JITENDRA SIZING FACTORY,KISHANGARH vs. ITO WARD 1, KISHANGARH

ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 29-07-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2019-20. 2.1 The solitary issue raised by the assessee is that the ld. CIT(A), NFAC has grossly erred on facts and in law in confirming the addition of Rs.1,56,694/- made by the DCIT, CPC, Bangalore u/s 143(1) on account of disallowance of 2 M/s. Jintendra Sizing Factory vs ITO, Ward -1, Kishangrh Employee’s Contribution of ESI and PF which was paid to the said funds accounts late but before the due date of filing of return u/s 139(1) of the Act. 2.2 Brief facts of the case are that the assessee filed its return of income on 10- 08-2019 declaring total income of Rs.7,53,100/- which was processed u/s 143(1) of the Act and in terms of intimation order dated 02-07-2020 issued by CPC, Bangaluru, the AO made disallowance of Rs.1,56,694/- towards employee’s contribution of Provident Fund. 2.3 In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:- ‘’5.12. (iv) Recently, the Hon’ble ITAT, Delhi in the case of Vedvan Consultants Pvt Ltd. (ITA No. 1312/Del./2020 A.Y. 2018-19) dated 26-08-2021 has upheld the retrospective applicability8 of aforesaid amendments vide para 12 of their order stating that the language of newly proposed explanation 2 to Section 36(1)(va) and explanation 5 to Section 43B makes it clear that the amendment is retrospective. 5.13 In view of the above discussion and considering the clarificatory amendment in law, the claim of the appellant cannot be accepted. Hence, the amounts of employee’s contribution to the PF paid by the appellant before filing of the Income Tax Return cannot be allowed as deduction under section 43B of the Income Tax Act. As the amounts once received from the employees are deemed as income of the appellant under section 2(24)(x) of the I.T. Act and as the same has not been deposited within the due date prescribed under the respective laws, the same is not deductible u/s 36(1)(va) of the I.T. Act. Hence, the action of CPC is adding the amount as income of the appellant is correct and as per law.

3 M/s. Jintendra Sizing Factory vs ITO, Ward -1, Kishangrh 5.14 As the disallowance of the amount involved only calculation as to whether the same was deposited before the due date or not involved only arithmetic calculation and is well within the purview of prima facie adjustment that can be made by the CPC u/s 143(1) of the I.T. Act, for such prima facie adjustment, no separate opportunity of hearing was necessary. The ground 1 raised by the appellant is accordingly rejected.’’ 2.4 During the course of hearing, the ld. AR of the assessee filed a detailed written submission and submitted that employees’ contribution to PF and ESI collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act and thus submitted that where such contribution has been deposited before the due date of filing of return of income, no disallowance u/s 36(1)(va) of the Act can be made. In support of this, the ld. AR relied on the decision of ITAT, Jaipur Bench in the case of Kishangarh Granites (P) Ltd. (ITA No. 141/JP/2021 dated 11-11-2021, decided in favour of the assessee).The ld. AR invited Bench attention to the Memorandum of Finance Bill. 2021 in which it is explicitly mentioned that these amendments will take effect from Ist April, 2021 and will accordingly apply to the Assessment Year 2021-22 and subsequent years. Therefore, the disallowance confirmed by the ld. CIT(A) as to the issue of deposition of PF/ESI deserves to be deleted.

4 M/s. Jintendra Sizing Factory vs ITO, Ward -1, Kishangrh 2.5 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.6 The Bench has heard both the parties and perused the materials available on record. As regards the issue of late deposit of Employees contribution towards PF/ESI, it is noted from the available records that the Employees Contribution towards PF/ESI has been paid before the due date of filing of return. The Bench observed that the issue of late deposit of PF/ESI contribution by the assessee but before filing the due date of filing of the return, is covered by the decision of ITAT, Jaipur Bench dated 22-02-2020 in the case of Pratap Technocrats Private Ltd. And another vs ADIT,CPC, Bengaluru (ITA 18/JP/2022, 33/JP/2022, 24,25, & 26/JP/2022 wherein ITAT has held as under:- ‘’20. By considering the totality of the facts and the judicial pronouncements, we are of the view that the amendment brought in the statute i.e. by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting explanation 2 is prospective and not retrospective. Hence, the amended provision of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee’s appeal is allowed.’’ Therefore, the Bench respectfully concurs with the findings of this Bench on the issue of PF/ESI and the order of the ld. CIT(A) is reversed. Thus the appeal of the assessee is allowed.

In the result, the appeal filed by the assessee is allowed. 3.0 Order pronounced in the open court on 14/10/2022.

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