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Facts
The assessee filed an appeal against the order of the CIT(A) for Assessment Year 2017-18. The appeal was filed beyond the prescribed time limit, but the delay was condoned. The Assessing Officer made additions on account of ad hoc disallowance of expenses and late deposit of PF/ESI.
Held
The Tribunal held that the additions made by the Assessing Officer were primarily ad hoc and not sustainable in view of various judicial pronouncements. The issue regarding the delayed payment of employee's contribution to PF/ESI was also considered, with reference to the Finance Act, 2021 and Supreme Court judgments. However, the Tribunal ultimately decided to restore the issues to the Assessing Officer for fresh consideration.
Key Issues
Whether the additions made by the Assessing Officer towards ad hoc disallowance of expenses and late deposit of PF/ESI are justified. Whether the amendment brought by Finance Act, 2021, regarding Section 43B and Section 36(1)(va) is applicable to the facts of the case.
Sections Cited
253(3), 143(3), 43B, 36(1)(va), 2(24)(x), 143(1)(a)(iv), 139, 142(1), 144B, 37(1)
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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
O R D E R PER ANADEE NATH MISSHRA: A.M. (A) This appeal vide 2017-18 against impugned appellate order dated 26.08.2024 (DIN & Order No. ITBA/NFAC/S/250/2024- 25/1067982356(1) of Commissioner of Income Tax (Appeals) [“CIT(A)”] for short]/National Faceless Appeal Centre (NFAC). (B) This appeal has been filed by the assessee, beyond time limit prescribed under section 253(3) of IT Act. The application for condonation of delay is supported by an affidavit of the assessee. The Ld. Sr. Departmental Representative for Revenue did not express any objection to the delay being condoned. Being satisfied with the reasons stated in application seeking condonation of delay in filing of this appeal; we condone the delay in filing of this appeal and admit the appeal for decision on merits.
(C) In this case, the assessment order dated 01.12.2019 was passed by the Assessing Officer (“AO”), u/s 143(3) of the Act whereby the assessee’s total income was determined at Rs.1,77,68,734/- as against the returned income of Rs.16,49,130/-. In the aforesaid assessment order, addition amounting to Rs.71,52,827/- was made by the Assessing Officer on account of ad hoc disallowance out of expenses and a further disallowance amounting to Rs.89,66,777/- was made by the Assessing Officer on account of late deposit of PF/ESI. The assessee’s appeal against the aforesaid assessment order was dismissed by the Ld. CIT(A) vide impugned appellate order dated 26.08.2024 of the Ld. CIT(A). The relevant portion of the aforesaid order dated 26.08.2024 of the Ld. CIT(A) is reproduced as under:-
“3. In course of the appeal, the appellant made submission which is as under: “Ground No. 1- General in Nature Ground No. 2, 3 & 4- That the Ld. AO has made an addition of 10% of salary contract expenses amounting to Rs.71,52,827/- on the ground that the assessee had not furnished any supporting documents in respect of such salary expenses on ad hoc basis. In this regard, it is to submit that the appellant had submitted the amount of salary on which EPF and ESIC is deducted amounting to Rs. 5,22,64,701/- along with the details of monthly labour payment made amounting to Rs. 1,92,63,576/-, hence the salary ledger comprises the details of the total salary of Rs.7,15,28,277/- charged to the profit and loss account and also the assessee had already submitted EPF and ESIC challans along with their ledger to support claimed Salary expenses and also all the payments were made through banking channel and the details of the same were already submitted by the appellant during the assessment proceedings and the ledger of salary expenses as hereby enclosed as per Annexure A. Also, the Ld. AO has made an addition of entire salary being reflected in the audited balance sheet without rejecting the book of accounts and also considering the nature of business of the appellant which is to provide security guard services and giving the salary to those security guards is the responsibility of the appellant, therefore such higher amount of salary expense must be accepted as it is their major and direct expenses. Therefore the allegation