TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 461
X X X X Extracts X X X X
X X X X Extracts X X X X
....mte Services (P) Ltd to hold that the belated employees contribution to PF & ESI has to be disallowed without adverting to specific grounds raised before him pertaining to the assumption of jurisdiction to make such adjustments u/s.143(1)(a). 4. The CIT(A) failed to appreciate the fact till 12.10.2022 (the day on which the Hon'ble Supreme court passed the order) the disallowance of belated employees contribution was a debatable issue and such adjustments cannot be made u/s.143(1)(a). 5. The CIT(A) failed to consider the fact that the day on which the impugned intimation was passed (i.e., 11.10.2021) there were divergent views taken by different high courts leaving such issue to be debatable one arid therefore falls outside the scope of adjustments u/s.143(1)(a). 6. The CIT(A) failed to appreciate the fact that the enabling provision having been given effect only from 01.04.2021 by way of amendment of sub-clause (iv) of Sec.143(1). Therefore, adjustment prior to A.Y.2020-21 on account of increase in income is not in accordance with law." 3. The learned A.R. submitted as follows: - 3.1 Appellant filed its ROI on 07.11.2020. It was processed u/s.143(1) and the AO, CPC disa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s been made under clause (a). 3.4 The section restricts the AO, CPC to only deal with the claims that are apparent from any information in the return. The word "apparent" means something which appears to be so ex-facie and is incapable of argument or debate. Meaning, the debatable point of law or fact cannot be corrected by way of processing u/s.143(1). In the instant case, disallowance of deduction u/s.36(1)(v)(a) being belated remittance of employee's PF & ESI has been subject to debate and there are cleavage of opinion by the Jurisdictional High Court and other High Courts. It is a different matter, that the Hontle Supreme Court in Checkmate Services (P) Ltd in Civil Appeal No.2833 of 2016 has put a quietus to this issue on 12.10.2022. On the date (21.01.2021) of processing of the ROI u/s.143(1) the said claim of expenditure was a debatable issue which cannot be disallowed u/s.143(1). Secondly, the ROI doesn't contain any information relating belated remittance of PF & ESI. Therefore, the disallowance on this count doesn't stand in the eyes of law. 3.5 It is also to be seen that sub-clause (iv) of Sec. 143(1)(a) has been amended vide Finance Act, 2021 w.e.f.01.04.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) - Information provided in tax audit report would cease to be relevant and disallowance u/s.143(1)(a)(iv) is to be deleted in toto. (c) Lanjani Co-operative Agri Society Ltd [2022] 218 TR 14 (Chd) - The enabling provision to invoke sec.143(1)(a)(v) came into force only w.e.f.01.04.2021 and the AO, CPC doesn't have power during AY.2018- 19 to invoke sub-clause(v) in the absence of enabling provision. (d) Bajaj Auto Finance Ltd Vs CIT [2018] 93 taxmann.com 63 (Bom) -Provision for bad debts u/s.36(1)(iii) being a debatable issue cannot be disallowed u/s.143(1)(a) of the IT Act. 10. It is further submitted that the Cuttack Bench of ITAT in the case of Nirakar Security & Consultancy Services (P) Ltd in ITA No.98/2022 remanded the matter to the file of the AO to adjudicate the grounds of Assessee relating to claim of the said employee's contribution as business expenditure u/s.37. This decision was rendered after considering the decision of the Hon'ble Supreme Court in Checkmate Services which clearly demonstrates the fact that even after the Supreme Court decision supra, the said deduction remains debatable. 11. In view of the above, it is prayed that the adjustment v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ative (DR). It is undisputed that the audit report filed by the assessee indicated the due dates of payment to the relevant funds under the respective Acts relating to employee's share and the said amounts were deposited by the assessee beyond such due dates but before the filing of the return u/s 139(1) of the Act. The case of the assessee before the authorities below has been that such payments before the due date as per section 139(1) of the Act amounts to sufficient compliance of the provisions in terms of section 43B of the Act, not calling for any disallowance. Per contra, the Department has set up a case that the disallowance is called for because of the per se late deposit of the employees' share beyond the due date under the respective Act and section 43B is of no assistance. 