Neelkanth Mansions and Infrastructure Private Limited, Mumbai V. Dy. Commissioner of Income Tax, Circle 14(1)(1), Mumbai, Mumbai

ITA 1938/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3492 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 21-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 43B; 143(3); 142(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI AMARJIT SINGH, JM ITA No. 1938/Mum/2021 (Assessment Year 2018–19) Ne e lka n th Ma n s io n s a n d In f ra stru ctu re P ri va te L im ite d 5 t h Flo o r, Fin e Ho u se , A n a d j i L a n e , M.G. Ro a d , Mu m b a i-4 0 0 0 7 7 Vs. T h e Dy. Co m m is sio n e r o f In co m e – ta x, Ce n t ra l C ir cle 1 4 (1 ) (1 ), 4 t h Flo o r, A a ya ka r B h a va n , M.K . Ma r g, Mu m b a i -4 0 0 0 2 0 (Appellant) (Respondent) PAN No. AAACN1245R Assessee by : Shri Gyaneshwar Kataram, CA Revenue by : Shri C.T. Mathews, Sr. AR Date of hearing: 21.04.2022 Date of pronouncement : 28.04.2022 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC) dated 20 th September, 2021, for Assessment Year 2018- 19, wherein the disallowance of ₹1,89,235/- being employers’ contribution to ESIC and amount of ₹70,435/- being employee’s contribution to ESIC is disallowed. 02. Assessee has raised following grounds of appeal:- “1. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), Page | 2 ITA no. 1938/Mum/2021 Neelkanth Mansions and Infrastructure Pvt. Ltd.; A.Y. 18–19 NFAC has erred in law and on facts in confirming the action of Ld. DCIT, CPC in upholding disallowance of Rs. 2,59,671/- u/s 36(1)(va) r.w.s. 2(24)(x) despite the fact that the said amount of Rs. 2,59,671/ comprises of two components, an amount of Rs. 1,89,235/- which pertains to employer's contribution to ESIC covered u/s 43B and an amount of Rs. 70.435/ which pertains to employee's contribution to ESIC covered u/s (36(1)(va) and not considering the conclusive evidence submitted in its written submission and supporting paper book. 2. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in confirming the action of Ld. DCIT, CPC in upholding disallowance of Rs. 70,435/- u/s 36(1)(va) in respect of employee's contribution to ESIC in contradiction to jurisdictional Courts decisions which is binding upon him and without observing the principles of natural justice and without appreciating the facts and circumstances of the case. 3. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in confirming the action of Ld. DCIT, CPC in upholding disallowance of Rs. 1,89,235/- under section 36(1)(va) in respect of employer's contribution to ESIC in contradiction to the explicit provision of section 43B and without observing the principles of natural justice and without appreciating the facts and circumstances of the case. Page | 3 ITA no. 1938/Mum/2021 Neelkanth Mansions and Infrastructure Pvt. Ltd.; A.Y. 18–19 4. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in disregarding the decisions of jurisdictional Courts which is binding upon him. 5. In the circumstances and facts of our case, the learned Commissioner of Income Tax (Appeal), NFAC has erred in not allowing the Assessee's request for withdrawal of appeal which assessee rightly made, since the Assessing Officer had allowed the payments of employee's and employer's contribution to ESIC made after the due date as specified in the concerned Act vide order u/s 143(3) dated 12/04/2021 after issue of Notice u/s 142(1) dated 24/12/2020 requesting the assessee to explain as to why the amount of Rs. 2,59,671/ should not be disallowed. The Assessing Officer allowed the claim after considering our reply dated 07/01/2021 filed during the course of scrutiny assessment in response to the said notice u/s 142(1) dated 24/12/2020. 6. Without prejudice to the above grounds of appeal, in the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), NFAC has erred to rely on amendment to Finance Act, 2021 and considering the same to apply retrospectively which is in direct contravention of the law since the amendment to section 36(1)(va) and section 43B are applicable w.e.f. 01/04/2021 and the Learned Commissioner of Income Tax (Appeals), NFAC has erred not to consider the insertion of Page | 4 ITA no. 1938/Mum/2021 Neelkanth Mansions and Infrastructure Pvt. Ltd.; A.Y. 18–19 explanation to section 36(1)(va) and section 43B under Finance Act, 2021 as clarificatory in nature and the law to be applied retrospectively.” 