of the Ld. Assessing officer that the assessee could not provide any details is unacceptable and the addition made a bare perusal of the Grounds of Appeal would reveal that the without considering the detailed replies, information and documents submitted by the appellant and assessing officer has made the impugned additions without independent application of mind, particularly to the facts and circumstances of the case and without considering the submissions made by the appellant along with the evidences and the explanation furnished by the appellant at the time when the proceedings for assessment were being undertaken. The order of assessment has been passed in absolute violation of the principles of Natural Justice without considering the submissions made by the appellant, the ledgers produced along with the replies particularly the submissions and documents furnished on 25.11.2019 and 30.11.2019 as much as incorrectly applying sec 101 of the Indian Evidence Act, 1872 as the assessee had discharged the onus cast upon him, therefore the impugned assessment order deserves to be declared a nullity and various abovementioned case laws also supports that the order is bad in law and in facts if the Ld. AO does not consider the replies and documents submitted by the assessee. Further, it is to submit that the accounts of the assessee are audited under the Income Tax Act, 1961 and there is no adverse observation from the auditors. The disallowance made is purely ad hoc which is not sustainable in view of the following judicial decisions: Dhakeswari Cotton Mills Ltd. vs. CIT [(1954)
26. ITR 775(SC)] + Lalchand Bhagat Ambica Ram vs. CIT [(1959)
37. ITR 288(SC)] CIT vs. National Rayon Commercial Co. Ltd. [(1992) 193 ITR 744 (Bom 1TO vs. Super Chemicals Distributors [(2005)
1. SOT 102 (Del)] S.A. Builders vs. CIT [288 ITR
1. (SC)] Further the Hon'ble ITAT Delhi Bench in the case of JCIT vs. Haryana Steel & Alloys Ltd. (in 1.T.A No. 3735/DEL/99) held that no addition can be made on surmises and conjectures. DCIT VS. SOPHISTICATED MARBLES & GRANITE INDUSTRIES [(2010)
3. ITR (TRIB) 220 (DEL)] 26TH FEBRUARY, 2010 “Business expenditure — Allowability — AO made ad hoc disallowance out of car expenses, depreciation, telephone expenses and expenses on business promotion — Not justified - Assessee appeared from time to time and filed the required details but without discussing anything in the assessment order, the AO disallowed one-fifth of the car expenses and depreciation on car and one-fifth on telephone expenses treating it as personal in nature - AO ha, never examined the details of such expenses before coming to the conclusion as to, whether any personal expenses are involved — Merely on estimate or on ad hoc no disallowance can be made - CIT (A) was justified in deleting the disallowance.” , HUGHES ESCORTS COMMUNICATIONS LTD. VS. JCIT ITAT , DELHI ‘C’ BENCH i (2007) 106 TTJ (DEL) 1065] “Business expenditure — Allowability -Expenses op general maintenance, insurance, security, payment to auditors, etc. — are legitimate, business expenses — AO has not pointed out any item of expenses of disallowance nature — Ad hoc disallowance, therefore, was not justified” - ACIT VS. ALLIEp CONSTRUCTION, ITAT, DELHI BENCH: CAMP MEERUT 3009/DEL/2003 [(2007) 106 TTJ (DEL) 616] Business expenditure — Allowability - Labour expenses — AO made an ad hoc disallowance of 10 percent as the vouchers were self made and not reliable —not justified - AO did not require the assessee to furnish the addresses of the labourers — No test check was made — It was not pinpointed which item of expenditure was not verifiable — CIT(A) justified in deleting the disallowance. * SUNITA MINE CHEM IND VS. ITO [JODHPUR BENCH, (2008) 114 TTJ (JD) 98] Business expenditure — Allowability — Disallowance of travelling expenses for personal user — there being no evidence on record to point out that any part of expenses was incurred except for business purposes, AO was not justified in making 1/5th ad hoc disallowance out of travelling expenses on account of possible personal user by comparing the expenses with those of earlier year. » COCA COLA INDIA (P) LTD. VS. DCIT [(2008) 116 TTJ (PUNE) 880] Business expenditure - allowability — Ad hoc disallowance of marketing expenses -AO made ad hoc disallowance of Rs. 2,00,00,000 out of marketing expenses in respect of payment made to parties to whom no letter / notice had been given by AO for confirmation - Not justified — Assessee had furnished details and reasons given by the AO for making such ad hoc disallowance have no merit. (Para 36.8) Business expenditure - Allowability - Expenses on advertisement — Expenses on advertisement on TV, cinema, radio and posters development, disallowed by CIT (A) by giving a general and vague reason that the same was capital expenditure ~ Not justified — CIT(A) having not pointed out such specific items of expenses, disallowance cannot be sustained. * SIMBHAOLI SUGAR MILLS LTD., VS. ACIT—/ITAT, DELHI ‘€’ BENCH - (2007)
