TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 755
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....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, the assessee has raised two grounds before the ld. CIT(A)....
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.....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 company, made adjustment on account of disallowance of expenditure indicated in the Audit Report u/s 143(1)(a)(iv). The same is d....
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.... 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 contribution have been reported. Ld. AO(CPC) simply matched the due dates of payment and actual date of payment while processing the return of income and any difference between the said dates has been assumed to be disallowance. But in actual scenario there is no disallowance but only difference in due date and actual date of payment. 2.2.vii. Hence, when there....
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....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 that date it was clear that if the amount of employees' contribution to ESI and PF is deposited before the due date of filing of return of income, no disallowance u/s 36(1)(va) can be made. Reliance is placed on the following decisions: Hon'ble Supreme Court CIT vs. Rajasthan State Beverages Corporation Ltd. (2017) 392 ITR 2 (St.) CIT vs State Bank of Bikaner and Jaipur SLP No. 16249/2014 In abov....
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....ifferent 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. The ld. AR of the assessee thus relying to written submission and judicial decision vehemently argued that the adjustment made by the CPC are outside the purview of the law prevailing on the year under question and at the same time fairly admitted that the after the decision of the apex court in the case of Checkmate Services there is no scope of not considering the claim had the case of the assessee been subjected to scrutiny u/s. 143(3) of the Act. The related to considering this adjustment as income of the assessee is al....
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....ee 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, namely:- (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if 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 68[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under 69[section 10AA or under any of the provisions of Chapter VI-A under the heading ....
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....r, 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 contribution to ESI/Provident Fund, made by the assessee [payments made after stipulated dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return prescribed u/s 139(1) of Income Tax Act] are to be sustained or deleted. We are aware about amendments to section 36(1)(va) and 43B of Income Tax Act, brought into effect by Finance Act, 2021. As regards whether these amendments are prospective in nature and applicable with effect from 01.04.2021 or retrospective in nature having applicability even before 01.04.2021; we are aware of some reported orders of ITAT, passed after the aforesaid amendments were brought in by Finance Act, 2021; in which the issue in di....
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....arlier, 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, that the aforesaid amendments are prospective, is accepted; then the decisions of Hon'ble Delhi High Court, in the cases of CIT vs. AIMIL Ltd. 321 ITR 508 (Delhi); and CIT vs. P.M. Electronics Ltd. 313 ITR 161 (Delhi) continue to hold good for Assessment Years to which these appeals before us, pertain. Accordingly, the view taken by Hon'ble Delhi High Court in these cases, that delayed payments of employees contribution of provident fund and ESI [payment made after stipulated dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return prescribed u/s 139(1) of Income Tax Act] does not constitute assessee's income, will continue to hold good for Assessment ....
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....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. Hindustan Electro Graphites Ltd. [2000] 243 ITR 0048 (SC), in which the view of Hon'ble Kolkata High Court in the case of Modern Fibotex India Ltd. & Anr. Vs. DCIT & Ors.[1995] 212 ITR 0496 (Calcutta) was approved. Same view was taken by the Hon'ble Madhya Pradesh High Court in the case of CIT vs. Satish Traders [2001] 247 ITR 0119 (Madhya Pradesh). (C.2) In view of foregoing discussion, we come to the following conclusions: (a) The fact that payments by way of employees' contribution to provident fund and ESI were made by the respective assessees after stipulated date prescribed under the relevant laws governing provident fund and ESI, but before the due date of filing of return of income prescribed u/s 139(1) of ....