03. The fact of the case shows that assessee is a company engaged in the business of builder and developers. It filed its return of income on 8 th October, 2018, declaring total income of ₹3,18,79,530/-. The above return was processed by passing intimation under section 143(1) of the Act on 19 th November, 2019. A sum of ₹2,59,671/- being sum received from employees and own contribution of assessee to Provident Fund, Superannuation, ESIC, etc. not credited to the account of respective fund on or before the due date prescribed under the respective law and therefore, same was disallowed under section 143(1)(a)(iv) of the income tax Act, 1961 (the Act). Against the intimation assessee filed an appeal before NFAC. Assessee contested that the contribution of ₹1,89,235/- is employer’s contribution which is disallowed in spite of the fact that it has been paid with the respective fund before the due date of filing of return of income. It was further stated that ₹70,435/- is the employees’ contribution which has also been paid before the due date of filing of the return of income and therefore both these disallowances should be deleted. The learned CIT(A) looked at the provisions of the Finance Act, 2021 and relying on the decision of co-ordinate Bench in case of Vedvan Consultants Private Limited Vs. DCIT in ITA No. 1312/Del/2020 dated 26 th August, 2021, Page | 5 ITA no. 1938/Mum/2021 Neelkanth Mansions and Infrastructure Pvt. Ltd.; A.Y. 18–19 confirmed the disallowance. Therefore, assessee is in appeal before us. 04. The learned Authorized Representative referred to page no. 89 of the Paper Book to show that sum of ₹1,89,235/- is a employer’s contribution to ESIC scheme which has been paid beyond the due date specified under ESIC law but is paid before the due date of filing of the return of income. He further referred to respective dates on which the payment has been made. He further submitted that a sum of ₹70,436/- is employees contribution which has also been paid before the due date of filing of the return. However, he admitted that employee’s contribution has not been deposited on or before the respective due dates of ESIC law. In view of this he submitted that the employer’s contribution cannot be disallowed in any circumstances. Further, with respect to the employee’s contribution a sum is paid before the due date of filing of the return of income same is allowable as deduction. He submitted that the impugned assessment order is Assessment Year 2018-19 and amendment has been brought by The Finance Act, 2021, therefore, amendment made by Finance Act, 2021 cannot be made applicable retrospectively. He relied upon several co- ordinate Bench decisions wherein, it has been held that amendment made by Finance Act, 2021 is prospective. 05. The learned Departmental Representative vehemently supported the orders of the lower authorities. It was stated that the amendment made by Finance Act, 2021 is Page | 6 ITA no. 1938/Mum/2021 Neelkanth Mansions and Infrastructure Pvt. Ltd.; A.Y. 18–19 squarely applicable for Assessment Year 2018-19 also, he referred to the language of the amendment and stated that it has clarified the law which was already there. Therefore, there is no reason to hold it not applicable for Assessment Year 2018-19. 06. We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that this issue is squarely covered in favour of the assessee that whether the amendment made by Finance Act, 2021 applies retrospective or prospectively by the decision of the co-ordinate Bench in case of Raj kumar Vs. ITD [2022] 136 taxmann.com 244 (Delhi - Trib.), wherein it has been held that these amendments are applicable prospectively with effect from Assessment Year 2021-22. When there are more than one decision of ITAT benches expressing diverse views, we tend to take a view which is in favour of assessee. In view of this, respectfully following the decision of co-ordinate Bench, we held that employees contribution of ESIC of ₹70,435/- though deposited by the assessee beyond due dates prescribed under respective ESIC law but before the due date of filing of the return of income is allowable to the assessee as deduction for impugned Assessment Year 2018-19. 07. With respect to the employer’s contribution of ESIC which has been deposited by the assessee before the due date of filing of the return of income is not covered by Provisions of Section 2(24) (x) of the Act and therefore, is allowable as deduction. In view of this, we hold that disallowance of Page | 7 ITA no. 1938/Mum/2021 Neelkanth Mansions and Infrastructure Pvt. Ltd.; A.Y. 18–19 employer’s contribution to ESIC of ₹1,89,235/- and employee’s contribution of ₹70435/- are allowable to the assessee as those are deposited before the due date of filing of the return of income. Accordingly, grounds no.1 to 6 of the appeal of the assessee is allowed. 08. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 28.04.2022. Sd/- Sd/- (AMARJIT SINGH) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 28.04.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai