income Tax Act, 1961 by the CIT(A) (NFAC i.e. National Faceless Appeal Centre) Delhi pertaining to 2018-19 assessment year. 2. The assessee has raised various grounds assailing the order. The issue agitated at hand can be summed up in ground Nos. 1& 5. The remaining grounds can be considered as arguments in support of the prayer.

ITA 194 /CHD/2021 A.Y. 2018-19 Page 2 of 4 Accordingly, ground Nos. 1 & 5 being taken up are he reunder :

1.

That the Ld. Commissioner of Income (Appeals) has erred in law as well as on facts in upholding the disallowance of the expenditure of Rs.30,88,200/- (Rs.84,167/- ESI and Rs.30,03,674/- EPF totaling Rs.30,88,200/-) claimed on account of deposit in EPF/ESI as employees share while processing of return under section 143(1) r.w.s.154 which is arbitrary and unjustified. 5. That the Ld. Commissioner of Income Tax (Appeals) has dismissed the appeal of the relying upon the amendment made in the Act by The Finance Act 2021 assuming it to be retrospective and as such the order passed is illegal, arbitrary and unjustified.

3.

The point at issue in the present proceedings, it was submitted, by the Id. AR is fully covered in favour of the assessee not only by the decision of the jurisdictional High Court in the case of CIT Vs Hernia Embroidery Mills (P) Ltd(2014) 366 ITR 167(P&H) relied upon and referre d to in ground No. 4 in the present proceedings but even otherwise by plethora of decisions of the ITA T. Reference was made to order dated 27.08.2021 in M/s Jupiter Aqua Lines Put. Ltd. Vs DCIT as an illustration.

4.

The Id. Sr.DR Mr. Ashok Khanna relied upon the impugned order. No distinguishing facts, circumstances or position or law was canvassed on behalf of the Revenue.

5.

We have heard the rival submissions and perused the material available on record. It is seen that the various Benches of the ITAT including the Chandigarh Bench decision dated 02.11.2021 in the case of Shri Sukhdev

ITA 194 /CHD/2021 A.Y. 2018-19 Page 3 of 4 Singh Vs IT O Chandigarh and order dated 02.11.2021 in ITA 255/CHD/2021 in the case of M/s Czar Faucets Limited Chandigarh Vs DCIT, Bangalore consistently taken the position that the amendments carried out to Section 36(l)(va) and u/s 43B of the Income Tax Act effected by the Finance Act, 2021 is prospective in nature. Reading from the Notes on Clauses at the time of introduction of the Finance Act, 2021 it has consistently been held that the amendment is applicable from 2020-21 assessment year onwards. In these circumstances, the addition made by way of disallowance of employees' share in EPF/ESI made beyond the specific statutory limits, howeve r, within the time limit as laid down in Section 139(1) of the Act i.e. before the due date of filing of the return, the addition cannot be made. We have taken into consideration not only the decision of the jurisdictional High Court in the case of CIT Vs Hemla Embroidery Mills (P) Ltd.(2014) 366 ITR 167(P&H) but also the decision in the case of CIT Vs Nuchem Ltd (ITA No. 323 of 2009). Accordingly, considering the fact that the payment was made well within the time of due date of filing of the return u/s 139(1) and the return stood so filed, we are of the view that the addition by way of a disallowance cannot be made . Accordingly, the addition is directed to be deleted.

ITA 194 /CHD/2021 A.Y. 2018-19 Page 4 of 4 The appeal of the assessee is allowed. Said order was pronounced in the presence of the parties via Webex.

6.

In the result, appeal of the assessee is allowed.

Order pronounced on 18 t h November, 2021.

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