TaxTMI 
TaxTMI 
2023 (6) TMI 168
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....ment of the Hon'ble High Courts as stated in the following paragraphs, to allow employee contribution paid before filing of income tax returns. 2. The CPC and Ld.CIT(A) have not appreciated the fact that the amendment to section 36(1)(va) is not applicable retrospectively in so far the memorandum explaining the provision of Finance Bill, 2021 clearly stated that the amendment to section 36(1)(va) is applicable from 1st April 2022, hence applying the same to AY 2018-19 is not correct. 3. That the delays in depositing the PF/ESI amounts were duly disclosed in Tax audit report filed with the income tax Return. Keeping in view that penalty for late deposit is already being charged by the EPF act, additional disallowance by IT act becomes burdensome and creates a liability on the assessee and causes undue hardship to the assessee. 4. The assessee has duly deposited the contributions with interest and penalty to the concerned department and at the same time these contributions have been deposited well within the due date of filing of Income Tax return." 4. The statement of facts as furnished by the assessee along with appeal Form 36 is reproduced as under: "1. Nepal Chand....
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....#39;s contribution only and not in respect of failure of the employer to deposit the funds deducted/collected from the employees, to say it in other words, the benefit of extended date i.e. last date of filing of return, would not be available in respect of employees' contribution and the same will not be allowed as deduction of expenditure if deposited after due date as prescribed by the relevant statutes irrespective of the fact that the same was deposited by the employer before the due date of filing of return of income u/s 139(1) of the Income Tax Act. The Hon'ble High Courts which ruled in favour of the assessee held that the provisions of section 43B(b) prescribing the due date as the last date for furnishing of return of income will not only apply to employers' contribution towards ESI/PF of employee but also to the employees' contribution which have been deducted by the employer and deposited by the employer as prescribed u/s 36(1)(va) of the Act. However, the Hon'ble Supreme Court in the case of 'Checkmate Services Pvt. Ltd vs. CIT' (supra) has held that by virtue of section 2(24)(x) of the Act, the amounts received or deducted by an employer u/....
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....iscover and find the correct law. Even, that where an earlier decision of the court operate for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which were earlier not correctly understood. In view of the above stated legal position, the law declared by the Hon'ble Supreme Court will be retrospectively applicable and it will be treated that earlier decisions of different High Court favouring the assessee would be of no benefit of assessee at this stage as the said decisions of the High Courts are treated to be never existed or to say are wiped out by the aforesaid decision of the Hon'ble Supreme Court. The assessee, herein, has not disputed the aforesaid legal position. However, at this stage, the contention as canvassed through written submissions is that the Assessing Officer could have disallowed the aforesaid employees' contribution to ESI/PF being deposited after the due date under the relevant statute, only in an assessment carried out u/s 143(3) of the Act. That the Assessing Officer did not have any power or jurisdiction to disallow the aforesaid amount while processing the return u/s 143(1)(a) of th....
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....ed 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 under the Provident Fund Act. Hence, it is merely recording of facts and a mere statement made by the Tax Auditor in his audit report. The Ld.CPC Bangalore had taken up this data from tax audit report and sought to disallow the same while proce....
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.... report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80IA, 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: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode : Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:] ... Explanation.-For the purposes of this sub-section,- (a) "an incorrect claim apparent from any information in the return" shall mean 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....
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....ng especially by pointing or moving your head; give information - to represent information without using words viz. The results are indicated in Table. Further, the word 'indication' has been explained as remark or sign that shows something happening or what somebody is thinking or feeling. Further the 'indicative' has been explained as showing or suggesting something. 13. In the light of the above meaning or expression of the word 'indicate', when we look into the facts of the case, we note that there is a prescribed form for furnishing of audit report and the auditor is supposed to furnish the information as per the prescribed columns of the Form 3CD. Under section 44AB of the Act, if the sales/turnover or the gross receipts, as the case may be, of an assessee carrying on business exceeds the prescribed threshold, it has been made mandatory for him to get his books of account audited. The object is to get a clear picture of the assessee's accounts so as to enable the Income Tax authorities to assess true and correct income of the assessee. The information furnished by the auditor in the prescribed form enable the Assessing Officer/CPC to make the requ....
