2022 (9) TMI 1320 - AT - Income Tax

Tribunal Partially Allows Appeal, Directs Deletion of Income Tax Addition

The Tribunal allowed the appeal partly, directing the deletion of the addition of Rs.58,72,654 under Section 36(1)(va) of the Income Tax Act. The Tribunal ... Delayed Employees’ contribution to ESI/Provident Fund - adjustment and intimation u/s 143(1) - contribution beyond specified date prescribed under laws providing ESI/Provident Fund but these payments were deposited by the assessee well before due date of filing of return of Income Tax prescribed u/s 139(1) - HELD THAT:- We are of the view that the aforesaid additions by way of adjustment and intimation u/s 143(1) were beyond the scope of Section 143(1) and further that the Ld. CIT(A) erred in law in confirming the aforesaid addition on a debatable and controversial issue. Accordingly, we direct the AO to delete the aforesaid addition. By way of abundant caution, we hereby clarify that we have not expressed any view in this order, on whether the aforesaid amendments brought in by Finance Act, 2021 [whereby Explanation-2 was inserted in Section 36(1)(va) of Income Tax Act and Explanation-5 was inserted in Section 43B are prospective or retrospective. In the light of our decision in foregoing paragraph (E) of this order; this issue is merely academic in nature; hence not decided. Interest on TDS, interest on GST and interest on PPF - We restore the issues regarding on account of interest on TDS, interest on GST and interest of PPF; and the issue regarding assessee’s claim of credit of TDS to the file of the Ld. CIT(A); with the direction to decide these issues on merits after providing reasonable opportunity to the assessee. Issues Involved:1. Addition of Rs.58,72,654/- under Section 36(1)(va) of the Income Tax Act, 1961.2. Adjustment of Rs.53,05,295/- on account of interest on TDS, interest on GST, and interest on PPF.3. Disallowance of TDS credit amounting to Rs.44,32,501/-.Detailed Analysis:1. Addition of Rs.58,72,654/- under Section 36(1)(va) of the Income Tax Act, 1961:The first issue revolves around the addition of Rs.58,72,654/- made under Section 36(1)(va) of the Income Tax Act, 1961, concerning the late deposit of employees' contributions towards provident fund and Employees State Insurance Fund. The payments were deposited after the specified date under the relevant laws but before the due date of filing the return of income under Section 139(1) of the Income Tax Act. The addition was made via adjustments under Section 143(1) of the Income Tax Act. The assessee appealed to the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)], who confirmed the addition, considering the amendment to Section 36(1)(va) by Finance Act, 2021, as retrospective.Upon appeal to the Income Tax Appellate Tribunal (ITAT), the Tribunal noted that the issue of whether the amendments are retrospective or prospective is debatable and controversial. The Tribunal cited several decisions from various benches of ITAT, which have held that the amendments are prospective and do not apply to periods before 01/04/2021. The Tribunal emphasized that adjustments under Section 143(1) on debatable issues are beyond the scope of the section. The Tribunal concluded that the adjustments made by Revenue were unfair, unjust, and bad in law, and directed the deletion of the addition of Rs.58,72,654/-.2. Adjustment of Rs.53,05,295/- on account of interest on TDS, interest on GST, and interest on PPF:The second issue pertains to the adjustment of Rs.53,05,295/- on account of interest on TDS, interest on GST, and interest on PPF. The Tribunal noted that the Ld. CIT(A) did not decide on this issue in the impugned appellate order. Both parties agreed that the issue should be restored to the file of the Ld. CIT(A) for a decision on merits. The Tribunal directed the Ld. CIT(A) to decide this issue after providing a reasonable opportunity to the assessee.3. Disallowance of TDS credit amounting to Rs.44,32,501/-:The third issue concerns the disallowance of TDS credit amounting to Rs.44,32,501/-. Similar to the second issue, the Ld. CIT(A) did not adjudicate this matter in the appellate order. Both parties agreed that this issue should also be restored to the file of the Ld. CIT(A) for a decision on merits. The Tribunal directed the Ld. CIT(A) to decide this issue after providing a reasonable opportunity to the assessee.Conclusion:The appeal was partly allowed for statistical purposes. The Tribunal directed the deletion of the addition of Rs.58,72,654/- and restored the issues regarding the adjustment of Rs.53,05,295/- and the disallowance of TDS credit of Rs.44,32,501/- to the file of the Ld. CIT(A) for a decision on merits.