17. SOT
90. (DEL) Business expenditure — Ad hoc disallowance for being excessive and unverifiable — Validity = Books of account of the assessee audited and no defects found therein by the AO — No specific expenditure pointed out which could not be subjected to check and verification — Such disallowances never made in the past — Impugned ad hoc disallowances could not be upheld. > AYUSHAKTI AYURVED (P) LTD. VS. ACIT IN A.Y. 2005-06 — 9th FEBRUARY, 2010 Business expenditure - Disallowances — Adhoc disallowances of 10% or 255 made by AO towards conveyance, telephone, postage and foreign travel expenses claimed by assessee — Expenses were recorded in the books of account on day-to-day basis - Adhoc disallowance cannot be sustained. * INSPECTING ASSISTANT COMMISSIONER VS. INDIAN ART EMPORIUM =
50. TTJ (BOM)(THIRD MEMBER) 258 Business expenditure - Sales promotion expenses Commission paid on the spot to various persons for bringing customers - Payments unverifiable ~ Customers who visit assessee’s shop are toursts and thus some incentive is necessary for guides to bring tourist to the shop — in the face of high turnover ad allowance of Rs. 6,990 and Rs. 10,220 is not high — same allowed. « LIFE SIGHT SURGICALS (P) LTD VS. DCIT16TH JULY, 2010 - [(2010) 133 TTJ (AHD)(UO) 27] Business expenditure - Allowability - Sales promotion expenses — assessee company has incurred Rs. 2,28,960/on the foreign trip of doctors - Assessee had incurred the expenditure on sponsorship of different programs and seminars on different occasions, as the doctors are the major role player in the profit earning process of the assessee — Assessee has established the genuineness of the expenditure and demonstrated its connectivity with the business of the assessee — Disallowance was not therefore sustainable. Adhoc disallowance not possible: RATTAN MECHANICAL WORKS LTD. VS. ITO [87 TAXMAN 288 9CHD.)(MAG)] Adhoc disallowance of Rs. 8000/was made out of travelling expenses without pointed out any specific item of personal use of inadmissible nature. The disallowance was deleted. + Inspecting Assistant Commissioner vs. Mills Stores Syndicate [(1987)
28. TTJ 109(Del) /
20. ITD
41. (Del)(TM)], The assessee maintained only internal vouchers in respect of brokerage and commission paid to boost it sales. The details in internal vouchers will serve as a proper voucher. Only part of the payment was allowed by Income-tax Officer. Such an allowance will show that the payment was necessary for the purpose of business. The deduction was allowed in full Beta Naphthol Pvt. Ltd. vs. DCIT [(1994)
50. TTJ 375 (Indore)], Lumpsum disallowance of Rs. 25,000/in conveyance expenses made by A.O. which was confirmed at Rs. 15,000/by CIT(A). Held that such lumpsum disallowances without pointing out the exact amount cannot be appreciated and should be deleted. « Dwarka Prosad Agarwal vs. ITO - ITAT (Calcutta) ~ [52 [TD 239] When the complete details of expenditure on publicity and cost of prints etc., have been furnished, no part could be disallowed on estimate without pointing out any specific inflation or absence of vouchers « National industrial Corporation Ltd. vs. CIT [(2002) 258 ITR 575 (Del HC)] Where the assessee company incurred a large expenditure on gift items as a matter of sales promotion, no disallowance could be made since no part of the expenditure was found to be for non-business purposes. Hemraj Nebhomal Sons vs. CIT [(2005)278 ITR 345 (MP)] Business expenditure — Allowability = Advertisement and Sales promotion expenses - Assessee engaged in the business of purchase and sales of Bidis — Expenditure incurred for advertisement and promotion of sale of Bidis has to be regarded as expenditure for business