Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 125116 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-09-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
13-09-2023
Assessment Year
2018-2019
Appeal Filed On
21-07-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VP AND SHRI ABY T. VARKEY, JM आयकर अपील सं/ I.T.A. No.1858/Mum/2022 (निर्धारण वर्ा / Assessment Years: 2018-19) Nirmal Bang Securities Pvt. Ltd. 301/302, B-2, Marathon Innova, Opp. Peninsula Building, Ganpatrao Kadam Marg, Lower Parel (W), Mumbai-400013. बिधम/ Vs. DCIT, Centralized Processing Center, Bengaluru DCIT-4(2)(1), Aayakar Bhavan, Maharishi Karve Road, Mumbai-400020. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAACN7369L (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 01/09/2022 घोषणा की तारीख /Date of Pronouncement: 23/09/2022 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/ (NFAC), Delhi dated 11.03.2022 for assessment year 2018-19. 2. The only grievance of the assessee is against the action of the Ld. CIT(A) in not condoning the fifty eight (58) day’s delay which according to assessee was erroneous; and also thereafter not giving relief to the assessee in respect of action of the AO’s/CPC passing intimation u/s 143(1) of the Income Tax Act, 1961 (hereinafter “the Act”). 3. Brief facts is that this this appeal emanates from the impugned order of the Ld. CIT(A) which was passed in the appeal preferred by Assessee by: Mr. Anant N. Pai Revenue by: Mr. Chetan Kacha (Sr. AR) ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 2 the assessee against the intimation order/action of the AO/CPC assessing the assessee’s income u/s 143(1) of the Act at Rs.22,93,63,180/- as against its returned income of Rs.19,26,73,750/-. The Appellant is a broking house for clients which trades on stock exchange and it filed its return of income on 22-09-2018 declaring total income of Rs. 19,26,73,750. The Appellant’s auditors had initially filed/uploaded their tax audit report on 22-09-2018. In the Form 3CA of their report, it reported payments covered under section 43B of the Act (i.e. employer’s contributions to Provident Fund / ESI) which was paid before the due date of filing income tax return @ Rs. 3,41,81,332. By oversight, they (auditors) also reported erroneously in the column for payments made after the due date of filing the return at as also Rs. 3,41,81,332/- instead of Rs. Nil. The auditors timely noticed this mistake and they uploaded a Revised Form 3CA on the very same day i.e. 22-09-2018. In the Revised Form 3CA, the auditors reported payments made before and after the due date of filing the income tax return @ Rs. 3,41,81,332 and Rs. Nil respectively. As regards employees’ contributions to Provident Fund/ ESI (covered u/s 36(1)(va), the tax auditors have reported payments totaling Rs. 25,08,096 as paid beyond the due dates under the Provident Fund / ESI statutes but before the due date of filing the income tax return. The tax auditors (relying on the judicial precedents as on date of filing of the report) have not stated that the payments totaling Rs. 25,08,096 are disallowable u/s 36(1)(va) of the Act. However, in the intimation processed by CPC/AO u/s 143 (1) dated 16-12-2019, the aforesaid ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 3 payments of Rs. 3,41,81,332 and Rs. 25,08,096 have been disallowed u/s 43B and u/s 36(1)(va) respectively. Both the disallowances have been made under sub clause (iv) of Section 143 (1) ie. “disallowance of expenditure indicated in the audit report but not taken in to account in computing total income in the return”. And the disallowance u/s 43B of Rs. 3,41,81,332 have been resorted to with the observation that there is “inconsistency in amount debited to profit and loss account but disallowed under section 43B”. From the aforesaid action/intimation of CPC it can be inferred that while making the said disallowance, the AO/CPC has only taken note of the original tax audit report and not the revised tax audit report filed/uploaded on the same day where the auditors have clearly reported that payments totaling Rs. 3,41,81,332 as having been paid before the due date of filing of the income tax return and therefore not dis-allowable u/s 43B of the Act. The disallowance u/s 36(1)(va) of Rs, 25,08,096 has been made with observation in the intimation that the amount represents “any sum received from employee as contribution to any provident fund /ESI not credit the employee's account on or before due date”. This disallowance has been resorted to even though the tax auditors have nowhere qualified that the amount of Rs. 25,08,096/- as disallowable u/s 36 (1)(va). With the above two disallowance totaling Rs.3,66,89,430/- adjusted/added to the appellant’s income, its total income has been finally determined @ Rs.22,93,63,180/- in the intimation dated 16.12.2019 by the AO/CPC as against as against the returned income of Rs.19,26,73,150/-. ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 4 4. Aggrieved by the aforesaid action of the AO’s/CPC, the assessee preferred an appeal before the Ld. CIT(A)/NFAC who was pleased to dismiss the appeal of the assessee by not condoning the delay of fifty eight (58) days. In this regard, we note that the intimation u/s 143(1) of the Act dated 16.12.2019 was received by the assessee on the same day and as per the Section 249(2) of the Act, the assessee was required to file appeal before the Ld. CIT(A) within the thirty (30) days of receipt of the AO’s order i.e. before the 15.01.2020. However, the assessee filed the appeal before the Ld. CIT(A) on 24.05.2021. The Ld. CIT(A) took note of the fact (Covid-19 Pandemic which started from March, 2020 onwards) and the suo-motto order of the Hon’ble Supreme Court in Misc. Application no. 665/2021 in SMW (C) no.3/220 dated 27.04.2021 wherein the Apex Court held that the limitation period for filing of appeals under any law from 15.03.2020 till the orders passed by Hon’ble Supreme Court (due to Covid-19 Pandemic) was to be excluded and thus the Ld. CIT(A) rightly took note that from 15.03.2020 onwards the limitation period got extended till 04.04.2021. However the period between 15.01.2020 & 15.03.2020 fifty eight (58) days) the Ld. CIT(A) did not condone. Thus, we find that the Ld. CIT(A) taking note of the order of the Hon’ble Supreme Court condoned the delay in this case except from 15.01.2020 till 15.03.2020 i.e. fifty eight (58) days. In respect of the fifty eight (58) days delay caused i.e. between 15.01.2020 to 15.03.2020, the assessee brought to our notice that the assessee on receipt of the intimation order dated 16.12.2019 had preferred an application for rectification of ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 5 mistake u/s 154 of the Act before the AO on 24.02.2020 (page 26 of the PB). But no action was taken by the AO on this application for rectification. Therefore, the assessee was constrained to file the appeal against the CPC’s intimation u/s 143(1) of the Act and in the interregnum Covid-19 Pandemic struck India and the Hon’ble Supreme Court extended the limitation period for filing of appeal from on 15-3.2020 onwards. And we note that the assessee finding no action from AO/CPC in respect of its application for rectification filed u/s 154 of the Act dated 24.02.2020, couldn’t file the appeal due to the Pandemic and therefore, at the most there was delay of thirty five (35) days i.e. between 15.01.2020 to 24.02.2020 which in the facts and circumstances of the case, according to us need to be condoned and we condone the same. 5. Having done so we note that the Ld. CIT(A) in the peculiar facts of the case has declined to look into the merits of the adjustment made by the CPC merely on the reason that since the AO has passed scrutiny assessment order u/s 143(3) of the Act on 30.04.2021 assessing the assessee’s income at Rs.25,61,61,286/-, according to him the doctrine of merger took place and therefore, the assessee’s appeal before him against the intimation order u/s 143(1) of the Act has become infructuous. It is true that when scrutiny assessment u/s 143(3) of the Act is passed, doctrine of merger takes place in the normal circumstances but in this case, this merger cannot be said to have taken place. The reason being that the AO while passing the scrutiny assessment order u/s 143(3) of the Act r.w.s. 144B of the Act on ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 6 30.04.2021 while assessing the assessee’s income at Rs.25,61,61,286/- has taken the income assessed u/s 143(1)(a) of the Act of Rs.22,93,63,180/- as the starting point of its income computation instead of the assessee’s returned income of Rs.19,26,73,750/- (Meaning the AO u/s 143(3) has adopted the intimation u/s 143(1)(a) of the Act as correct without adjudicating the same even though rectification application was filed (PB page 26) as on 24.02.2020). Therefore, in the peculiar facts of the case as discussed (supra) it cannot be said that on the issues agitated by the assessee against the action of CPC/AO u/s 143(1)(a) of the Act was hit by doctrine of merger as erroneously held by the Ld. CIT(A); and therefore the impugned action of Ld CIT(A) declining to adjudicate the issue cannot be countenanced. 