2021 (11) TMI 48 - AT - Income Tax

Tribunal allows appeal, deletes Income Tax Act addition, citing timely ESI/PF deposits

M/s Pee Tee Turners Versus Assistant Director of CPC, Centralized Processing Centre, Bengaluru.

The Tribunal allowed the appeal of the assessee, directing the deletion of the addition of Rs. 6,28,972 made by the CPC under Section 143(1) of the Income ... Addition u/s 2(24)(x) read with section 36(1)(va) - delay in payment of ESI and PF made by CPC - whether CPC as no power to make adjustment u/s 143(1) of the Income Tax Act for disallowance of ESI/PF late deposit u/s 36(1)(va)/43B ? - HELD THAT- 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) - 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 - 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. The addition by way of adjustment while processing the return of income u/s 143(1) 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. - Decided in favour of assessee. Issues Involved:1. Confirmation of addition under Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961 due to delay in payment of ESI and PF.2. Authority of CPC to make adjustments under Section 143(1) for disallowance of ESI/PF late deposit under Sections 36(1)(va)/43B.Detailed Analysis:1. Confirmation of Addition under Section 2(24)(x) read with Section 36(1)(va):The assessee filed its return declaring total income of Rs. 57,28,400, which was processed under Section 143(1). The CPC made a disallowance of Rs. 6,28,972 towards employee’s contribution to ESI and PF due to late payment. The CIT(A), NFAC confirmed this disallowance, leading to the appeal.The assessee contended that although the contributions were deposited late, they were made before the due date for filing the return of income. The assessee cited the Rajasthan High Court decisions in CIT vs. Rajasthan State Beverages Corporation Ltd. and CIT vs. State Bank of Bikaner and Jaipur, which held that contributions paid before the due date of filing the return should not be disallowed. The assessee also referenced recent Tribunal decisions supporting this view.Conversely, the Revenue argued that the contributions were not made within the prescribed due dates under Section 36(1)(va). The Revenue emphasized the Finance Act, 2021 amendment to Section 36(1)(va), asserting it clarifies that contributions must be paid within the due dates specified in the respective legislation, and this clarification applies retrospectively.The Tribunal reviewed the facts and found that the contributions were indeed deposited before the due date for filing the return. The Tribunal noted that the Rajasthan High Court had consistently held that such contributions cannot be disallowed if paid before the return filing due date. The Tribunal also observed that the CIT(A) should have followed the jurisdictional High Court's binding decisions.2. Authority of CPC to Make Adjustments under Section 143(1):The assessee argued that the CPC lacked the power to make such adjustments under Section 143(1). The Tribunal, referencing its own previous decisions and those of other Benches, noted that adjustments for contributions paid before the return filing due date do not fall within the scope of prima facie adjustments under Section 143(1).The Tribunal concluded that the Finance Act, 2021 amendments to Section 36(1)(va) and Section 43B, which specify that contributions must be paid within the due dates mentioned in the respective statutes, apply prospectively from April 1, 2021, and not to the assessment year in question (2019-20).Conclusion:The Tribunal directed the deletion of the addition of Rs. 6,28,972 made by the CPC, as the contributions were paid before the due date for filing the return of income. The appeal of the assessee was allowed.Order:The appeal of the assessee is allowed. The order was pronounced in the open Court on 28/10/2021.