carried on by the assessee — once ail the conditions mentioned in section 37(1) are satisfied, it is not proper on the part of AO to probe as to whether the expenditure was legitimate or necessary. « CIT v. Tirrihannah Co. Ltd. [(1992) 195 ITR 393 (Cal.)] Tea samples and complimentary tea distributed to th4e shareholders, directors and friends at the annual general meeting of the assessee — company * Oriental Science Apparatus Workshops v. CIT [(2002) 254 ITR 271 (P&H)] - Where an advertisement was given in a souvenir which merely mentioned ‘with best compliments from’ without advertising the products, such expenditure was allowed as admissible deduction CIT Vs. Berger Paints (India) Ltd., (No.2) [(2002) 254 ITR 503 (Cal)] ~ Wherg advertisement expenses were capitalized in accounts as the benefit of such outlay Spills over to future years it was held that although Accounting standard would perm) such a treatment but since it is an obligation incurred during the year, it could be treated as relating to year in which it is incurred and allowed as a deduction of that year for income tax purposes notwithstanding the accounting treatment. + Ray; Marketing (P) Ltd. vs. CIT [280 ITR 519 (Cal)] * EMPORIUM — ITAT BOMBAY 'p: THIRD MEMBER BENCH —50 TTJ (BOM)(THIRD MEMBER) 258 Business expenditure — Sales promotion expenses ~ Commissioner paid on the spot to various persons for bringing customers — Payments unverifiable — Customers who visit assessee’s shop are tourists and thus some incentive is necessary for guides to bring tourist to the shop — in the face of high turnover ad allowance of Rs. 6,990 and Rs. 10,220 is not high — same allowed. * JCIT vs. Haryana Steel & Alloy Ltd., - ITAT. Dethi -ITA No. 3735/Del/ conjectures. held that no addition can be made on surmises and « DCIT vs. Project Technologists (P) Ltd.
98. TTJ 471 — ITAT + Nodj Exports vs. Asst. CIT, 117 TTJ (Del) 913 “Ad hoc disallowances made by the A.O. out of the foreign tour expenses without supporting evidences to indicate any expenditure of personal nature are not sustainable.” Also, the Ld. AO has disallowed genuine salary expenses solely relying upon the assumptions which is also not confronted by the Ld. AO and complete the assessment without providing the opportunity of cross examination thus violating the law laid down by Hon'ble Supreme Court in case of KISHINCHAND CHELLARAM Vs. THE COMMR. OF INCOME-TAX BOMBAY CITY Il, BOMBAY dated 16/09/1980 and M/S ANDAMAN TIMBER INDUSTRIES VS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II (CIVIL APPEAL NO. 4228 OF 2006). Hence, the order of Assessment has been passed in absolute violation of the principles of Natural Justice, without providing adequate opportunity of being heard and therefore deserves to be declared a nullity. It is therefore prayed that the ad hoc disallowance may please be directed to be allowed. Ground No. 5That Ld. Assessing officer had disallowed u/s 43B of the Income tax Act.1961 made an addition of contribution to employee provident fund of Rs. 65,84,930/ and ESI contribution of Rs.23,81,847/on the ground that the assessee had not submitted any supporting documents and also not furnished any evidence that this payment is actually made. In this regard it is to submit that the assessee had already submitted EPF and ESIC challans along with their ledger and also ail the payments were made through banking channel and the details of the same were already submitted by the appellant during the assessment proceedings however the Ld. Assessing Officer has not considered the detailed replies, information and documents submitted by the appellant and a bare perusal of the Grounds of Appeal would reveal that the assessing officer has made the impugned additions without independent application of mind, particularly to the facts and circumstances of the case and without considering the submissions made by the appellant along with the evidences and the explanation furnished by the appellant at the time when the proceedings for assessment were being undertaken. The grounds assailing the validity of the additions made in the impugned order of assessment primarily rest on the fact that the defects permeating in the order of assessment, are on the technical issues and the merits of the matter, the grave erroneous observations of the assessing officer deserve to be quashed. The order of