TaxTMI 
TaxTMI 
2022 (6) TMI 224
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....ees contribution to Provident Fund and ESI which were not remitted within the due date prescribed u/s. 36(1)(va) of the Act but were remitted before the due date of filing of income tax returns u/s. 139(1) of the Act, could be subject matter of adjustment u/s. 143(1)(a) of the Act by the Central Processing Centre (CPC) and could be allowed as deduction. 3. We have heard rival submissions and perused the materials available on record. It is not in dispute that assessee had remitted the employees' contribution to PF & ESI much before the due date of filing of return u/s. 139(1) of the Act, though the same has been remitted belatedly beyond the due date specified under the respective PF & ESI Acts. We find that this issue is no longer res integra in view of the recent decision of the Co-ordinate Bench of this Tribunal in the case of Kalpesh Synthetics Pvt. Ltd., vs. DCIT, CPC, Bangalore reported in 137 taxmann.com 475 dated 27/04/2022. For the sake of convenience, the entire order is reproduced hereunder:- "By way of this appeal, the assessee-appellant has challenged the correctness of the order dated 31st March 2021, passed by the learned CIT(A) in the matter of the p....
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....thus contended that dehors the observations made by the tax auditor, what was reported as delayed payment in column 20(b) were delayed payments of contributions received from the employees for various funds, as referred to in Section 36(1)(va) vis-à-vis the respective statute, but not vis-à-vis the provisions of the Income Tax Act. The judicial precedents in support of the said contention were pointed out. None of these arguments, however, impressed the Assessing Officer-CPC. The disposal of this objection, as per the standard template text embedded in the impugned intimation, was that "As there has been no response/the response given is not acceptable, the adjustment(s) as mentioned below are being made to the total income as per provisions of Section 143(1)(a)". Leave aside giving reasons for not agreeing with the submissions of the assessee, no efforts were made even to strike out the inapplicable clause (i.e. whether the reply was not given or whether the reply was found unacceptable). The efforts to get the intimation under section 143(1) rectified under section 154 did not yield results either. Aggrieved, the assessee carried the matter in appeal before the CIT(....
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.... Finance Bill 2021, is prospective in nature, and, accordingly, so far as the period prior to 1st April 2021 is concerned, such a disallowance cannot come into play. Our attention is invited to a series of decisions of the coordinate benches holding so. It is thus submitted that for this reason also, the impugned adjustment under section 143(1) must stand deleted. Shri Chourasia, the learned Senior Departmental Representative, on the other hand, invites our attention to the fact that there is a significant difference between the earlier legal position, i.e. when judgments as in the case of Khatau Junkar (supra) were delivered vis-à-vis the law as it stood at the material point of time. It is submitted that the scope of expression 'an incorrect claim, if such claim is apparent from any information in the return' appearing in Section 143(1)(a) is now statutorily defined under Explanation to Section 143(1) and it means a claim, on the basis of an entry, in the return,--(i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate suc....
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.... which the provisions of sub-clause (x) of clause 24 of Section 2 applies". The intent of the legislature is thus said to be unambiguous. Our attention is then invited to the words of the statute, and it is submitted that it cannot be open to us to disregard the specific words in the legislation itself which specifically uses the expression "shall never be deemed to have been applied". It is suggested that while the amendment is to take effect from the date specified, that is 1st April 2021, once that amendment takes effect, it has to apply also on pending cases as it provides covering the earlier cases as is clearly discernible from the peculiar expressions employed therein. We are thus urged to confirm the impugned adjustments and decline to interfere in the matter. In a brief rejoinder, it is submitted that the tax auditor is an independent professional and, even though the tax auditor is appointed by the assessee, the views of the assessee need not be the same as that of the tax auditor and that a statement by the tax auditor cannot be binding on the assessee. It is submitted that in any event the tax auditors in question had subsequently revised the tax audit report and correc....
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....(a) which goes well beyond such adjustments and includes the cases such as "(iii) disallowance of loss claimed, if the return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return". So far as the first point is concerned, it must be noted that the expression "incorrect claim apparent from any information in the return", for the purpose of Section 143(1)(a), is further defined, under Explanation to Section 143(1), and it means that a claim, on the basis of an entry, in the return,--(i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the informat....
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....n thirty days of the issue of such intimation, such adjustments shall be made". The scope of permissible adjustments under section 143(1)(a) now is thus much broader, and, as long as an adjustment fits the description under section 143(1)(a)(i) to (v), read with Explanation to Section 143(1), such an adjustment, subject to compliance with first and second proviso to Section 143(1), is indeed permissible. It is, however, important to take note of the fact that unlike the old scheme of 'prima facie adjustments' under section 143(1)(a), the scheme of present section 143(1) does not involve a unilateral exercise. The very fact that an opportunity of the assessee being provided with an intimation of 'such adjustments' [as proposed under section 143(1)], in writing or by electronic mode, and "the response received from the assessee, if any" to be "considered before making any adjustment" makes the process of making adjustments under section 143(1), under the present legal position, an interactive and cerebral process. When an assessee raises objections to proposed adjustments under section 143(1), the Assessing Officer CPC has to dispose of such objections before proceedi....
