ASHISH DYECHEM & TEXTILES PROCESSORS PVT. LTD, MUMBAI V. DCIT 4(1) (1) , MUMBAI

ITA 1748/MUM/2021

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1632 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 30-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 115JB; 143(1); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1748/MUM/2021 (ASSESSMENT YEAR: 2018-19) & ITA No. 1749/MUM/2021 (ASSESSMENT YEAR: 2019-20) Ashish Dyechem & Textile Processors- Private Limited, 420, Laxmi Plaza, Laxmi Industrial Estate, Link Road, Andheri (West), Mumbai - 400053 [PAN: AAACA3928N] Deputy Commissioner of Income Tax, 4(1)(1), Mumbai, Room No. 223, 2 nd Floor, Aaykar Bhavan, New Marine Lines, Churchgate, Mumbai - 400020 ................ Vs ................ Appellant Respondent Appearances For the Appellant/ Assessee For the Respondent/Department : : Shri Mitali Gopani Shri Vinod Bhaskaran Date of conclusion of hearing Date of pronouncement of order : : 04.04.2022 01.07.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. These are two appeals filed by the Appellant/Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „the CIT(A)‟] for the Assessment Year 2018-19 [CIT(A)-9, Mumbai/10147/2019-20,] and Assessment Year 2019-20, [CIT(A)-9, Mumbai/10008/2020-21] on 16.09.2021 and 16.09.2021, respectively. ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 2 2. The appeals were heard together as identical issues were involved and are being disposed of by way of a common order. ITA No. 1748/MUM/2021 (Assessment Year 2018-19) 3. By way of the present appeal the Appellant/Assessee has challenged the order, dated 16.09.2021, whereby the CIT(A) had dismissed the appeal against the intimation/order, dated 27.11.2019, issued/passed by Deputy Commissioner of Income Tax, CPC under Section 143(1) of the Act. 4. The Appellant has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case, the CIT(A) legally erred in confirming the order of AO wherein a sum of Rs. of Rs.,7.72,467/- being the employees contribution of Provident Fund and ESIC amounting to Rs.6,25,702/-and Rs.1,46,765/- respectively paid after the due date of the fund disregarding the fact that these contributions were duly paid on or before the due date of filing the return of income. 1.1 On the facts and in the circumstances of the case, the CIT(A) legally erred in not discussing the submissions made by the appellant and also not following the binding decisions of the Hon'ble Jurisdictional Bombay High Court which were relied on by the appellant i.e. Ghatge Patil Transports Ltd. (368 ITR 749) and Hindustan Organics Chemicals Limited (ITA 399 of 2012) 2. On the facts and circumstances of the case, the CIT(A) erred in confirming the charging of interest u/s 234C at Rs.4, 267/- excessive than the interest charged on the returned income. ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 3 3. On the facts and circumstances of the case, the CIT(A) legally erred in not disposing the additional ground of appeal filed by the appellant on 07.09.2021 regarding the deduction of education cess charged by the AO under the head "Income From Business". 3.1. This additional ground/claim was filed arising out of the judgment of the Hon'ble Jurisdictional Bombay High Court in the case of Sesa Goa Ltd (423 ITR 436). a. The said decision has been further followed by the Hon'ble ITAT, Mumbai in the case of UHDE India (p) Ltd v ACIT (211 TTJ 0339).” The grounds raised by the Appellant are taken up seriatim hereinafter. Ground No.1 to 1.1 5. The brief facts are that the Appellant, engaged in the business of manufacture of textiles (other than by the handloom), filed its return of income for the Assessment Year 2018-19 on 01.10.2018, declaring total income of INR 2,60,96,427/- under Section 115JB of the Act, which was processed under Section 143(1) of the Act by the Deputy Commissioner of Income Tax, CPC accepting income of INR 2,60,96,427/- under Section 115JB of the Act and computing income at INR 2,13,75,535/- under the normal provisions of the Act after making addition of INR 7,72,467/- being aggregate employees‟ contribution to Employees‟ State Insurance Corporation (ESI) amounting to INR 1,46,765/- and Provident Fund (PF) amounting to INR 6,25,702/- deposited after the due date specified in the applicable statute but before the due date of filing income tax return prescribed under Section 139(1) of the Act. ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 4 6. Being aggrieved, the Appellant filed appeal against intimation/order under Section 143(1), dated 27.11.2019 before the CIT(A) which was dismissed by the CIT(A) vide order, dated 16.09.2021, holding as under: “6 I have carefully perused Appellant‟s submissions and facts on records. The law has been amended w.e.f. 1-4-2021 and the provisions of sec. 43B have been made inapplicable to the employee‟s contribution to PF/ESI. The Finance Act 2021 has amended sec 43B as well as sec. 36(1)(va) by insertion of Explanations to those section......... xx xx 6.4 It is evident from the above observations of the Hon'ble Supreme Court that the main section, the explanation and the intention of the Legislature set out through the Memorandum to the Finance Act have to be read together and harmoniously. As discussed in this order, it is evident from the language of sec 43B(b) and the explanatory notes to Finance Act 1983, that employees' contribution was never intended to be covered by sec 43B. This has been reiterated and reinforced through Explanation 5 to sec 43B and Expl 2 to the 36(1)(va) inserted by Finance Act 2021. If such was the intention of the Legislature expressly made clear in the Finance Act 2021, through the explanatory notes, it would necessarily to be held Expl 5 to sec 438 & Expl 2 to sec 36(1)(va) would apply to all pending matters as on date. On these arguments, it is held that the late payment of PF, ESI etc are not covered by sec 43B. ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 5 7. Admittedly in the present appeal, the facts indicate that the sum of Rs.7,72,467/- being employee's contribution to PF/ESI has been paid late under that Act. Based on the reasoning above, the addition made by the AO deserves to be upheld. The addition of Rs.7,72,467/- is confirmed and all grounds are dismissed. 8. Before parting, the issue of the decisions of various High Courts & the Hon'ble supreme Court cited by the appellant and their applicability to the present appeal, must be addressed. It could be observed that the said decision was rendered by the Hon'ble Courts, on the law as it stood prior to the amendments through Finance Act 2021, which is to say, the Hon'ble Courts were seized of the matter prior to the insertion of Explanations to sec 43B & 36(1)(va) The law as it stands today, after the insertion of the explanations, makes it abundantly clear that the provisions of sec 43B are deemed never to have applied to the late payment of PF/ESI. In the circumstances, the argument of the appellant would not stand.” 7. Now the Appellant is before us challenging the order dated 16.09.2021 passed by CIT(A). 8. The Ld. Authorised Representative for the Appellant appearing before us submitted that the addition of INR 7,72,467/- under Section 36(1)(va) of the Act has been made without appreciating that the employee‟s contribution to PF (INR 7,72,467/-) and ESI (INR 6,25,702/-) was deposited before the due date of filing return and was allowable as deduction under Section 36(1)(va) read with Section 43B of the Act in terms of the following decisions of the Hon‟ble Bombay High Court in ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 6 the case of CIT vs. Ghatge Patil Transports Ltd. (2015) 53 taxmann.com 141 (Bombay), CIT vs. Hindustan Organics Chemicals Ltd. [2014] 366 ITR 1 (Bombay) and decision of Hon‟ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC). Further, the Tribunal has in number of decisions held that the amendments introduced by the Finance Act, 2021 are applicable for Assessment Year 2021-22, and therefore, the CIT(A) has erred in confirming the disallowance by placing reliance on the same. 9. Per contra, Ld. Departmental Representative relied upon the order passed by the CIT(A) to support the order/intimation issued by CPC under Section 143(1) of the Act. He also relied on the amendments made to Section 36(1)(va) and Section 43B of the Act by the Finance Act, 2021. He submitted that the addition/adjustment squarely falls within the ambit of the provisions of Section 143(1)(a)(iv) of the Act. 10. We have carefully considered the rival submission as well as the order passed by the lower authorities. It is admitted position that employees contribution towards ESI (INR 6,25,702) and PF (INR 1,46,765/-) were deposited by the Appellant before the due date of filing the return prescribed under Section 139(1) of the Act though the deposit was made belatedly as per the applicable statute. The intimation/order under Section 143(1) of the Act was issued/passed