Tribunal allows appeal, overturns disallowance of EPF & ESI contributions. Finance Act, 2021 amendments apply prospectively.

The appeal was allowed by the Tribunal, with the delay in filing condoned due to technical issues. The disallowance of employee contributions to EPF and ESI was overturned, as the Tribunal held that the Finance Act, 2021 amendments apply prospectively and should not affect contributions made before the due date for filing the income tax return. The Tribunal emphasized that the amendments do not have retrospective effect, leading to the deletion of the disallowance and ruling in favor of the assessee.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of employee contribution to EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961.

Detailed Analysis:

Condonation of Delay in Filing the Appeal:
The assessee filed an application for condonation of a 2-day delay in filing the appeal, attributing the delay to technical issues with the ITAT e-filing website. The assessee attempted to file the appeal on 29-12-2021 but succeeded only on 30-12-2021, with the hard copy submitted on 31-12-2021. The Tribunal, referencing the Supreme Court judgment in Collector, Land Acquisition vs. Mst. Katiji, emphasized a liberal approach to condonation of delay, focusing on substantial justice over technicalities. The delay was deemed beyond the control of the assessee and without malafide intent, leading to the acceptance of the condonation application.

Disallowance of Employee Contribution to EPF and ESI:
The core issue was the disallowance of Rs. 7,89,648/- for late payment of employee contributions to EPF and ESI, despite being deposited before the due date for filing the income tax return under Section 139(1). The CIT(A) upheld the disallowance based on the Finance Act, 2021 amendments to Sections 36(1)(va) and 43B, which were argued to apply retrospectively.

The Tribunal examined the facts and relevant case laws, including decisions from various High Courts and the Supreme Court, which consistently held that contributions paid before the due date of filing the return should not be disallowed. The Tribunal cited the case of M/s Kogta Financial (India) Ltd. Vs CPC, where it was held that the amendments by the Finance Act, 2021, are applicable prospectively from the assessment year 2021-22 and not retrospectively.

Moreover, the Tribunal referenced decisions from the Delhi and Bangalore Benches, which supported the view that the amendments do not apply to assessment years prior to 2021-22. The Tribunal concluded that the disallowance was unjustified and directed the deletion of the addition, thus allowing the appeal in favor of the assessee.

Conclusion:
The appeal was allowed, with the Tribunal condoning the delay in filing and deleting the disallowance of the employee contributions to EPF and ESI, emphasizing that the amendments to the relevant sections by the Finance Act, 2021, apply prospectively and not to the assessment year in question.

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