2022 (5) TMI 461 - AT - Income Tax

Tribunal rules in favor of assessee, emphasizing judicial precedents and quasi-judicial approach for deductions

Kalpesh Synthetics Pvt Ltd. Versus Deputy Commissioner of Income Tax, CPC Bengaluru.

Kalpesh Synthetics Pvt Ltd. Versus Deputy Commissioner of Income Tax, CPC Bengaluru. - [2022] 96 ITR (Trib) 690 (ITAT [Mum]) Issues Involved:1. Adjustment under Section 143(1) based on tax audit report indicating delayed payment of employees' provident fund contributions.2. Admissibility of deductions for provident fund payments made after the due date under the relevant statute but before the filing of the income tax return.3. Applicability of judicial precedents and amendments to Section 36(1)(va) and Section 43B by the Finance Bill 2021.Detailed Analysis:Adjustment under Section 143(1) based on tax audit report indicating delayed payment of employees' provident fund contributions:The assessee challenged the adjustment made by the Centralized Processing Centre (CPC) under Section 143(1) of the Income Tax Act, 1961, disallowing Rs 4,24,634 due to delayed payment of employees' provident fund contributions. The adjustment was based on the tax audit report indicating delays in depositing provident fund dues. The assessee contended that such payments, made before filing the income tax return but after the statutory due date, were still deductible based on judicial precedents. However, the CPC did not accept this argument and proceeded with the adjustment, which was upheld by the CIT(A).Admissibility of deductions for provident fund payments made after the due date under the relevant statute but before the filing of the income tax return:The assessee argued that according to the Hon'ble jurisdictional High Court, payments made after the statutory due date but before the filing of the income tax return should be deductible. The CPC, however, relied on the tax audit report, which indicated delays and did not consider the judicial precedents cited by the assessee. The Tribunal observed that the scheme of Section 143(1)(a) allows adjustments for disallowances indicated in the audit report but noted that the tax audit report is an independent professional opinion and not binding on the assessee. The Tribunal emphasized that the views of the tax auditor cannot override judicial precedents, especially when the jurisdictional High Court has ruled otherwise.Applicability of judicial precedents and amendments to Section 36(1)(va) and Section 43B by the Finance Bill 2021:The Tribunal noted that the law, as interpreted by the Hon'ble jurisdictional High Court, allows for deductions of provident fund payments made before the due date of filing the income tax return, even if made after the statutory due date. The Tribunal also addressed the amendments introduced by the Finance Bill 2021, which are prospective and not applicable to the assessment year 2018-19. The Tribunal highlighted that the CPC must consider objections raised by the assessee and provide specific reasons for rejecting them, which was not done in this case.Conclusion:The Tribunal concluded that the adjustment made under Section 143(1) was not justified as it did not consider the binding judicial precedents and the objections raised by the assessee. The Tribunal emphasized the need for a quasi-judicial approach in processing returns under Section 143(1), requiring the CPC to provide specific reasons for rejecting objections. Consequently, the Tribunal deleted the impugned adjustment and allowed the appeal.