DYNAMIC CABLES LIMITED,JAIPUR vs. COMMISSIONER OF INCOME TAX APPEALS NATIONAL FACELESS APPEAL , DELHI

1 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ t;UrHkkbZ t;UrHkkbZ] ys[kk lnL; ds le{k t;UrHkkbZ BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 329/JP/2021 fu/kZkj.k o"kZ@Assessment Year : 2019-20 cuke M/s. Dynamic Cables Ltd. The Centralized Processing Vs. F-260, Road No.13, VKI Area Centre, Bangaluru-560 500 / The AO, Circle-1, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCD 5741 Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mukesh Gupta, CA jktLo dh vksj ls@ Revenue by: Shri A.S. Nehra, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 07/03/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 31 /03/2022 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal by the assessee is directed against the order of the ld. CIT(A) dated 30-10-2021, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2019-20. 2. The hearing of the appeal was concluded through video conference by both

the parties in view of the prevailing situation of Covid-19 Pandemic. 3.0 The Solitary ground of appeal raised by the assessee is as under:- ‘’Under the facts and circumstances of the case the ld. CIT(A) has grossly erred in law as well as on facts in sustaining the addition of Rs. 789,648/-

2 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur disallowing employee contribution of EPF and ESI u/s 36(1)(va) of the Act deposited before filing income tax return even after Supreme Court judgement and High Court Judgement (including Rajasthan High Court and ITAT Jaipur bench) on this issue in favour of the assessee.

4.1 At the outset of the hearing, the Bench observed that there is delay of 02

days in filing the appeal by the assessee for which the assessee filed an application

dated 02-02-2022 praying therein for condonation of delay on the ground that the

assessee had tried to file appeal application on 29-12-2021 on ITAT GOV.IN E-

filing Website but due to error the assessee could not file the appeal on 29-12-

2021 in ITAT website. The assessee further submitted that he got success in filing

the appeal on 30-12-2021 in ITAT Website and thus submitted the hard copy to

ITAT office on 31-12-2021. Hence, the delay occurred due to the reason beyond

the control of the assessee. The assessee further submitted that there was no

malafide or deliberate intention in filing the present appeal. Thus assessee prayed

for condonation of delay of 02 days in late filing the appeal which is beyond his

control.

4.1 The ld. DR during the course of hearing objected to the assessee's

application for condonation of delay.

4.2 We have heard both the parties and perused the materials available on

record. We find that assessee has made efforts to file the appeal on 29-12-2021 but

due to technical fault/ reason in ITAT website the assessee could not file the same.

3 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur However, the assessee got success to file the appeal on line in ITAT website on

30-12-2021 and subsequently the assessee filed the hard copy of the appeal

application on 31-12-2021 in ITAT office which shows that the assessee has

neither malafide nor deliberate intention in late filing the appeal. Hence, the delay

is occurred due to technical fault/ reason in ITAT website which is beyond the

control of the assessee. Therefore, it is observed that the assessee is prevented by

sufficient cause in not filing the appeal in time. The Hon'ble Supreme Court in the

case of Collector, Land Acquisition vs. Mst. Katiji, 167 ITR 471 observed as

under:-

‘’The Legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression " sufficient cause " in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice--that being the life-purpose of the existence of the institution of courts. A justifiably liberal approach has to be adopted on principle. "Every day's delay must be explained" does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an evenhanded manner. There is no warrant for according a step-motherly treatment when the State is the applicant praying for condonation of delay. "When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay."

In this view of the matter, the application of the assessee for condonation of delay

in filing the appeal is allowed.

4 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur 5.1 The Bench during the course of hearing observed that the only issue arises

in this appeal of the assessee is regarding disallowance of employee’s contribution

of PF and ESI deposited belatedly but before due date of filing of return of income

U/s 139(1) of the Income Tax Act, 1961 (in short, the Act).

6.1 Apropos solitary ground of the assessee, the facts as emerges from the order

of the ld. CIT(A) are as under:-

‘’6.3.27 In view of the foregoing discussion and the prevailing position of the law applicable on this contentious issue, including clarificatory amendment of the provisions of the statute by the Finance Act, 2021, I find that the addition of Rs. 7,89,468/- made by the AO u/s 2(24(x) of the Act r.w.s. 36(1)(va) of the Act on account of delayed payment of employees’ contribution to the PF and ESI which was not credited to the employees account by the due date stipulated under the respective law/ rules, has been correctly made by the AO and does not call for any interference. Accordingly, the entire addition of Rs. 7,89,468/- made by the AO is confirmed. Therefore, the ground of appeal raised by the assessee on this issue is dismissed.

7.0 In the result, the appeal filed by the assessee against order/intimation u/s 143(1) of the Act for the A.Y. 2019-20 is dismissed.’’

6.2 During the course of hearing the ld.AR of the assessee filed the written

submission contending that the ld. CIT(A)/NFAC, Delhi has erred in sustaining the

addition of Rs. 7,89,648/- on account of late payment of ESI & PF u/s 36(1)(va) of

the I.T. Act, 1961 and the ld.AR also relied on various case laws but few of which

are mentioned as under:-

5 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur 1. CIT vs Rajasthan State Beverages Corporation Ltd 2018 Tax Pub 0020 (DT) 3306 (SC) 2. CIT vs State Bank of Bikaner & Jaipur (2014) 99 DTR 131(Raj) 3. CIT vs Jaipur Vidhyut Vitran Nigam Ltd. (2014) 262 CTR 62 (Raj) 4. CIT vs Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 2014 Pub (DT) 3815 (Raj) 5. CIT vs Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) 6. CIT vs Vinay Cement Ltd (2009) 313 ITR 1St. (SC)

6.3 During the course of hearing, the ld. DR relied on the orders of the lower

authorities.

6.4 We have considered the rival submissions as well as the relevant material on

record. There is no dispute that prior to the amendment brought by the Finance

Bill, 2021 in Section 36(1)(va) as well as Section 43B of the Act, the issue of

allowability of employees contribution towards PF and ESI and depositing the

same in the government account before the due date of filing of return of income

U/s 139(1) of the Act was settled and decided in favour of the assessee by various

binding precedents of Hon’ble High Courts including the Jurisdictional High

Court. The limited controversy is whether the amendment brought to Section

36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment

year 2021-22 as it is specifically stated in the memorandum of Finance Bill, 2021.

It is worthwhile to mention that the Coordinate Bench of this Tribunal in the case

6 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur

of M/s Kogta Financial (India) Ltd. Vs CPC order dated 11/11/2021 in ITA No.

182/JP/2021 has considered this issue in para 5 to 7 as under:

“5. We have heard the rival contentions and perused the material available on record. In case of Mohangarh Engineers and Construction Company vs DCIT, CPC (Supra), speaking through one of us, 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. 14. 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. 15. 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: “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).

7 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur

8 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur

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. 18. 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.” 6. 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, I 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 2018-19 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

9 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur specifically says so. In the decisions referred to by us in the earlier 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.” 7. 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. 37,62,586/- 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.” Thus, it is clear from the above cited decision that this Tribunal has considered

various decisions on this issue and by following decisions of the Coordinate

Benches of the Tribunal, this issue was decided in favour of the assessee by

holding that amendment in Section 36(1)(va) as well as Section 43B of the Act by

way of inserting the explanation vide Finance Bill, 2021 are applicable only from

A.Y. 2021-22 and subsequent assessment years and therefore, the said amendment

is not applicable to the assessment year under consideration.

6.5 Similar view has been taken by the Delhi Benches of the Tribunal in the case

of Chatru Mal Garg Vs ACIT (supra) in para 7 as under:

“7. I have heard the rival submissions and perused the materials on record. The issue in the present ground is with respect to disallowance under section 36(1)(va) of the Act. It is an undisputed fact that there has been slight delay in the deposit of employees’ contribution of PF and ESI by the assessee and the contribution have been deposited beyond the due date prescribed by the relevant authorities but at the same time it is also a fact that the amounts have been deposited with the appropriate authorities by the assessee before filing the return of income for the relevant assessment year. I find that Hon’ble Delhi High Court in the case of CIT vs. AIMIL Ltd. (supra) has held that no disallowance under

10 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur section 36(1)(va) of the Act is called for when the amounts are deposited before filing the return of income. Similar view has also been taken by the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Hemla Embroidery Mills (P) Ltd (supra) and Indian Geotechnical Services (supra). As far as the applicability of amendment made by Finance Act 2021 is concerned, I find that the Co-ordinate Bench of Tribunal in the case of Indian Geotechnical Services (supra) has held that amendment made by Finance Bill 2021 shall take effect from 1st April 2021 and will accordingly apply to A.Y. 2021-11 and subsequent years. In the present case assessment year involved is 2018-19 and therefore following the aforesaid decision in thecase of Indian Geotechnical Services (supra), I am of the view that the amended provisions would have no application to the case under consideration. Before me, Learned DR has relied on the decision of Co-ordinate Bench of Tribunal in the case of Vedvan Consultants Pvt. Ltd. (supra). It is settled law that when two judgments are available giving different views then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 82 ITR 192 by the Hon’ble Supreme Court. I therefore following the decision of High Courts cited hereinabove and the decision of the Co-ordinate Bench of Tribunal, I am of the view that no addition u/s 36(1)(va) of the Act is called for in the present case. Therefore I direct the AO to delete the addition. Thus the ground of assessee is allowed.’’

Thus, it is clear that the Delhi Benches of the Tribunal has considered the earlier

decision of the Tribunal in the case of Vadvan Consultants Pvt. Ltd. (supra) and

the issue was decided by following the decisions of Hon’ble Delhi High Court and

Hon’ble Punjab & Haryana High Court and the decisions of the Division Bench of

the Delhi Tribunal in the case of Indian Geotechnical Services in ITA No.

622/Del/2018 order dated 27/08/2021. Accordingly, in view of the above

discussions as well as following the decisions of the Coordinate Benches of the

Tribunal, this issue is decided in favour of the assessee and consequently, the

disallowance made on account of employees contribution towards PF & ESIC

deposited before due date of filing of return of income U/s 139(1) of the Act

amounting to Rs. 7,89,648/- is deleted.

11 ITA No. 329/JP/2021 Dynamic Cables Ltd. vs CPC, BENGALURU/AO, CIRCLE-1, Jaipur 7.0. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 31 /03/2022

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सहायक पंजीकार@Aेेज. त्महपेजतंत