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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: SHRI SANJAY GARG & SHRI GIRISH AGRAWAL
Present for: Appellant by : Shri S. Dutta, AR Respondent by : Shri Vijay Kumar, Addl. CIT Date of Hearing : 14.06.2023 Date of Pronouncement : 21.06.2023 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide Appeal No. ITBA/NFAC/S/250/2021-22/1037688066(1) dated 10.12.2021 passed against the intimation issued by Asstt. Director of Income Tax, CPC, Bangalore u/s.143(1) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 30.04.2020 for AY 2019-20.
There is a delay of 24 days in filing the present appeal. Impugned order of Ld. CIT(A) is dated 10.12.2021. The appeal was filed on 04.03.2022. Thus, the period from March 2020 upto the date of filing of appeal is covered by the decision of Hon’ble Supreme Court.
Victoria International Pvt. Ltd. AY 2019-20 This period has been excluded by the Hon’ble Supreme Court in the case of suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022 by which the period from 15.03.2020 to 28.02.2022 has been directed to be excluded for the purpose of limitation. Vide this order a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly, we condone the delay and proceed to adjudicate the appeal.
At the outset, it is noted that assessee has filed amended grounds of appeal
on 12.01.2013 which are reproduced as under: “1. For that, on the facts and in the circumstances of the case as well as in law, the order of the Commissioner of Income-tax (Appeals) is perverse, rather against evidence and material on record and without an iota of material or evidence to support and sustain the same.
2. For that, on the facts and in the circumstances of the case as well as in law, the order of the Commissioner of Income-tax (Appeals) is arbitrary, illegal, excessive, perverse and bad in law.
3. For that, on the facts and in the circumstances of the case as well as in law, the Ld. Commissioner of Income-tax (Appeals) confirmed the addition of Rs.8,45,628/-[Amended figure] which has been made by the ADIT,CPC, Bengaluru while processing the return on the ground that the employee's contribution to the Employees Provident Fund and Employees State Insurance(ESI) Fund has been deposited beyond the due date as applicable under the provisions of EPF and ESI Act by invoking the provisions of Sec 36(1)(va) of the Income Tax Act, 1961 and such action resorted to by both the lower authorities is arbitrary, illegal, excessive, perverse and bad in law.
4. For that, on the facts and in the circumstances of the case as well as in law, the Ld. Commissioner of Income-tax (Appeals), has confirmed the disallowance made by ADIT,CPC, Bengaluru amounting to Rs.11,65,874/- of the deduction claimed u/s 80JJAA of the Act; on the ground that Return of Income was filed belatedly and such action resorted to by both the lower authorities is arbitrary, illegal, excessive, perverse and bad in law.”
4. Brief facts of the case are that assessee is engaged in business of manufacturing biscuits and cakes. It filed its return of income on 23.11.2019 which is a belated return since the extended due date for filing the return was 31.10.2019. Total income reported by the as- sessee in the return is Rs.23,85,885/-. Centralised Processing Centre, Bengaluru (CPC) processed the return and issued its intimation u/s. Victoria International Pvt. Ltd. AY 2019-20 143(1) of the Act dated 30.04.2020. In this processing of return, two adjustments were made in respect of business income by making dis- allowance of Rs.13,14,651/- towards delayed payment of employees’ contribution to PF/ESI find u/s. 36(1)(va) of the Act and of Rs.11,65,874/- towards deduction claimed u/s. 80JJAA of the Act. Aggrieved, assessee went in appeal before the Ld. CIT(A) who sus- tained the two disallowances. Aggrieved, assessee is in appeal before the Tribunal.
5. Before the Tribunal, Ld. Counsel for the assessee has furnished a written submission dated 25.04.2023, also paper book in two volumes is placed on record to substantiate the claim made by the assessee. On the first issue relating to disallowance for delay in deposit of employees’ contribution to PF/ESI fund, Ld. Counsel submitted that there is mistake committed by the tax auditor while reporting the correct dates in the tax audit report in Form 3CD which is verifiable from the challans for the said deposits. In this respect, he invited the attention to volume two of the paper book which contains challan and payment proof for contribution to PF & ESI fund. Ld. Counsel fairly submitted that the issue may be remitted back to the file of Ld. AO for verification of the correct date of deposit of the employees’ contrbution from the material placed on record and allow the claim of the assessee thereon.
Ld. Sr. DR did not object to the submission. Considering the fact on record as well as the material furnished by the Ld. Counsel, we find it proper to remit this issue to the file of Ld. AO for the limited purpose of verification and allow the claim of the assessee towards employees’ contribution to PF/ESI fund in accordance with the law and by also taking into consideration the recent judgment by the Hon’ble Supreme Court in the case of Chekmate Services Pvt. Ltd. vs.
Victoria International Pvt. Ltd. AY 2019-20 CIT [2022] 143 taxmann.com 178 (SC). Accordingly, ground taken by the assessee in this respect is allowed for statistical purposes.
On the second issue relating to disallowance towards deduction claimed u/s. 80JJAA of the Act, it has been disallowed since the assessee has not filed its return within the prescribed due date. In this respect, Ld. Counsel submitted that provisions of section 80AC as amended by Finance Act (No. 13), 2018 was on the statute and was effective from AY 2018-19. However, the consequential amendment u/s. 143(1)(a)(v) was inserted with effect from AY 2021-22. According to him, in absence of the enabling provision, effect of sec. 80AC cannot be given in the year under consideration which is AY 2019-20. For this, Ld. Counsel referred to the provisions of section 80AC, which is reproduced as under: “Section 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after- (i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C. -Deductions in respect of certain incomes", no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.”