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....it report is suggestive of some disallowance but not taken into account by the assessee in computing the total income in the return, the Assessing Officer/CPC would give intimation to the assessee of such proposed adjustments and whereupon the assessee has the right to file response/objection to such adjustment and the Assessing Officer/CPC is required to consider such response/objection before making the adjustments. Therefore, the word 'indicate' does not mean that the auditor is required to specifically mention that such and such disallowance is required to be made in the case of the assessee, rather, correct view would be that the auditor is required to furnish the information and that information can be compared and considered by the Assessing Officer/CPC in the light of the relevant statutory provisions as well as relevant laws and if such information is suggestive of any adjustment of disallowance, the Assessing Officer will make such disallowance after giving opportunity to the assessee to rebut the same. 15. We have come across of the another decision of the Coordinate 'Chennai Bench' of the Tribunal passed in bunch of appeals with the title case of "M/s E....
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....see did not fulfil the mandate of Sec.36(1)(va). It could also be seen that this is not an increase in income but disallowance of expenditure, the adjustment of which is covered u/s 143(1)(a)(iv) which provide that the disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return could be made while processing the return of income. The amendment made w.e.f. 01.04.2021 by insertion of words 'increase in income' would have no impact on such disallowance since it is only a disallowance of expenditure and the revenue is very well entitled to make such an adjustment u/s 143(1)(a)(iv). 8. The impugned adjustment, in our opinion, would also fall u/s 143(1)(a)(ii) since it is an incorrect claim which is apparent from any information in the return. The adjustment made by CPC flows from reporting made by Tax Auditor in Tax Audit Report in Form 3CD. As per statutory mandate, the assessee is required by law to get its accounts audited u/s 44AB if its turnover crosses threshold turnover. The purpose of the audit is to enable the revenue to make correct computation of assessee's income. A proper audit would, inter-a....
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..... The case law of Hon'ble Supreme Court in Kvaverner John Brown Engg. (India) P. Ltd. V/s ACIT (305 ITR 103), as referred on behalf of assessee, deal with deduction u/s 80-O for which two interpretations were possible viz. the deduction could be computed at gross value or the same could be computed on net value. The same is not the case here. The action of revenue is in accordance with the law laid down by Hon'ble Supreme Court in the cited decision. In fact, Hon'ble High Court of Madras in Tamilnadu Magnesite Ltd. vs. DCIT (303 ITR 71) held that where the amount was inadmissible in view of Sec.43B which overrides section 36(1) of the Act, the revenue was well within its power to make a prima facie adjustment in the computation of taxable total income while processing return of income under Section 143(1)(a) of the Act. The aforesaid decision supports our view. 12. The decision of Hon'ble High Court of Bombay in Bajaj Auto Finance Ltd. vs. CIT (93 Taxmann.com 63) as referred before us deals with case of debatable issue and hence distinguishable. The case law of Chandigarh Tribunal in Lanjani Co-operative Agri Service Society Ltd. vs. DCIT (ITA No.332/Chd/2021 date....
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....; that the tax audit reports are mere opinions and these opinions flag the issues which are required to be considered by the stakeholders; that these audit reports are inherently even less relevant, more so, when the reports require reporting of a factual position rather than express an opinion about legal implication of that position. The Coordinate Mumbai Bench further goes on to hold that when the law enacted by the legislature has been construed in a particular manner by the Hon'ble Jurisdictional High Court, it cannot be open to anyone in the jurisdiction of that Hon'ble High Court to read it in any other manner than as read by the Hon'ble Jurisdictional High Court. That, hence, the views expressed by the tax auditor in such a situation, cannot be the reason enough to disregard the binding views of the Jurisdictional High Court. The Coordinate bench, therefore, goes on to read down provisions to section 143(1)(a)(iv) and to hold that "what essentially follows is the adjustments under section 143(1)(a) in respect of "disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return" is to be read as, for....