assessment has been passed in absolute violation of the principles of Natural Justice without considering the submissions made by the appellant, the ledgers produced along with the replies particularly the submissions and documents furnished on 25.11.2019 and 30.11.2019 as much as incorrectly applying sec 101 of the Indian Evidence Act, 1872 as the assessee had discharged the onus cast upon him, therefore the impugned assessment order deserves to be declared a nullity and various abovementioned case laws supports that the order is bad in law and in facts if the Ld. AO does not consider the replies and documents submitted by the assessee Further, the appellant is again submitting hereby the copy of EPF/ESIC challans and their ledger as per Annexure B. It is therefore prayed to you to kindly allow the same. Ground No. 6, 7 & 8_That Ld. AO has passed an order and made an addition without considering the facts of the case and replies, documents and evidences submitted by the appellant and also could- not produce any cognate reason before imposing such huge penalty In this regard it is to State that the Ld. AO has made an addition without specifying the reason of disallowance and without pointing out any defects therein even when the appellant had submitted all the requisite information asked by the Ld. AO, thus, the order of the Assessment passed by the Ld. AO is bad in law and in facts as the Ld. AO did not make any effort to confirm veracity of alleged salary expenses from employees, thus the said assessment order is devoid of any material or basis to prove the averments made by the Ld. AO and the same has been passed in great hurry without appreciating the evidences and documents placed on records and also the Ld. AO committed wrong in coming to perverse finding in a casual manner and the same is liable to be cancelled and various case laws in the favour of the assessee justified that the order passed by the Ld. AO is bad in law and in facts: A.) In HIGH COURT OF DELHI, Principal Commissioner of Income Tax, Central-1 v. Forum Sales Pvt Ltd. “Where AO made additions to income of assessee on account of unaccounted profit, disallowance of expenses and inflated purchases, since AO was provided with requisite bills, vouchers and addresses of transacting parties, however he did not make any effort to confirm veracity of alleged, inflated bills, in view of said facts AO could not make addition on account of inflated expenses on estimate basis without rejecting books of account” B.) In HIGH COURT OF KARNATAKA, United Trading Co. v. Income Tax Officer “Where impugned assessment order had been passed without providing sufficient or reasonable opportunity to assessee and without considering replies of assessee in response to notice, impugned assessment order being violative of principles of natural justice was to be set aside and matter was to be remitted back for consideration afresh in accordance with law.” Additional Ground No. 1The Ld. Assessing Officer has made an total addition of Rs. 1,61,19,604/- addition without issuing Show cause notice as mandated by law. Further, relying upon the various judgements passed by various tribunals, High Courts and Supreme Court, it is clear that in order to made an addition Show cause notice should be issued and relying upon the various judgements passed by various tribunals, High Courts and Supreme Court, it is clear that in order to pass an order is mandatory to issue show cause notice: a.) In HIGH COURT OF MADRAS P. T. Leg Chengalvaraya Naicker Trust v. Income-tax Officer Failure to issue Show Cause Notice (SCN)/Draft Assessment Order (DAO) under section 144B, before Passing final assessment order, is only a procedural irregularity, hence, where no SCN/DAQ had been issued prior to passing of final assessment order, impugned assessment, were to be set aside and liberty granted to revenue to complete assessments dg novo, in accordance with law. PRAYER In view of our aforesaid submissions, it ig most respectfully prayed that your honour graciously be pleased: (i) (ii) to delete the addition made by the leamed assessing officer. to cancel the notice of demand ag issued in the aforesaid order. However, in case your good self-desires any further information and or Explanation, the same may kindly be informed so that necessary compliance can be made for the same as well.”
