TaxTMI 
TaxTMI 
2023 (4) TMI 755
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion. The action of the ld. AO(CPC) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire such order, being illegal and void ab initio. 2. In the facts and circumstances of the case and in law, National Faceelss Appeal Centre / CIT(A) erred in confirming the action of the ld. AO(CPC) in disallowing the Employee contribution of Rs. 4,62,183/-, under Section 36(1)(va), w.r.t. PF/ESI, when the same was deposited by the assessee firm, before the due date of filing the return of income. The Action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire addition made by Ld. AO(CPC) and confirmed by ld. CIT(A)." 3. The brief fact of the case is that the assessee filed its Return of Income for A.Y. 2018-19 on dated 31.10.2018. The declaring a total income of Rs.69,87,730/-. The return was processed u/s 143(1) on 12.11.2019 making adjustment of Rs.4,62,183/- under section 36(1)(va) of Income Tax Act, 1961. 4. Aggrieved by the said adjustment made by the CPC, the assessee has filed this appeal before the ld. CIT(A). Basically, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of perfumes. During the year, the assessee company filed its return of income on 31.10.2018, declaring total income of Rs 69,87,730. II. The return of the assessee company was processed u/s 143(1) vide Intimation dated 12.11.2019 wherein ld. AO (CPC) made disallowance of Superannuation fund and ESI of Rs. 4,62,183, resulting into demand of Rs 1,47,439. III. The assessee company preferred appeal against such Intimation u/s 143(1) dated 12.11.2019 before National Faceless Appeal Center ("NFAC"), in which the said disallowances have been confirmed. The present appeal has been preferred by the assessee company against the order of NFAC. GROUNDS OF APPEAL GROUND NO. 2: DISALLOWANCE u/s 36(1)(va) AMOUNTING TO Rs. 4,62,183 In view of the judgement of Checkmate Services Private Limited Vs CIT- I (Supreme Court), it has been clarified that the amendment brought by Finance Act, 2022 is prospective in nature. Hence, the same is not discussed in detail. GROUND NO. 1: ADJUSTMENT BEYOND SCOPE OF SECTION 143(1) 1. ASSESSING OFFICER & NATIONAL FACELESS APPEAL CENTRE Ld. AO (CPC), while processing the return of income of the assessee co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....02.2018 February-18 44,953 15.03.2018 17.03.2018 March-18 47,600 15.04.2018 16.04.2018 Total 3,91,800 Employees State Insurance Month Employee's Contribution Due Date of payment under Relevant Law Actual payment Date April-17 7,685 15.05.2017 19.05.2017 May-17 7,710 15.06.2017 21.06.2017 June-17 7,579 15.07.2017 21.07.2017 October-17 8,796 15.11.2017 30.11.2017 November-17 8,010 15.12.2017 16.12.2017 December-17 7,785 15.01.2018 31.01.2018 January-18 8,242 15.02.2018 20.02.2018 February-18 8,364 15.03.2018 17.03.2018 March-18 6,212 15.04.2018 16.04.2018 Total 70,383 2.2.v. It is further submitted that in the clause 20(b), the auditor is required to report the details of the contribution not the amount of disallowance or any late payments made to the respective funds. Screenshot evidencing the same is as under: 2.2.vi. It is evident from the above screenshot that no disallowance has been made but only the dates of payments of employee's contributio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elves, are taken as justification enough for a disallowance under the scheme of the Act. There is no meeting ground in this inherently contradictory approach. Elevating the status of a tax auditor to such a level that when he gives an opinion which is not in harmony with the law laid down by the Hon'ble Courts above- as indeed in this case, the law, on the face of it, requires such audit opinion to be implemented by forcing the disallowance under section 143(1), does seem incongruous." 2.2.xi. Same ratio has been laid down by Hon'ble ITAT, Mumbai Bench in the case of P.R. Packaging Service vs. ACIT-25(3), Mumbai ITA No. 2376/Mum/2022, wherein under identical set of facts, as in the case of the assessee company, additions made w.r.t Section 36(1)(va), under Section 143(1) were deleted by Hon'ble ITAT, Mumbai Bench, holding such adjustment in the processing to be outside the scope of Section 143(1)(a)(iv). The said decision has been rendered by Hon'ble ITAT, Mumbai Bench subsequent to the decision of Hon'ble Supreme Court in Checkmate Services Private Limited (Supra). 2.2.xii. It is further submitted that the processing of return of income was made i.e. on 12.11.2019. On....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under s. 36(1)(va) of the Act. In fact in the above matters one of the parties is same as in the present appeals, therefore, the issue is no more res Integra in the light of judgments of this Court referred to supra and, in our view, no substantial question of law arises out of the impugned orders of the Tribunal, which may require attention of this Court. 2.2.xiii. In view of the above the law prevailing as on the date of processing did not authorize Ld. CPC to take a different view that too by way of adjustment by processing the return u/s 143(1). In view of above the adjustment made by ld. AO (CPC) is illegal and without jurisdiction. Relief may please be granted by quashing such adjustment." 6. In addition to the written submission the ld. AR of the assessee also relied upon the following judicial precedent to support the grounds raised before us: • Garg Heart Centre & Nurshing Home Private Limited vs. ACIT in ITA No. 1700/Del/2022 dated 25.08.2022. • Kalpesh Synthetics (P.) Ltd. vs. DCIT (2022) 137 taxmann.com 475( Mumbai Trib.). • M/s P. R Packaging Service vs. ACIT in ITA No. 2376/Mum/2022 dated 07.12.2022. 7. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ld. AR of the assessee thus, based on the above contention submitted that the adjustment made by the CPC are outside the permissible adjustment as per the provision of law. 8. Per contra, the ld. Sr. DR supported the contentions raised in the order of the ld. CIT(A) and vehemently argued that the disallowance are evidently not paid in time the same is disallowable and for that he has relied upon the decision of Hon'ble Apex Court in case of Checkmate Services P. Ltd. vs CIT Appeal No. 2833 of 2016 dated 12.10.2022. 9. We have heard the rival contentions, perused the material on record. The ld. AR of the assessee in ground no. 1 argued that the adjustment made by the CPC are outside the permissible adjustment as provided under the Act and to support he has relied upon the various judicial decision. To decide the ground raised by the assessee we have persuaded the provision of section 143(1) 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dered view that the adjustment made by the lower authorities are outside the purview of Section 143(1) of the act. To support the view taken by us we have relied upon the detailed finding of the coordinate Delhi bench's decision in the case of Garg Heart Center & Nursing Home Private Limited in ITA No. 1700/Del/2022. The relevant finding is reiterated here in below:- "(C.1.1) We have heard both sides. We have perused the materials on record. Relevant facts are not in dispute. In all these appeals before us, the employees' contribution to ESI/Provident Fund, were deposited by the respective assessees after the specified date prescribed under laws governing ESI/Provident Fund. However, these payments were deposited by the respective assessees well before the date of filing of return of Income Tax prescribed under section 139(1) of Income Tax Act. The aforesaid additions have been made to the income of the respective assessees by way of adjustment and intimation u/s 143(1) of Income Tax Act. (C.1.2) The issue before us is whether, the aforesaid additions by way of adjustments and intimation u/s 143(1) of Income Tax Act in respect of payments of Employee's contributio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and Nursing Home Pvt. Ltd. & Ors. vs. ACIT Page 20 of 28 Tribunal have, in fact, specifically considered the aforesaid amendments brought to Income Tax Act by Finance Act, 2021; and have taken the view that the amendments are prospective in nature (i.e. applicable from AY 2021-12 onwards) having no application for the period prior to 01.04.2021 i.e. for assessment years prior to AY 2021- 22. Even if Revenue does not accept the view, that the aforesaid amendments are prospective in nature having no application for Assessment Years prior to Assessment Year 2021- 22; it is clearly established in the light of aforesaid decisions of Income Tax Appellate Tribunal (ITAT); referred to in this paragraph earlier, that the issue whether the aforesaid amendments are prospective or retrospective, is at least debatable and controversial, on which a view in faour of the assessee (that the aforesaid amendments are prospective) can legitimately exist, even if such a view favorable to the assessee is contested by Revenue. (C.1.3) Let us consider the two alternate views, one in favour of the assessee and the other in favour of Revenue; more closely. If the view in favour of the assessee, tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e are of the view that the aforesaid adjustments made by Revenue u/s 143(1) of IT Act were unfair, unjust, and bad in law. For this view, we also respectfully take support from the order of Agra Bench of ITAT, in the case of Mahadev Cold Storage vs. Jurisdictional Assessing Officer (supra). At the very least, Revenue should have given due consideration to the fact that the issue was highly debatable and controversial. As already discussed earlier, adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, is beyond the scope of section 143(1) of Income Tax Act. Revenue was clearly in error, in making the aforesaid adjustments u/s 143(1) of Income Tax Act on a debatable and controversial issue. We would also like to make respectful mention of order of Jabalpur Bench of ITAT in the case of Nikhil Mohine vs. DCIT (supra), in which similar view has been taken. (C.1.4) Further, it is also well settled that retrospective amendment cannot be invoked to make addition by way of adjustment and intimation u/s 143(1) of Income Tax Act. This view was taken by the Hon'ble Supreme Court in the case of CIT vs. Hindust....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p Singh and Ansal API Infrastructure Limited respectively and direct the Assessing Officer to delete the additions made by way of adjustments/intimation u/s 143(1) of IT Act. For the same reasons, we uphold the impugned appellate order of Ld. CIT(A) in the case of M/s Jagatjit Industries Ltd." 9.2 Respectfully following the above view the ground no 1 raised by the assessee is allowed. 10. Since we have allowed the appeal of the assessee on technical ground. We have not decided the ground of the assessee on merits and that ground left open. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 20/02/2023 ============= Document 1 (b) Details of contributions received from employees for various funds as referred to in section 36(1)(va): Serial number Nature of fund Sum received Due date for The actual from employees payment amount paid The actual date of payment to the concerned authorities Document 2 (b) Amounts inadmissible under section 40(a):- (i) as payment to non-resident referred to in sub-clause (i) (A) Details of payment on which tax is not deducted: S.No. Date of A....