4. Before proceeding further, it would be apposite to take note of the relevant statutory provision in this regard. Section 2(24) provides that `income' includes: `(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.' The main provision of section 43B, providing for the deduction only on actual payment basis, has been relaxed by the proviso so as to enable the deduction even if the payment is made before the due date of furnishing the return u/s 139(1) of the Act for that year. The claim of the assessee is that the deduction becomes available in the light of section 36(1)(va) read with section 43B on depositing the employees' share in the relevant funds before the due date u/s 139(1) of the Act. This position was earlier accepted by some of the Hon'ble High Courts holding that the deduction is allowed even if the assessee deposits the employees' share in the relevant funds before the date of filing of return u/s.139(1) of the Act. This was on the analogy of treating the employee's share as having the same character as that of the employer's share, becoming deductible u/s 36(1)(iv) read in the hue of section 43B(b). Recently, the Hon'ble Supreme Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of certain incomes, in SL.No. 2.1 deduction is claimed under Section 80P however return is not filed within due date". Against this observation the assessee filed writ petition before the Hon'ble Madras High Court and the writ petition has been dismissed by observing as under: - "7. The scope of an 'intimation' under section 143(1)(a) of the Act, extends to the making of adjustments based upon errors apparent from the return of income and patent from the record, Thus to say that the scope of 'incorrect claim' should be circumscribed and restricted by the Explanation which employs the term 'entry' would, in my view, not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purposes of section 143(1)(a) of the Act. 5.5 Further, the coordinate bench of the Tribunal in MP No.117/Bang/2022 dated 30.11.2022 in the case of ACIT Vs. M/s. Sunrise Freight Movers Pvt. Ltd. wherein held as under: "5.6 Coming to the merit of the issues raised by the revenue in its miscellaneous petition, we not that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ginal order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case." 5.7. Article 141 of the Constitution of India provides that the law declared by Hon'ble Supreme Court shall be binding on all courts within the territory of India. The law laid down by Supreme Court operates retrospectively and is deemed to the law as it has always been unless, the Supreme Court, says that its ruling will only operate prospectively. 5.8 In the light of the law as explained above, there is a mistake apparent on record in view of the decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt.Ltd. (supra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anently forever under Section 36(1)(va) of the Act. On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis under Section 43B of the Act and is therefore not lost totally. Therefore, as per the above decision, the additions made by Revenue authorities were fully justified. 7. It is also noted that the Hon'ble ITAT, Mumbai Bench, in the case of M/s. P R Packaging Services Vs. ACIT in ITA No.2376/Mum/2022, for Assessment Year 2019-20, order dated 07.12.2022 has taken the view that while processing return under section 143(1) of the Income Tax Act, 1961 (hereinafter called 'the Act'), the CPC cannot disallow employees' contribution to PF and ESI which are paid beyond the due dates for payment under the relevant laws relating to ESI and PF contribution while processing return under section 143(1) of the Act. In this regard, we find that the Hon'ble ITAT had taken the aforesaid view on the basis that the CPC has made the addition based on the provisions of section 143(1)(a)(iv) of the Act which lays down that : "disallowance of expenditure (or increase in income) indicated in the audited report but not taken into account ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n favour of the assessee and if those decisions of High Courts stand overruled by decision of Supreme Court in the case of Checkmate Services Pvt. Ltd., (supra) with retrospective effect, then the very basis of the decision rendered in the case of Kalpesh Synthetics(supra) no longer survives. Alternatively, the adjustment can be justified on the basis of the provisions of section 143(1)(a)(ii) of the Act which lays down that adjustment can be made to the total income in the event of "an incorrect claim, if such incorrect claim is apparent from any information in the return". The form of return contains clause with regard to amounts disallowable u/s.36 of the Act. The aforesaid view of ours is also supported by a decision rendered by the ITAT, Bengaluru Bench in the case Itek Packz Vs. ITO ITA No.995/Bang/2022, order dated 28.12.2022. In that decision, the Tribunal, after considering the decision rendered in the case of P R Packaging (supra) held following the decision of Cemetile Industries Vs ITO in ITA No.693/Pun/2022, order dated 23.11.2022 that disallowance can be made under section 143(1)(a) of the Act of employees' share of ESI and PF paid beyond the due date under the releva....