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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 205/JP/2022
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 205/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Dr. B. Lal Clinical Laboratory Private ACIT, Vs. Limited Circle-7, 6-D, Malviya Industrial Area Jaipur, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACB 6185 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vedant Agarwal (Adv.) jktLo dh vksj ls@ Revenue by : Ms Monisha Choudhary (JCIT) a lquokbZ dh rkjh[k@ Date of Hearing 27/06/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 14/07/2022
vkns'k@ ORDER
PER: DR. S. SEETHALAKSHMI, J.M. This appeal by the assessee is directed against the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi [hereinafter referred to as (NFAC)] dated 16.03.2022 for the AY 2017-18.
Delay of 11 days is involved in filing of the present appeal. The assessee appellant explaining the reasons leading to delay in filing of the present appeal, it is stated that the same had occasioned on account of technical glitches that were involved in online filing of the appeal, as a result whereof the appeal was filed manually, and the same had resulted to a delay of 11 days in filing of the same.
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No objection was raised by the ld. D.R as regards the request of the assessee for condoning the aforesaid delay of 11 days in filing of the present appeal before us.
In the backdrop of the aforesaid facts, we herein being of the considered view that the delay in filing of the present appeal had crept in on account of bonafide reasons, therefore, condone the same. 5. The assessee has raised the following grounds:-
“1. On the facts and circumstances of the case ld. Lower Authorities grossly erred in making and confirming disallowance of Rs. 1,95,444/- on account of delay payment of ESIC and PF ignoring this fact that payment has been made on or before the due date of filing Income Tax Return.”
Brief facts of the case are that the assessee company has furnished its return of income pertaining to the assessment year 2017-18 under consideration u/s 139(1) of the I.T. Act on 01.11.2017 declaring total income of Rs. 1,32,66,920/-. In the processing an addition of Rs. 1,95,444/- was made. This is on account of delay of deposit of employees’ contribution towards Provident Fund and ESI. Against this intimation the assessee preferred this appeal.
Being aggrieved by the impugned order issued U/s 143(1) of the IT Act, the assessee is preferred an appeal before the ld. CIT(A). The assessee filed complete details of the entire payments i.e. employee’s PF & ESI contribution paid before the due date of filing of return of income.
The assessee before the ld. CIT(A) contended that when the amount of employee’s contribution to ESI & PF is deposited before the due date of filing of return of income, no disallowance U/s 36(1)(va) can be made and that this
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issue is settled in favour of the assesseee by the judgments of Hon’ble High Courts, which are produced as under:-
Aimil Limited (2010) 321 ITR 508 (Delhi) 2. State Bank of Bikaner & Jaipur ( 2014) 363 ITR 70 (Rajasthan) 3. Essae Teraoka Pvt. Ltd. (2014) 366 ITR 408 (Kar.) 4. Spectrum Consultants India P. Ltd. (2014) 2 ITR-OL 622 5. GhatgePatil Transports ltd. 368 ITR 749 6. CIT vs. Sabari Enterprises 298 ITR 141 (Karn) 7. CIT vs. Jaipur Vidyut Vitran Nigam Ltd. and Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (2014) 363 ITr 307 8. CIT vs. State Bank of Bikaner & Jaipur and Jaipur Vidyut Vitaran Nigam Ltd. (2014) 363 ITR 70
The reliance was also placed on the decisions of the ITAT Jaipur Bench in the following cases:-
• Dr. B. Lal Clinical Labotary Pvt. Ltd. vs. ACIT in ITA No. 313/JP/2021 dated 20.01.2022. • Bal Swaroop Agarwal vs. ITO in ITA No. 320/JP/2021 dated 20.01.2022. • Pradeep Kumar Sharma vs. ITO in ITA No. 314/JP/2021 dated 20.01.2022. • Anil Sharma vs. ITO in ITA No. 315/JP/2021 dated 20.01.2022.
The assessee before the ld. CIT(A) also contended that the amendment brought in by the Finance Act, 2021 in Section 36(1)(va) of the Act and has also referred to the rationale of the amendment as explained by the memorandum in the Finance Bill, 2021.
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The ld. CIT(A) finally held that the adjustment made by the AO will fall in the category of S.143(1)(a)(ii) of the Act as it was an incorrect claim of deduction u/s 36(1)(va) of the Act. The ld. CIT(A) observed that it is not in dispute that appellant's ROI itself shown the delay in payments of Employee’s contribution to PF/ESIC amounting to Rs 1,95,444/- within the "due date" prescribed as per Explanation 2 Section 36(1)(va) and that by virtue of deeming provision of Section 2(24)(x) r.w.s 36(1)(va) of the Act, deduction was not admissible to the assessee for Rs. 1,95,444/- based on the ROI and the information contained therein. Hence, the AO rightly invoked provisions of S.143(1)(a)(ii) of the Act and made the adjustment for such incorrect claim made by the assessee.
Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. The Ld. AR for the assessee at the time of hearing submitted that the payment to employee’s contribution towards PF and ESI was made before the date of filing the return of income by the assessee U/s 139(1) of the Act.
On the other hand, the ld. CIT-DR only relied on the order of ld. CIT(A) and stated that ld. CIT(A) has passed exhaustive order explaining the provisions of the Act.
We have considered the rival contention and perused the orders of the authorities and the material available on record. Admitted facts of the present case are that the payments of PF & ESI contribution relating employee’s contribution are before the due date of filing of return of income U/s 139(1) of the Act. We have noted that the issue under consideration is covered by the decision of the Coordinate Bench in case of Dr. B. Lal Clinical laboratory
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Private Limited vs. ACIT in ITA 313/JP/2021 order dated 20.01.2022 (Supra) wherein it is held as under:- “8. We have heard the rival contentions and purused the material available on record. In case of Mohangarh Engineers and Construction Company vs DCIT, CPC (Supra), we have extensively dealt with the identical matter relating to employee’s contribution towards ESI/PF and our findings therein read as under: “13. We have heard the rival contentions and perused the material available on record. On perusal of the details submitted by the assessee as part of its return of income, it is noted that the assessee has deposited the employees’s contribution towards ESI and PF well before the due date of filing of return of income u/s 139(1) and the last of such deposits were made on 16.04.2019 whereas due date of filing the return for the impugned assessment year 2019-20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputedly, the employees’s contribution to ESI and PF which have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act.
The issue is no more res integra in light of series of decisions rendered by the Hon’ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions.
In this regard, we may refer to the initial decision of Hon’ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon’ble High Court after extensively examining the matter and considering the various decisions of the Hon’ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon’ble High Court was pleased to held as under:
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“20. On perusal of Sec.36(1)(va) and Sec.43(B)(b) and analyzing the judgments rendered, in our view as well, it is clear that the legislature brought in the statute Section 43(B)(b) to curb the activities of such tax payers who did not discharge their statutory liability of payment of dues, as aforesaid; and rightly so as on the one hand claim was being made under Section 36 for allowing the deduction of GPF, CPF, ESI etc. as per the system followed by the assessees in claiming the deduction i.e. accrual basis and the same was being allowed, as the liability did exist but the said amount though claimed as a deduction was not being deposited even after lapse of several years. Therefore, to put a check on the said claims/deductions having been made, the said provision was brought in to curb the said activities and which was approved by the Hon'ble Apex Court in the case of Allied Motors (P) Ltd. (supra).
A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the above proviso and, further more second proviso was removed by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec.43B starts with a
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notwithstanding clause & would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of filing of return.
We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act.
Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act.”
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The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Vitran Nigam Ltd. (supra), CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), and CIT vs Rajasthan State Beverages Corportation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act.
We further note that though the ld. CIT(A) has not disputed the various decisions of Hon’ble Rajasthan High Court but has decided to follow the decisions rendered by the Hon’ble Delhi, Madras, Gujarat and Kerala High Courts. Given the divergent views taken by the various High Courts and in the instant case, the fact that the jurisdiction over the Assessing officer lies with the Hon’ble Rajasthan High Court, in our considered view, the ld CIT(A) ought to have considered and followed the decision of the jurisdictional Rajasthan High Court, as evident from series of decisions referred supra, as the same is binding on all the appellate authorities as well as the Assessing officer under its jurisdiction in the State of Rajasthan.
In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs 4,38,530/- so made by the CPC towards the delayed deposit of the employees’s contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon’ble Rajasthan High Court.”
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In the instant case, admittedly and undisputedly, the employees’ contribution to ESI and PF 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. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case. Similar view has been taken by the Coordinate Bangalore Benches in case of Shri Gopalkrishna Aswini Kumar vs. ACIT (supra) wherein it has held as under:-
“7. The Hon'ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd., (supra) has taken the view that employee's contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee's share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon'ble Karnataka High Court. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier
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paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act in both the Assessment Years deserves to be deleted.” 10. In light of the aforesaid discussions and in the entirety of facts and circumstances of the case and following the consistent decisions taken by the various Benches of the Tribunal, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs 2,38,852/- so made by the CPC towards the deposit of the employees’s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted.”
A similar issue has been decided by the Hon’ble Delhi High Court in the case of CIT vs. AIMIL Ltd., (2010) 321 ITR 508 wherein it has been held as under:-
“The deletion with effect from April 1, 2004 by the Finance Act, 2003 of the second proviso to section 43B of the Income-tax Act, 1961, which stipulates that contributions to the provided fund and Employees State Insurance Fund should be made within the time mentioned in section 36(1)(va), that is, the time allowed under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, as well as the Employees’ State Insurance Act, 1948, it treated as retrospective in nature. If the employees’ contribution is not deposited thereafter, the employer not only pays interest and delayed payment but can incur penalties also, for which specific provisions are made in the those Acts. In so far as Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payments, if the actual payment is made before the return is filed. Where for the assessment year 2002-03 the assessee had deposited employer’s contribution as well as employees’ contribution towards provident fund and ESI after the due date, as prescribed under the
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relevant Act/Rules but before the due date for filing the return under the Income-tax Act: Held accordingly, that no disallowance could be made in view of the provisions of Section 43B as amended by the Finance Act, 2003.” 16. From the above discussion, it is clear that there are series of decisions of various Hon’ble High Courts on this issue and even Hon’ble Jurisdictional High Court in the case of M/s. Industrial Security & Intelligence India P Ltd., (supra) held that the payment of employees contribution in regard to PF & ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B of the Act.
Now, the question arises, whether by the Finance Act, 2021, the provisions of Section 36(1)(va) by inserting the Explanation 2 r.w.s. 43B of the Act have been amended, whereby it is clarified that the provisions of Section 43B of the Act shall not apply and shall be deemed ought to have been applied for the purpose of determining the due date under this clause. In our opinion, this amendment has been brought in the statute book to provide certainty about the applicability of provisions of Section 43B of the Act inspite of belated payment of employee’s contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. The relevant Clauses 8 & 9 of the memorandum explaining the provisions are reproduced as under:-
“Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provide that income to
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include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees. Section 36 of the Act pertains to the other deductions. Sub-section (1) of the said section provides for various deductions allowed while computing the income under the head ‗Profits and gains of business or profession‘. Clause (va) of the said sub-section provides for deduction of 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” to mean 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 there-under or under any standing order, award, contract of service or otherwise. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. Though section 43B of the Act covers only employer‘s contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer 40 contribution and employee‘s contribution towards welfare fund. It may be noted that employee‘s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs
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to be stressed that the employer‘s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee‘s contribution towards welfare funds. Employee‘s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee‘s contributions. Accordingly, in order to provide certainty, it is proposed to – (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the ―due date‖ under this clause; and (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies. These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.” 17. The present appeal is filed by the assessee against disallowance of Rs. 1,95,444/- pertaining to employees contribution made towards ESI & PF which was paid by the appellant company after the "due date" under respective statute of ESIC/PF. This disallowance was made by the AO under section 143(1) of the Act on the basis of remarks in the relevant column of Form no. 3CD report attached with the return of income. In the appeal petition, the appellant has stated that total income returned at Rs. 1,32,66,920/- has been processed at Rs. 1,30,71,476/- after making adjustment u/s. 143(1)(a)(ii) for Rs. 1,95,444/- by disallowing PF and other contribution
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paid after due date prescribed by respective labour laws, out of sum collected from employees contribution to PF/ESIC etc. The assessee has stated that disallowance of Rs. 1,95,444/- was not in accordance with the provision of Section 43B of the Act as the said amount were duly remitted before the due date of filling of return of income. The appellant has referred to the decisions of various High Courts including the decision of jurisdictional Rajasthan High Court in the case of Rajasthan State Beverages Corporation Ltd 392 ITR 2 and similar other decisions on this issue.