4. Observations, Findings and Decision 4.1 This appeal is being preferred against the order u/s 143(3) dated 01.12.2019 In the Instant case was selected for scrutiny through CASS. Accordingly, notices u/s 143(2) as well as 142(1) have been issued. During the course of the assessment proceeding, the AO specifically asked about the details of salary, contractual expenses of Rs.7,15,28,277/-. Since, the appellant failed to provide any documentary evidences in support of such expenses, the AO disallowed 10% of such expenses amounting to Rs.71,52,827/to the income of the appellant. The AO also added back Rs.89,66,777/being delayed payment of employers/Employees’ contribution to PF and ESI by invoking provision of section 43B of the Act. 4.2 During the appellate proceedings, the appellant submitted a detailed submission in this regard which has been duly perused. From the perusal of the submission, it has been found that the appellant also failed to submit any documentary evidences like Form-16, pay slips and bank statement showing such expenses being in the nature of salary. Therefore, in absence of such documentary evidences, I found no merit in the argument of the appellant and therefore, I do not find any ground to interfere with the order of AO. Therefore, the addition of Rs. 71,52,827/- is hereby sustained, and the ground of the appellant is dismissed. 4.3. With regard to delayed payment of employer’s/Employee’s contribution to PF and ESI amounting to Rs.89,66,777/-, the issue is discussed and decided in the following paragraphs: i) I have considered the submission made by the appellant. As the Employee’s Contribution of PF and ESI were paid by the appellant after the “due date” as per the explanation below section 36((1)(va) of the I T Act,1961, the same was added back to the total income of the appellant in the light of provision of Section 2(24)(x) r.w.s. 36(1)(va) of the Act relying upon the information given by the auditor in Form 3CD. As per the provisions of section 143(1)(a)(iv) the following adjustment can be made: “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)…… (ii)….. (iii)….. (iv) disallowance Of expenditure indicated in the A -it Report but not taken is to account in, computing the total come the return; ii) This shows that CPC is within the power to make such adjustment as Appellant’s auditor himself has indicated in the tax audit report that such payments have been made beyond the due date prescribed in the section 36(1)(va) of the | T Act,1961, but Appellant has claimed it in the Return of Income against the Audit Report. Accordingly, the issues raised by the appellant on this count does not seems to carry much weight. iii) The submission of the appellant in respect of disallowance of employee's contribution is duly considered. However, the same cannot be accepted in view of the amendments made to section 36 and 43B by the Finance Act, 2021. The Finance Act, 2021 has amended section 36, which reads as under “In section 36 of the Income-tax Act, in sub-section (1), in clause (va), the Explanation shall be numbered as Explanation 1 thereof and after Explanatioy 1 as so numbered, the following Explanation shall be inserted, namely: - ‘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;.. The finance Act, 2021 has also amended section 43, as under “In section 43B of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely: “Explanation 5.-For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies.” v) Thus, the Finance Act, 2021, has amended section 36 of the Income-tax Act, relating to other deductions. Sub-section (1) of the said section provides for allowing of deductions provided for in the clauses thereof for computing the income referred to in section 28 of the said Act. Clause (va) of the said sub- section provides for allowance of deduction for any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply. if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause 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. By virtue of newly inserted Explanation 2 to clause (va) of sub-section (1) of the said section, 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 the said clause. vi) Section 43B of the Income-tax Act relates to allowing certain deductions only on actual payments. Clause (b) of the said section provides that any sum payable by the assessee as an employer by way of contribution to any provident fund superannuation fund or gratuity fund or any other fund for the welfare of employee? shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year, in which such sum is actually paid by him. Proviso to the said section provides that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub- section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. By virtue of insertion of Explanation 5 to this section, the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of subclause (x) of clause (24) of section 2 applies. vii) Reference is also made to the Supreme Court judgement in the case of Commissioner of Income Tax-l, Anmedabad vs. Gold Coin Health Food Pvt. Ltd. (2018) 9 SSC 622 wherein while dealing with a similar issue. Hon'ble Supreme Court in Para 15 of the decision has quoted the following: “In Principles of Statutory interpretation, 11%Edn. 2008, Justice G.P. Singh has stated the position regarding retrospective operation of statutes as follows: The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Cries and approved by the Supreme Court. For modem purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law or the meaning or effect of any statute. Such Acts are usually held to be retrospectives. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word ‘declared’ as well as the word ‘enacted’. But the use of the words ‘it is declared’ is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to be substance rather than to the form. If anew Act is ‘to explain’ an earlier act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language ‘shall be deemed always to have meant’ or ‘shall be deemed never to have included” is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law. The presumption against retrospective operation is not applicable to declatory statutes...... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is “to explain” an earlier act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to Supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended...... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69).
Where a statutes passed for the purpose of supplying an obvious omission a former statute or to ‘explain’ a former statute, the subsequent statute has relation back to the time when the prior Act was passed. The™rulé against retrospectively is inapplicable to such legislations as these are explanatory and declaratory in nature.” - Zile Singh vs. State of Haryana, (2004) 8 SCC 1.” viii) From the wordings above, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal also. The amendment declares that provisions of section 43B does not apply and deemed to have never been applied for the purpose of determining the due date. ix) Recently, in the decision dated 12 October 2022 in the case of Checkmate Services Pvt Ltd vs Commissioner of Income Tax-1, in (2022] 143 taxmann.com 178 (SC), wherein Hon'ble Apex Court has held that- “54, In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which Is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. in the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the retum, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. it is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obsiante clause under Section 438 or anything contained in that provision wouid not absolve the assessee from its ability to deposit the employee's contribution on or before the due date as a condition for deduction. 55. in the light of the above reasoning, this court is of the opinion that there is no infirmity in the approsch of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not ley down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.” Therefore, in view of the above Apex Court's judgement dated 12 October 2022 employees contribution to PF/ESI should be and ought to be deposited by the appellant within the due date as per section 36((1)(va) of the I T Act,1961, and not before the due date of filing the return as claimed by the appellant and accordingly, the grounds taken by the assessee are dismissed.
In the final result, the appeal is dismissed.”
Assessment Year:2017-18 11 (C.1) The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 26.08.2024 of the Ld. CIT(A). In the course of appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short), a paper book containing the following particulars was filed from the assessee’s side: - (C.2) At the time of hearing, the Ld. Authorized Representative for the assessee submitted that the assessee had filed written submissions in the office of the Assessing Officer during the assessment proceedings. He drew our attention to paper book which contained copy of acknowledgement of written submissions filed by the assessee. He further submitted that during the appellate proceedings in the office of the Ld. CIT(A) also, the assessee had submitted written submissions. He further drew our attention to the paper book which contained the acknowledgement of the written submissions filed in the office of the Ld. CIT(A). He submitted that the Assessing Officer passed the assessment order and the Ld. CIT(A) passed the aforesaid impugned appellate order without giving any consideration to the aforesaid written submissions. He submitted that the issues in dispute regarding aforesaid additions made by the Assessing officer amounting to Rs.71,52,827/- and Rs.89,66,777/- may be restored back to the file of the Assessing Officer with the direction to pass fresh assessment order on these issues after providing reasonable opportunity to the assessee. The learned Departmental Representative for the Revenue expressed no objection and left the matter to the discretion of the Bench. In view of the foregoing, the impugned appellate order dated 26.08.2024 of the Ld. CIT(A) is set aside and the issues in dispute regarding the aforesaid additions of Rs. Rs.71,52,827/- and Rs.89,66,777/- are restored back to the file of the Assessing Officer with the direction to pass de novo order on these specific issues in accordance with law after providing reasonable opportunity to the assessee and after giving due consideration to the written submissions and other evidences filed by the assessee. (D) In the result, the appeal is partly allowed for statistical purposes. (Order was pronounced in the open court on 11/09/2025)