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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
This appeal is filed by assessee against the order passed by the National faceless appeal Centre (the learned CIT – A), Delhi for assessment year 2017 – 18 on 31/8/2021 wherein the appeal filed against the order of Central processing centre, Bengaluru (the learned AO) dated 22/9/2019 wherein a disallowance of ₹ 792,353/– was made u/s 143 (1) of the act with respect to the sum received from employees contribution to provident fund or superannuation fund, was dismissed.
“1. Learned Commissioner of Income Tax (Appeals) erred in confirming the adjustment made to Total Income of the Appellant us 143(1)(a)(iv) of the Act in the Intimation passed u/s 143(1) of the Act by Learned Centralized Processing Centre, Income Tax Department to the tune of Rs. 7,92,353/- being alleged belated payment of Employees contribution to PF & ESIC as the payments were made beyond the due date as specified in the respective PF & ESIC Act.
Appellant submits that in view of the facts and circumstances of the case as well as in law, the said adjustment to Total Income of the Appellant to the tune of Rs. 7.92,353/- u/s 36(1) (va) is bad in law and ought to be allowed in full while passing Intimation u/s 143(1) of the Act.
Learned Commissioner of Income Tax (Appeals) erred in confirming the adjustment made to Total Income of the Appellant u/s 143(1)(a)(iv) of the Act in the Intimation passed u/s 143(1) of the Act by Learned Centralized Processing Centre, Income Tax Department to the time of Rs. 792,353/- on the plea that contribution to PF & ESIC are solely and exclusively governed by the provisions of section 36(1) (va) of the Act without any reference to Section 438 of the Act.
Appellant submits that in view of the facts and circumstances of the case as well as in law, the Appellant submits that in view of the facts and circumstances of the case as well as in law, the said adjustment made to Total Income of the Appellant u/s 143(1)(a)(iv) of the Act which are confirmed by CIT(Appeals) ought to be deleted.
3. Learned Commissioner of Income Tax (Appeals) erred in confirming the adjustment made to Total Income of the Appellant u/s 143(1)(a)(iv) of the Act in the Intimation passed u/s 143(1) of the Act by Learned Centralized Processing Centre, Income Tax Department to the tune of Rs. 7,92,353/- by relying on Explanation 2 to Section 36(1) (va) of the Act introduced by Finance Act, 2021 w.e.f 01.04.2021 wherein it is stated that "Explanation 2.-For the removal of doubts, it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause"
Appellant submits that, the above amendment by way of insertion of Explanation 2 to Section 36(1)(va) of the Act is prospective in nature and hence does not apply to AY 2017-18.
4. Learned Commissioner of Income Tax (Appeals) erred in confirming the adjustment made to Total Income of the Appellant u/s 143 (1)(a)(iv) of the Act in the Intimation passed us 143(1) of the Act by Learned Centralized Processing Centre, Income Tax Department to the tune of Rs. 7,92,353 without referring to the specific provisions of adjustment contained in section 143(1)(a)(iv) of the Act. Appellant submits relevant clause 20(b) of Audit Report in Form 3CD nowhere requires Auditor to report disallowance in clause 20(b) of Form 3CD (Tax Audit Report). In other words, it is only information about due date of Payment and actual date of payment of ESIC and PF dues which is required to be reported by the Tax Auditor.
Appellant submits that in view of the facts and circumstances of the case as well as in law, after going through the provision of Section 143(1)(a)(iv) of the Act together with clause 20(b) of Form 3CD, mo adjustment can be made for belated payment of PF & ESIC dues as clause 20(b) of Form 3CD does not require a Tax Auditor to report a disallowance, but only requires Tax Auditor to provide information about due date of Payment and actual date of payment
Facts shows that assessee is a company engaged in the business of food and travel filed return of income on 15 June 2018 declaring a total income of Rs 1,00,84,975/–.
The central processing Centre proposed to the adjustment u/s 143 (1) (a) of the income tax act as per communication dated 21 February 2019 that sum received from employees contribution to the extent not credited to the employees account on or before the due dates as specified in the respective law is disallowable. The assessee submitted its response on 7 March 2019. Learned AO process the return on 15 April 2019 making the above adjustment/addition of ₹ 792,353/–.
Assessee preferred appeal before the learned CIT – A. The order was passed on 31/H 2021 where the appeal filed by the assessee was rejected for following reasons:- i. according to the provisions of the income tax act as contained in Section 2 (24) (x) read with Section 36 (1)(va), the employees contribution becomes income of the assessee if not paid before the due date prescribed Under the respective provident fund/fund law. It has nothing to do with the due date of filing of the return of income by the assessee. There are ii. The circular number 22/2015 dated 17/12/2015 issued by the central board of direct tax also explains the law in that way. iii. There is an amendment by insurance and of explanation 2 to clause (va) of Section 36 (1) with effect from 1/4/2021 by the finance act of 2021 and corresponding amendment to the provisions of Section 43B by inserting explanation 5 also explained the law as it is in existence since beginning. iv. Reliance was placed on the decision of CIT versus Gold coin health Food private limited (2008) 304 ITR 308 (SC) wherein it has been held that the proviso so inserted code good for the assessment years prior to 2021 – 22.
Therefore, assessee is aggrieved with the above order and is in appeal before us. The learned authorised representative submitted a paper book containing 103 pages and submitted that there are several judicial precedents of the various coordinate benches, which clearly says that if the employees contribution is deposited by the assessee before the due date specified for filing of the return of income it cannot be disallowed. He also referred to the
The learned departmental representative supported the orders of the learned lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that the adjustment has been made by the central processing Centre u/s 143 (1) of the act. Identical issue has been dealt with by the coordinate bench in case of Kalpesh Synthetcis P Limited V DCIT [2022] 137 taxmann.com 475 (Mumbai - Trib.)[27- 04-2022] and held that a. The adjustments under section 143(1)(a)(iv) in respect of "disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return" is to be read as, for example, subject to the rider "except in a situation in which the audit report has taken a stand contrary to the law laid down by Hon'ble Courts above".
b. AO, CPC must dispose off objections of assessee against proposed adjustments u/s 143(1)(a) by a reasoned order as reasons constitute the soul of a quasi-judicial order
Accordingly we allow ground number 1 & 2 of the appeal in favour of the assessee and direct the learned assessing officer to delete the disallowance of ₹ 792,353/– on account of delayed payment of Provident fund and ESI of employees contribution Under the respective law but deposited before the due date of filing of the return of income for the reason that same are not this allowable.
In the result appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 31.05.2022.