In the present case, we have gone through the observation of ld. CIT(A), recorded at page- 12 & 13 of the impugned order which reads as under:-
“Hence, I hold that if the employer fails to deposit the entire amount toward employees’ contribution on account of PF &ESI with concerned department on or before the due date under PF & ESI, the assessee shall not be entitled for deduction to that extent. In fine if employees contribution received by the assessee is not credited to the employee’s account in the relevant fund or funds on or before the due date mentioned in the explanation to section 36(1)(va) [i.e. due dates under PF Act, ESI Act/other law], the assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 of the Act even if contribution deposited on or before due date [i.e. due date for filing income tax return under section 36(1)(va) for depositing employers’ contributions to these funds. In the result, the appeal is dismissed.” 19. After considering the above findings of CIT(A), now we have gone through ratio laid down by the Hon’ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466, wherein the Hon’ble Supreme Court held that unless contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. The law passed today cannot be applied to the events of the past. The Hon’ble Supreme Court held that if
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somebody does something today, he do it keeping in view the law of today and in force and not tomorrow’s backward adjustment of it. According to Hon’ble Apex court every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit, which means law looks forward not backward. In the case of Vatika Township Pvt. Ltd., (Supra), the issue under challenge before Hon’ble Supreme Court was the insertion of proviso to section 113 of the Act by the Finance Act 2002 for charging of surcharge. Hon’ble Supreme Court noted that though provision for surcharge under the Finance Acts have been in existence since 1995, the charge of surcharge with respect to block assessments, having been created for the first time by the insertion of proviso to Section 113 of the Act, by Finance Act, 2002, it is clearly a substantive provision and is to be construed as prospective in operation. The Hon’ble Supreme Court held that the amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by parliament.
The Hon’ble Supreme Court finally held that the proviso to Section113 of the Act is prospective and not retrospective. For this proposition their lordships of the Hon’ble Supreme Court observed at page 495 as under:-
“Notes on Clauses” appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that “this amendment will take effect from 1st June, 2002”. These become epigraphic words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that few other amendments in the Income Tax Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a) of S.92F is amended “so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract.” This amendment
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takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of 3 concepts: (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. Thus, it was a conscious decision of the legislature, even when the legislature knew the implication thereof and took note of the reasons which led to the insertion of the proviso, that the amendment is to operate prospectively. Learned counsel appearing for the assessees sagaciously contrasted the aforesaid stipulation while effecting amendment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Finance Acts pertaining to other years where the legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to Section 113 is concerned, there is no such language used and on the contrary, specific stipulation is added making the provision effective from 1st June, 2002. (e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 dated 27th August, 2002, with the subject “Finance Act, 2002 – Explanatory Notes on provision relating to Direct Taxes”. This circular has been issued after the passing of the Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to the Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with amendments in Section 158BE, would be prospective i.e. it will take effect from 1st June, 2002.
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(f) Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in second proviso to sub- section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: “Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act.” Addition of this proviso in the Finance Act, 2003 further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect of the surcharge, having been created for the first time by the insertion of the proviso to Section 113, is clearly a substantive provision and hence is to be construed prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a taxing statute can be said to be intended to remove 'hardships' only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from June 1, 2002.” 20. As per ratio laid down by the judgment of Hon’ble Supreme Court in Vatika Township P. Ltd. (Supra), there cannot be imposition of any tax without the authority of law and such law has to be unambiguous and should prescribe the liability to pay taxes in clear terms.
By considering various decisions passed by this Bench, that this issue is settled in favour of the assessee by the Judgments of this Hon’ble Bench:
18 ITA No. 205 /JP/2022 Dr. B. Lal Clinical Laboratory Pvt. Ltd. • Pratap Technocrats Pvt, Ltd. vs. ADIT in ITA No. 18/JP/2022 dated 22.02.2022. • Prahlad Narayan Bairwa vs. ADIT in ITA No. 33/JP/2022 dated 22.02.2022. • Jairaj vs. ADIT in ITA No. 24,25 & 26/JP/2022 dated 22.02.2022. • The Earth House Resorts LLP vs. ADIT in ITA No. 28/JP/2022 dated 22.02.2022. • Group Zeor vs. ITO in ITA No. 250/JP/2021 dated 01.03.2022. • Karni Kehar Security Co-operative Scoeity Ltd. vs. DCIT in ITA No. 310/JP/2021. • Devi Shanker vs. DCIT in ITO 35/JP/2022 dated 01.03.2022. 22. By considering the totality of the facts and the various judicial pronouncements, we are of the view that the amendment brought in the statue 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 provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2017-18 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee’s appeal is allowed.
In the result, the appeal of the assessees is allowed.
Order pronounced in the open Court on 14 /07/2022. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalashmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 14/07/2022.
19 ITA No. 205 /JP/2022 Dr. B. Lal Clinical Laboratory Pvt. Ltd. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Dr. B. Lal Clinical Laboratory Private Limited, 1. Jaipur. izR;FkhZ@ The Respondent- ACIT, Circle-7, Jaipur. 2. 3. vk;dj vk;qDr@ CIT vk;dj vk;qDr@ CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 5. xkMZ QkbZy@ Guard File { ITA No. 205/JP/2022} 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत