Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the CIT(A)- National Faceless Appeal Centre (NFAC), New Delhi passed u/s 143(1) and 250 of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal.
1. The CIT(A) erred in confirming the action of the CPC in making adjustments in the returned income which are not permissible under section 143(1) of the Act and thereby determined the total income of Rs.1,01,15,817/- as against
Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 2 - the returned income at Rs.96,42,584/- in the intimation dated 16.10.2019 issued under section 143(1) of the Act without appreciating the facts and circumstances of the case.
2. The CIT(A) erred in confirming the disallowance of Rs.4,33,488/- under section 40 (a)(üi) of the Act on account of non-compliance with the provision of chapter XVII-B which is not a permissible adjustment under section 143(1) of the Act.
The CIT(A) failed to appreciate that the assessee has made the payment on account of the salary to its employees who are Non Resident Indians and not Citizens of India for the services rendered outside India. Thus, the provisions of section 192 of the Act are not applicable in the facts under consideration. Hence, the disallowance of Rs.4,33,488/-made under section 40(a) (ili) is not justified and the same may be deleted.
4. The CIT(A) erred upholding the disallowance of Rs.39,745/- made by the CPC under section 36(1) (va) of the Act on account of delayed payment on account of employees contribution toward provident fund without appreciating that the same is not permissible adjustment under section 143(1) of the Act.
5. The CIT(A) failed to appreciate that the assessee has paid the amount on account of employee contribution before the due date of filing of return u/s 139(1) of the Act. The amendment made in the Finance Act, 2021 is prospective in nature and thus the same will not apply for the assessment under consideration. Thus, the disallowance made under section 36(1) (va) is not justified and the same may be deleted.
The Appellant craves leave to add, alter, rescind or amend any of the Grounds.
The brief facts of the case are that the assessee company is engaged in business of metals and chemicals and has filed the return of income on Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 3 - 30.10.2018 for the A.Y 2018-19 with a total income of Rs. 96,17,580/- under normal provisions of the Act and Rs1,16,27,966/- u/s 115JB of the Act. The assessee has received intimation u/s 143(1) of the Act dated 16.10.2019 processing the return of income with (i)disallowance of delayed payment of employees contribution towards provident fund u/s 36(1)(va) of the Act of Rs.39,745/- and (ii) the assessee has made the payments to Non resident Indians (NRI) towards salaries without deduction of TDS and the A.O. has applied the provisions of Sec. 40(a)(iii) of the Act and made disallowance of Rs.4,33,488/- and assessed the total income of Rs1,00,90,820/-.
3. Aggrieved by the intimation, the assessee has filed an appeal before the CIT(A),whereas the CIT(A) has confirmed the addition of the belated deposits of PF contributions and disallowance u/sec40(a)(iii) of the Act and dismissed the appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal.
At the time of hearing, none appeared on behalf of the assessee. The Ld.DR submitted that the Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 4 - explanation 2 to Sec 36(1)(va) of the Act in finance Act 2021 was introduced and the amendment is applicable to the earlier years and on the other issue of disallowance u/sec40(a)(iii) of the Act, the Ld.DR supported the order of the CIT(A) appeal.
We heard the Ld.DR submissions and perused the material available on record. The assessee has contended in the ground of appeal that the assessee is governed by the law applicable to said Assessment year. Whereas the amended provisions/explanations are w.e.f F.Y 1-4-2021.The assessee for the various reasons could not deposit the employees contribution to provident fund within the time allowed under prescribed Act. Whereas, the assessee has deposited the amount before filing of the return of income U/sec 139(1) of the Act. The Ld.CIT(A) has dealt on the delay in depositing the employees contribution to provident fund aggregating to Rs35,99,592/-. Whereas, the assessee has complied with the provisions of Law and deposited the contributions before the due date of filling the Return of income U/sec139(1) of the Act which cannot be disputed. The Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 5 - fact remains that the provisions/explanation was introduced in the Finance Act 2021 which is effective from 1-4-2021.
6. We considering the overall facts, circumstances and the submissions find on the similar issue, the Co- ordinate Bench of this Hon’ble Tribunal in M/s Kalpesh Synthetics Pvt Ltd Vs DCIT. Cpc in ITA no 1785/Mum/2021.A.Y2018-19 order dated 27.04.2022 has considered the facts, provisions of law on the section 143(1) and sec36(1)(Va) of the Act and allowed the appeal and observed at Page10 Para 9 &10 which is read as under: 9 what a tax auditor states in his report are his opinion and his opinion cannot bind the auditee at all. In this light, when one considers what has been reported to be ‘due date’ in column 20 (b) in respect of contributions received from employees for various funds as referred to in Section 36(1)(va) and the fact that the expression ‘due date’ has been defined under Explanation (now Explanation 1) to Section 36(1)(va) provides that “For the purposes of this clause, ‘due date’ means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise”, one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just
Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 6 - a factual report about the fact of payments and the fact of the due date as per the Explanation to Section 36(1)(va). This due date, however, has not been found to be decisive in the light of the law laid down by Hon'ble Courts above, and it cannot, therefore, be said that the reporting of payment beyond this due date in the tax audit report constituted “disallowance of expenditure indicated in the audit report but not taking into account in the computation of total income in the return” as is sine qua non for disallowance of Section 143(1)(a)(iv). When the due date under Explanation to Section 36(1)(va) is judicially held to be not decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is “indicative” of the disallowance of expenditure in question. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon’ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well.
In view of the detailed discussions above, we are of the considered view that the impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. As we hold so, we make it clear that our observations remain confined to the peculiar facts before us, that our adjudication is confined to the limited scope of adjustments which can be carried out under section 143(1) and that we see no need to deal with the question, which is rather academic in the present context, as to whether if such an Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 7 - adjustment was to be permissible in the scheme of Section 143(1), whether the insertion of Explanation 2 to Section 36(1)(va), with effect from 1st April 2021, must mean that so far as the assessment years prior to the assessment years 2021-22 are concerned, the provisions of Section 43B cannot be applied for determining the due date under Explanation (now Explanation 1) to Section 36(1)(va). That question, in our humble understanding, can be relevant, for example, when a call is required to be taken on merits in respect of an assessment under section 143(3) or under section 143(3) r.w.s. 147 of the Act, or when no findings were to be given on the scope of permissible adjustments under section 143(1)(a)(iv). That is not the situation before us. We, therefore, see no need to deal with that aspect of the matter at this stage.
We considering the ratio of judicial decision and the facts emanated in the course of hearing find that the amendment was brought in finance Act 2021 w.e.f 1-4-2021.The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee shall be applicable prospectively. We considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to assessment year 2018-19. The assessee has deposited the employee’s contribution of Provident fund before the due date of return of income u/sec 139(1) of the Act. Accordingly, we set-
Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 8 - aside the order of the CIT(A) on this disputed issue and direct the assessing officer to delete the disallowance and allow these grounds of appeal in favour of the assessee.
8. The second disputed issue is with respect to disallowance of salary paid to the employees , who are NRIs and the services are rendered outside India. The contentions raised by the assessee in the grounds of appeal that the provisions of Sec. 192 of the Act are not applicable to these facts and the CIT(A) has also confirmed the addition u/s 40(a)(iii) as the assessee has not complied with the provisions of Chapter XVII-B. The contentions raised are that the adjustment made u/s 143(1) of the Act is not permissible. We find the intimation u/s 143(1) of the Act was processed and there was no occasion/opportunity was make available to the assessee to substantiate with the explanations on non deduction of TDS on the Salaries. Hence to meet the ends of justice, we shall provide an opportunity to the assessee to substantiate with the explanations and material information. Accordingly, we restore this issue to the file of the A.O to examine and verify
Rishabh Metals and Chemicals Pvt Ltd, Mumbai - 9 - the facts and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information. And the ground of appeal raised by the assessee is allowed for statistical purposes.
9. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 27.06.2022.