7.1. From the perusal o the above section, it is noted that deductions in respect of certain incomes as provided in Chapter VI-A shall not be allowed unless assessee furnishes return of income on or before the due date specified u/s. 139(1) of the Act. This provision is effective from AY 2018- 19.
Further, reference was made to sec. 143(1)(a) of the Act which provides for the permissible adjustment which can be Victoria International Pvt. Ltd. AY 2019-20 made in computing the total income or loss while processing the return of the assessee. The relevant provision of sec. 143(1)(a) is reproduced as under:
“Section 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely :- (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading "C. -Deductions in respect of certain incomes", 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:”
8.1. From the above section, it is noted that sub-clause (v) was inserted by the Finance Act (No. 13), 2021 w.e.f. AY 2021-22. Thus, the enabling provision for making a disallowance of deduction claimed under Chapter VI-A under the heading “C.- deductions in respect of certain incomes” came on the statute only from AY 2021-22.
Victoria International Pvt. Ltd. AY 2019-20 9. To buttress the contentions, Ld. Counsel placed reliance on the decision of Coordinate Bench of ITAT in the case of Sugatha Pugazedhi Vs. ACIT in wherein identical issue was dealt and it was held that “it is very clear that up to AY 2020-21 there is no provision us. 143(1)(a) of the Act to make any adjustments towards Chapter VI-A deductions while processing return of income u/s. 143(1)(a) of the Act. Therefore, we are of the considered view that even if assessee does not file return of income on or before due date prescribed u/s. 139(1) of the Act, then no adjustment can be made towards Chapter VI-A deductions under the head C.- deductions in respect of certain income. Since, deduction u/s. 80JJAA comes under Chapter VI-A under the head C.- in our considered view while processing return of income for the AY 2018-19 the AO cannot make any adjustments while processing return of income u/s. 143(1)(a) of the Act.”
9.1. Ld. Counsel also placed reliance on other two similar decisions of the Coordinate Benches of ITAT in the cases of:
(i) Koodaranhi Regional Agriculture Welfare Cooperative Society Ltd. Vs. ITO in for AY 1919-20; (ii) Shiksha Vibhag Karmchari Sahakari Samiti Ltd. Vs. NFAC in ITA No. 272/JPR/2022 for AY 2019- 20. 9.2 Ld. Counsel claimed for the deletion of adjustment made of Rs.11,65,874/- towards deduction claimed u/s. 80JJAA of the Act.
Victoria International Pvt. Ltd. AY 2019-20 10. Per contra, Ld. Sr. DR emphasized that since section 80AC was on the statute, CPC has rightly disallowed the claim as it fell within the purview of prima facie adjustment u/s. 143(1)(a)(ii) of the Act as an incorrect claim.
We have heard the rival contentions and perused the material available on record and have gone through the applicable provisions discussed before us. It is a fact that the disallowance has been made in the processing of return by CPC for which intimation is issued u/s. 143(1) of the Act. The year under appeal before us is AY 2019-20 for which return has been filed belatedly. Processing of return u/s. 143(1) is mandated by clause (a) which provides for specific adjustment which can be made. We note that though the provisions of section 80AC were on the statute, effective from AY 2018-19, applicable to the assessee. However, the enabling provision which would allow for making an adjustment in clause (a) of section 143(1) was inserted by way of sub-clause (v) w.e.f. AY 2021-22 only. Thus, there was no mechanism available with CPC, Bengaluru to make this adjustment while processing the return u/s. 143(1)(a) of the Act for AY 2019-20.
11.1. On the submission made by Ld. Sr. DR as to this adjustment falling within the purview of section 143(1)(a)(ii) of the Act, a specific query was raised by the Bench to the Ld. Counsel, who submitted that the claim of the assessee is not held to be incorrect while making a disallowance. The sole reason for disallowance is that the return has been filed belatedly. There is no dispute in respect of the quantum of deduction claimed by the assessee. Hence, it does not fall
Victoria International Pvt. Ltd. AY 2019-20 within the purview of adjustment u/s. 143(1)(a)(ii). For this assertion, reference was made to the decision of Koodaranhi Regional Agriculture Welfare Cooperative Society Ltd. (supra) wherein this issue has been dealt and it was held that it would not fall within the purview of prima facie adjustment u/s. 143(1)(a)(ii).
11.2. Considering the facts on record, applicable provisions of law discussed above and the judicial precedents of the Coordinate Benches, we are of the considered view that there is no provision u/s. 143(1)(a) to make any adjustment towards Chapter VI-A deductions to give effect to the provisions of section 80AC for AY 2019-20 under consideration before us. Accordingly, we hold that CPC has erred in making the disallowance towards deduction claimed u/s. 80JJAA of the Act while processing the return of income u/s. 143(1)(a) and, therefore, we direct to allow the claim of deduction made u/s. 80JJA of the Act. Thus, the ground taken by the assessee in this respect is allowed.
In the result, appeal of the assessee is partly allowed for statistical purposes.