2022 (6) TMI 81 - AT - Income Tax

Tribunal allows appeal, cites Covid-19 impact. Addition for delayed deposits deleted.

The Tribunal allowed the appeal of the assessee, condoning the delay in filing the appeal due to reasons related to the Covid-19 pandemic. The Tribunal ... Delayed of employees contribution towards ESI/PF - assessee’s failure to pay the employee’s contribution of PF/ESI within the prescribed due dates as per Section 36(1)(va) - Scope of amendment - 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) 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 cas. Thus addition by way of adjustment while processing the return of income u/s 143(3) made by the AO towards the deposit of the employee’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. Assessee appeal allowed. Issues Involved:1. Condonation of delay in filing the appeal.2. Disallowance of employees' contribution towards ESI/PF due to delayed payment.3. Applicability of amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The appeal filed by the assessee was delayed by 222 days. The assessee requested condonation of the delay, attributing it to the Covid-19 pandemic and associated restrictions, which hindered office operations and access to necessary portals. An affidavit was furnished by the Managing Director of the assessee company to support the request. Considering the reasons and in the interest of natural justice, the delay was condoned, and the appeal was decided on merits.2. Disallowance of Employees' Contribution towards ESI/PF Due to Delayed Payment:The assessee filed its return of income declaring NIL income, but the AO made an addition of Rs. 5,33,816/- for delayed payment of PF and ESI. The CIT(A) confirmed this disallowance under Section 143(3) based on the assessee’s failure to pay the contributions within the prescribed due dates as per Section 36(1)(va) of the Income Tax Act, 1961.During the hearing, the assessee argued that the contributions, although delayed, were made before the due date for filing the return of income under Section 139(1). The assessee cited various judicial precedents, including decisions from the Jaipur Bench of the Tribunal and the Hon’ble Rajasthan High Court, which held that such contributions, if made before the due date of filing the return, should not be disallowed.The Revenue, however, contended that the contributions were not made within the prescribed due dates and relied on the amendment introduced by the Finance Act, 2021, which clarified that such contributions would not be allowed as deductions if not deposited on time.3. Applicability of Amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021:The Tribunal noted that the amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021, are applicable from 1st April 2021 and thus apply to the assessment year 2021-22 and subsequent years. Since the impugned assessment year was 2019-20, the amended provisions could not be applied retrospectively.The Tribunal referred to the consistent decisions of the Hon’ble Rajasthan High Court, which held that contributions made before the due date of filing the return under Section 139(1) should not be disallowed, even if they were paid after the due dates under the respective statutes. The Tribunal emphasized that the jurisdictional High Court's decisions are binding and should be followed.Conclusion:In light of the above discussions and consistent judicial precedents, the Tribunal directed the deletion of the addition of Rs. 5,33,816/- made by the AO for delayed deposit of employees' contributions towards ESI and PF, as these were paid before the due date of filing the return of income under Section 139(1). The appeal of the assessee was allowed.Order Pronounced:The order was pronounced in the open Court on 31/05/2022.