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....rectness or otherwise of such a rejection of submissions. Whether the statute specifically provides for it or not, in our considered view, the need for disposal of objections by way of a speaking order has to be read into it as the Assessing Officer CPC, while disposing of the objections raised by the assessee, is performing a quasi-judicial function, and the soul of a quasi-judicial decision making is in the reasoning for coming to the decision taken by the quasi-judicial officer. While on this aspect of the matter, we may usefully refer to the observations made by the Hon'ble Supreme Court, in the case of Union Public Service Commission v. Bibhu Prasad Sarangi and Ors., [2021] 4 SCC 516. While these observations are in the context of the judicial officers, these observations will be equally applicable to the decisions by the quasi-judicial officers like us as indeed the Assessing Officer CPC. In the inimitable words of Hon'ble Justice Chandrachud, Hon'ble Supreme Court has made the following observations: ..... Reasons constitute the soul of a judicial decision. Without them, one is left with a shell. The shell provides neither solace nor satisfaction to the ....
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....ssional. The fact that the tax auditor is appointed by the assessee himself does not dilute the independence of the tax auditor. The fact remains that the tax auditor is a third party, and his opinions cannot bind the auditee in any manner. As a matter of fact, no matter how highly placed an auditor is, and even within the Government mechanism and with respect to CAG audits, the audit observations are seldom taken an accepted position by the auditee-even when the auditor is appointed by the auditee himself. These are mere opinions and at best these opinions flag the issues which are required to be considered by the stakeholders. On such fine point of law, as the nuances about the manner in which Hon'ble Courts have interpreted the legal provisions of the Income Tax Act in one way or the other, these audit reports are inherently even less relevant-more so when the related audit report requires reporting of a factual position rather than express an opinion about legal implication of that position. In the light of this ground reality, an auditee being presumed to have accepted, and concurred with, the audit observations, just because the appointment of auditor is done by the asses....
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.... power to punish for contempt of itself. Under article 226, it has a plenary power to issue orders or writs for the enforcement of the fundamental rights and for any other purpose to any person or authority, including in appropriate cases any Government, within its territorial jurisdiction. Under article 227 it has jurisdiction over all Courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that Court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate Courts can equally do so, for there is no specific provision, just like in the case of the Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working: otherwise, there would be confusion in the administration of law and respect for law would irretrievably suffer 8....
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....ecedents in this regard. For this reason also, the inputs in question in the tax audit report can not be reason enough to make the impugned disallowance. The assessee must succeed for this reason as well. 9. What a tax auditor states in his report are his opinion and his opinion cannot bind the auditee at all. In this light, when one considers what has been reported to be 'due date' in column 20(b) in respect of contributions received from employees for various funds as referred to in Section 36(1)(va) and the fact that the expression 'due date' has been defined under Explanation (now Explanation 1) to Section 36(1)(va) provides that "For the purposes of this clause, 'due date' means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise", one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just a factual report a....
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.... 1) to Section 36(1)(va). That question, in our humble understanding, can be relevant, for example, when a call is required to be taken on merits in respect of an assessment under section 143(3) or under section 143 r.w.s. 147 of the Act, or when no findings were to be given on the scope of permissible adjustments under section 143(1)(a)(iv). That is not the situation before us. We, therefore, see no need to deal with that aspect of the matter at this stage. 11. In a result, this appeal is allowed. Pronounced in the open court today on the 27th day of April 2022. 3.1. We also find that in this case, the Ld. DR filed his written submissions as under:- 1. Circular 22/2015 of CBDT clearly states that employee's contribution to welfare funds are governed by Section 36(1)(va) of the Act. It is stated that the said disallowances are clearly covered by Section 36(va) of the Income tax Act, 1961. 1.1 With reference to payment of employees dues to ESIC/PF dues, it is pertinent to note that the EPF & MP Act 1952 speaks of two types of contributions, namely - the Employer's share, and - the Employee's share. As a precautionary measure under the Income....
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....as a measures of penalizing employers who mis-utilize employee's contributions 2.1 Vide Finance Act, 2021, Section 36(1)(va] & Section 43B were amended and the phrase "shall be deemed never to have been applied" has been inserted. The use of this phrase shows that the said amendments are retrospective in application. Reliance is placed on the judgment of Hon'ble SC in the case of Commissioner of Income-tax, Ahmedabad v. Gold Coin Health Food (P.) Ltd. [2008] 172 Taxman 386 (SC). The issue before the Hon'ble Court was whether the amendments to Explanation 4 to Section 271(1)(c) made applicable from 01/04/2003 by Finance Act had retrospective applicability or not and the Hon'ble Court held that the said amendments are clarificatory and applicable even retrospectively. The relevant paragraphs are Para 14, 15, 16 & 17. 2.2 Also, Hon'ble ITAT, Delhi in the order of Vedvan Consultants Pvt. Ltd. Vs. DCIT in ITA No. 1312/Del/2020 dated 26/08/2021 has held in Para 12 of the order that these amendments are retrospective. 3. Therefore, it is humbly prayed that the additions made by the Assessing Officer rejecting the claim of deduction towards em....