TaxTMI 
TaxTMI 
2022 (12) TMI 1384
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....assed under section 250 of the Act is so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case. 2. The Appellant denies itself liable to be assessed to total income of Rs. 13,48,407/-as against the returned income of NIL on the facts and circumstances of the case. 3. The appellant denies itself to be liable to the disallowance of Rs. 13,48,407/-under section 36(1)(va) of the Act, on the facts and circumstances of the case. 4. The learned CIT(A) failed to appreciate that the amendment to the section 36(1)(va) was prospective from the AY 2022-23 and the_ disallowance ought to have been deleted in full, on the facts and circumstances of the case. 5. The authorities below failed to appreciate that the intimation issued by the learned Assessing Officer under section 143(1) of the Act was bad in law, since the adjustment made was beyond the scope of the act, on the facts and circumstances of the case. 6. The authorities below failed to appreciate that the PF & ESI contributions were remitted before the due date of filing return of income stipulated under sec....
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....thin the ambit of primafacie adjustments stipulated in that section. For this purpose, I rely on the judgement of order of the Tribunal Mumbai Bench in the case of P.R. Packaging Services in ITA No.2376/Mum/2022 dated 7.12.2022, wherein held as under: 3. We have heard the rival submissions and perused the materials available on record. It is not in dispute that assessee had remitted the employees contribution to Provident Fund beyond the due date prescribed under the Provident Fund Act, but had duly remitted the same before the due date of filing the return of income under section 139(1) of the Act. This fact of remittance made by the assessee with delay had been reported by the Tax Auditor in the Tax Audit Report. The copy of the Tax Audit Report is placed on record by the Ld.AR before us together with its annexures. On perusal of the same, we find that the Tax Auditor had merely mentioned the due date for remittance of Provident Fund as per the Provident Fund Act and the actual date of payment made by the assessee. The Tax Auditor had not even contemplated to disallow the employees' contribution to Provident Fund wherever it is remitted beyond the due date prescribed und....
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.... 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(l)(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. I however, important to take note of the fact that unlike the old scheme of 'prima facie adjustments' under sec 143(l)(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 opposed under sec 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 pre legal position, an interactive and cerebral process. When an assessee raises objections to proposed adjustment under section 143(1), the Assessing Officer CPC has to dispose of such objections before proceeding further in the matter - one....
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....ther the statute specifically provides for it or not, in our considered view, the need for disposal of objections by way of a speaking order 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 [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 litigant. We are constrained to make these observations what we have encountered i....
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....ce 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 assessee himself, is too unrealistic and incompatible with the very conceptual foundation of independence o....
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....rits 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 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 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 irretrievably suffer" 8. When the law enacted by the legislature has been construed in a particular manner by the Hon'ble jurisdictional....
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....owance. 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 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(l)(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 purposes of this clause, 'due date' means the date by which the assessee is required as an employer to credit 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 about the fact of payments and the fact of the due date as per Explanation to section 36(l)(va). This due date, however, has not been found to be decisive in the ligh....
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.... under section 143(3) r.w.s. 147 of the Act, or when no findings were to be given on the scope of permissible adjustments under section 143(l)(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" 5. We are conscious of the fact that the issue on merits is decided against the assessee by the recent decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT reported in 143 taxmann.com 178 (SC) dated 12/10/2022. This decision was rendered in the context where assessment was framed under section 143(3) of the Act and not under section 143(1)(a). 6. Hence we direct the Ld. Assessing Officer to delete the addition made in respect of employees' contribution to Provident Fund, in the facts and circumstances of the instant case. Accordingly, grounds 1 to 3 raised by the assessee are allowed." 4. On the contrary, ld. D.R. submitted that this issue is squarely covered by the order of the Tribunal in the case of Cemetile Industries Vs. ITO (14)1, Pune in ITA No.693/Pun/2022 dated 23.11.2022. Further, he relied on the order o....
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.... 36(1)(va)). The other important feature is that this this distinction between the employers' contribution (Section 36(1)(iv)) and employees' contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 438 covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees' liability. These include liabilities such as tax liability, cess duties etc. or interest having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not he given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer's contribution which is its primary liability under law - in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus....
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....duction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed." 8. Keeping in view of the decision of the Hon'ble Supreme Court, I uphold that the addition can be made in respect of the employees' contribution in regard to PF/ESI, which has not been deposited within the stipulated date as per the respective Act, since in the case on hand, the assessee has not deposited the employees, contribution within the due date as per the respective Act. Therefore, the disallow....
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....- G as answers to question No.26 u/s 44AB of the Act report showing the amount not paid on or before the due date of respective Act was at Rs.69,833/-, which was duly disallowed by the assessee itself. Hence, no further disallowance could be made. 5.1. On the contrary, ld. DR brought to my notice that the Annexure E which is relating to the answer to question No.20(b) in tax audit report showing the details of contribution received from employees for various funds as referred tin section 36(1)(va) of the Act that amount belatedly paid at Rs.13,48,410/- same was disallowed by AO u/s 143(1) of the Act and to be confirmed. In my opinion, the disallowance made by the AO is to be restricted to the expenditure of ESI & PF not paid within the due date of relevant provisions of the Act. The assessee has been listed these details in the Annexure E to tax audit report filed u/s 44AB of the Act along with return of income. Being so, I find no merit in the arguments of assessee's counsel that AO cannot make disallowance u/s 143(1) of the Act with regard to belated payment of employees' ESI & PF contribution within due date of respective Act and as held by the coordinate bench in the case of....
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....39;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.' Thus, it is axiomatic that deposit of the employees' share of the relevant funds before the due date under the respective Acts is sine qua non for claiming the deduction. Au Contraire, if the contribution of the employees to the relevant funds is not deposited by the employer before the due date under the respective etc., then the deduction u/s.36(1)(va) is lost notwithstanding the fact that the share of the employees had already crystallized as income of the employer u/s.2(24)(x) of the Act. 5. Adverting to the facts of the case, it is seen that the assessee claimed the deduction for the employees' share for depositing the same in the relevant funds beyond the due date as given in Explanation 1 to section 36(1)(va) on the strength of section 43B. The latter section opens with a non-obstante clause and provides that a deduction otherwise allowable in respect of: `(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or supera....
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....e allowed only if the employees' share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts and further that the due date u/s.139(1) of the Act is alien for this purpose." 5.2. The coordinate bench of Bangalore in the case of Automac Diesels cited (supra) has decided the issue as follows: "On the rejoinder submitted by the ld.DR, the adjustments u/s 143(1)(a) of the Act can be made and in the section, it is very clear that which type of adjustments can he made. He also relied on judgment of the Hon'ble Madras High Court in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. Deputy Commissioner of Income-tax reported in (2022) 138 taxmann.com 571, wherein he also relied on the decision of the coordinate bench of the Tribunal in the case of M/s. IV Sanctum vs Asstt. Director of Income Tax CPC Bengaluru, in ITA No. 98.6/Bang/2022 vide order dated 24.11.22 for the AY 2O19-20." 5.3. This was squarely decided by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT reported in 143 Taxmann.com178. 5.4. Further, the Hon'ble Madras High Court in the case of A....
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....section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its Order dated 10.9.2003 allowing the Rectification Application has given a finding that Samtel Color Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record. 13. "Rule of precedent" is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income-tax Act, 1961. When prejudice results from an order attributable to the Tribunal's mistake, error or omiss....