4. Coming to the adjustment made by the CPC of total Rs.3,66,89,430/- (Rs.3,41,81,332/- u/s 43B of the Act in respect of employer’s contributions to PF/ESI and Rs.25,08,096/-) on the ground that the assessee has not remitted the contributions (PF and ESI) before the due dates specified in the relevant statutes (PF and ESI), as brought to our notice the auditors while uploading tax audit report in the Form 3CA on 22.09.2018 had initially reflected that it has paid Rs.3,41,81,332/- in time but also mistakenly reported that payments were made after the due date of filing the return of the very same amount (which should have been nil) while reporting disallowance u/s 43B of the Act. However it has been brought to our notice that the ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 7 assessee realizing the mistake has promptly filed on the very same day on 22.09.2018 revised Form 3CA correcting the mistake that after due date of filing the ITR return, nil need to be paid. We note that this was a mistake apparent on the face of the record or in any case due to the mistake in the initial report which has been corrected by filing of the revised report. Whatever it may be, still it can be seen that due to uploading of both reports, there arose a disputed question of fact as to whether the sum paid after due date of filing of return was Rs.3,41,81,332 or Nil. In any case, when the assessee has filed the rectification application on the same date and when it came to notice of the AO regarding disallowance of Rs. Rs.3,41,81,332/-, it was incumbent upon the CPC/AO to have looked into the factual assertion made by the assessee that it has wrongly shown that Rs.3,41,81,332/- was remitted after the due date of filing the return. Having not done so, the action of the CPC/AO cannot be countenanced. Likewise, the action of the Ld. CIT(A) not looking into the merits of the grounds raised by the assessee also cannot be countenanced. We note that the assessee’s claims is that employer’s contributions in respect of PF/ESI has been remitted before the due date of filing of return of income which needs to be allowed if it is correct. Since it is a question of fact as to whether the assessee has remitted the employer’s contributions of PF/ESI before the due date of filing of return of income, it needs to be verified by AO; and in case the assessee succeeds in showing that it has remitted the employer’s contributions regarding PF/ESI before the due date of filing of return of income, then the same needs to be ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 8 allowed. So, this issue is restored back to AO for the limited purpose of verification as directed supra. 5. Coming to the adjustment made to the tune of Rs.25,08,096/- u/s 36(1)(va) of the Act in respect of employee’s contributions to the PF/ESI also, we note that the issue is no longer res-integra. We take note of the Hon’ble Bombay High Court decision in the case of CIT Vs. Ghatge Patil Transports Ltd. (2014) 368 ITR 749 (Bom) and the Tribunal’s decision in various decisions wherein it have been consistently held regarding this issue that if employee’s contributions to PF/ESI have been remitted even if after due date as prescribed under PF/ESI Act, however if remitted by the assessee before the due date of filing return of income u/s 139 of the Act, then it need to be allowed; and further this Tribunal has already held that the amendment made to Section 36(1)(va) of the Act by Finance Act, 2021 is prospective in operation and takes effect from 01.04.2021 only and not applicable to this year. And therefore, we direct the AO to delete the adjustment made of Rs.25,08,096/-. 6. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on this 23/09/2022 Sd/- Sd/- (PRAMOD KUMAR) (ABY T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER Mumbai; Dated 23/09/2022 Vijay Pal Singh, (Sr. PS) ITA No.1858/Mum/2022 A.Y. 2018-19 Nirmal Bang Securities Pvt. Ltd. 9 आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, सत्यापपत प्रपत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. पवभागीय प्रपतपनपि, आयकर अपीलीय अपिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file.
AI Insights
The case involves Nirmal Bang Securities Pvt. Ltd., a broking house, appealing against the intimation order under section 143(1) of the Income Tax Act, 1961, which resulted in an increased assessment of income for the assessment year 2018-19. The primary issues were the disallowances made under sections 43B and 36(1)(va) of the Act concerning employer's and employee's contributions to PF/ESI. The Tribunal found procedural lapses in the handling of the rectification application by the AO and discrepancies in the reporting of the contributions in the tax audit reports. The Tribunal's decision emphasized the need for factual verification by the AO regarding the timing of the contributions' remittance.