on 27.11.2019. CIT(A) has sought to justify the additions/adjustments made under Section 143(1) of the Act by placing reliance upon the amendments introduced by the Finance Act, 2021 which was passed much later on 28.03.2021 by contending that the amendments are to be interpreted as ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 7 being clarificatory in nature and therefore, applicable retrospectively. The date on which intimation/order under Section 143(1) of the Act was passed, the issue stood decided in the favour of the Appellant by virtue of the decisions of the jurisdictional High Court in the case of CIT vs. Ghatge Patil Transports Ltd. (2015) 53 taxmann.com 141 (Bombay), CIT vs. Hindustan Organics Chemicals Ltd. [2014] 366 ITR 1 (Bombay) cited by the Ld. Authorised Representative of the Appellant. Even after the introduction of amendments to Section 36(1)(va)/43B of the Act by way of Finance Act, 2021, Hyderabad Bench of the Tribunal had, vide order dated 15.06.2021, in the case of Salzgitter Hydraulics (P.) Ltd. vs ITO, Ward 3(1), Hyderabad: 189 ITD 676 (Hyderabad - Trib.), held that the aforesaid amendments are applicable from Assessment Year 2021-2022. The Memorandum Explaining the provisions of the Finance Bill, 2021 clearly provides that “These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years”. Accordingly, the adjustments/additions made by the Deputy Commissioner of Income Tax, CPC in respect of employees contribution to ESI and PF fell outside the scope of Section 143(1) of the Act. Even otherwise, this issue is covered in favour of the Appellant by the decision of co–ordinate bench in case of Kalpesh Synthetics (P.) Ltd. Vs. Deputy Commissioner of Income-tax, CPC Bangaluru [2022] 137 taxmann.com 475 (Mumbai - Trib.) 11. In view of above, the addition/disallowance of INR 7,72,467/- under Section 36(1)(va)/43B of the Act made vide intimation/order under Section 143(1), dated 27.11.2019, is deleted and Ground No. 1 raised by the Appellant is allowed. ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 8 Ground No. 2 12. Ground No. 2 raised in the appeal pertaining to interest charged under Section 234C of the Act is disposed off as being consequential. Ground No.3 13. Ground No. 3 raised in the appeal pertaining to deduction of education cess is disposed off as being not pressed on the basis of statement made by the Ld. Authorised Representative of the Appellant under instructions. 14. We note that the Appellant has raised an additional ground vide letter dated 27.10.2021 also directed against the above additional of INR 7,72,462/-. Since we have deleted the addition as above and allowed Ground No.1, the additional ground raised by the appellant is being disposed off as being infructuous. 15. In view of above, the appeal filed by the Appellant for the Assessment Year 2018-19 is partly allowed. ITA No. 1749/Mum/2021 (Assessment Year 2019-20) 16. Both the sides are in agreement that the facts and circumstances of the appeal for the Assessment Year 2019-20 are identical to those for the immediately preceding Assessment Year 2018-19 except for the amount of disallowance. Accordingly, adjudication of grounds of appeal for the Assessment 2018-19 shall apply mutatis mutandis to the identical grounds raised in the appeal for the Assessment Year 2019-20. ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 9 17. In view of above, the addition/disallowance of INR 2,96,887/- under Section 36(1)(va)/43B of the Act made vide intimation/order under Section 143(1), dated 29.05.2020, is deleted and Ground No. 1 raised by the Appellant is allowed. Additional ground raised vide letter dated 27.10.2021 is disposed off as being infructuous. Ground No. 2 raised in the appeal pertaining to interest charged under Section 234C of the Act is disposed off as being consequential. Ground No. 3 raised in the appeal pertaining to deduction of education cess is disposed off as being not pressed on the basis of statement made by the Ld. Authorised Representative of the Appellant under instructions. Accordingly, the appeal filed by the Appellant for the Assessment Year 2019-2020 is partly allowed. 18. In the result, both the appeals filed by the Appellant are partly allowed. Order pronounced on 01.07.2022. Sd/- Sd/- (Prashant Maharishi) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 01.07.2022 Alindra, PS ITA Nos. 1748-1749/Mum/2021 Assessment Years: 2018-19 & 2019-20 10 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai