Tribunal overturns adjustment, stresses need for specific reasons in quasi-judicial decisions

The Tribunal allowed the appeal, deleted the impugned adjustment of Rs. 1,05,193/-, and emphasized the importance of providing specific reasons in quasi-judicial decisions in line with binding judicial precedents and the correct legal position. The Tribunal's decision was pronounced on 25th August 2022.

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Issues Involved:
1. Validity of processing of income tax returns under section 143(1) of the Income Tax Act, 1961.
2. Disallowance of Rs. 1,05,193/- due to delay in payment towards employees' provident fund contributions under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Processing of Income Tax Returns under Section 143(1):
The assessee challenged the correctness of the CIT(A)'s order upholding the validity of processing income tax returns under section 143(1) for the assessment year 2019-20. The Tribunal noted that the scheme of processing returns under section 143(1) has evolved significantly. The current scheme involves an interactive process where the assessee is given an opportunity to respond to proposed adjustments, and the Assessing Officer (CPC) must consider these responses before making any adjustments. The Tribunal emphasized that this process is quasi-judicial and requires the Assessing Officer CPC to provide specific reasons for rejecting any objections raised by the assessee. The Tribunal found that the Assessing Officer CPC had failed to provide such reasons, using a standard template text without striking out inapplicable portions, thus not fulfilling the requirement of a quasi-judicial function.

2. Disallowance of Rs. 1,05,193/- Due to Delay in Payment Towards Employees' Provident Fund Contributions:
The primary issue was the disallowance of Rs. 1,05,193/- on account of delayed payment towards employees' provident fund contributions, as reported in the tax audit report. The Tribunal referenced an identical issue considered in the case of Kalpesh Synthetics Pvt. Ltd., where it was held that payments made after the due date under the respective statute but before filing the income tax return are deductible in the computation of business income. The Tribunal noted that the tax audit report, prepared by an independent professional, is not binding on the assessee, and the views expressed therein cannot override the legal position established by judicial precedents. The Tribunal highlighted that the law laid down by the Hon'ble jurisdictional High Court must prevail over the tax auditor's observations. It was also noted that the insertion of Explanations to Section 36(1)(va) and 43B by the Finance Bill 2021 is prospective in nature and does not apply to periods before 1st April 2021.

The Tribunal concluded that the impugned adjustment was not sustainable in law, as it was based on the tax audit report's observations, which were contrary to the binding judicial precedents. The Tribunal also emphasized that the Assessing Officer CPC's failure to provide specific reasons for rejecting the assessee's objections further invalidated the adjustment. Consequently, the Tribunal deleted the impugned adjustment of Rs. 1,05,193/-.

Conclusion:
The Tribunal allowed the appeal, deleted the impugned adjustment, and emphasized the need for specific reasons in quasi-judicial decisions, aligning with the binding judicial precedents and the correct legal position. The order was pronounced in the open court on 25th August 2022.

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