M/S. SCANTECH LASER PVT. LTD, NAVI MUMBAI V. INCOME TAX OFFICER CIR 15(3) (2), MUMBAI

ITA 1968/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2060 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2018-2019
• Appeal Filed On: 25-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 2; 43B; 143(3); 143(1); 250; 139(1)

Judgement Text

1 ITAs 1967 & 1968/Mum/2021 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI M. BALAGANESH (ACCOUNTANT MEMBER) AND SHRI PAVAN KUMAR GADALE (JUDICIAL MEMBER) I.T.A No.1967/Mum/2021 - A.Y. 2019-20 I.T.A No.1968/Mum/2021 - A.Y. 2018-19 Scantech Laser Pvt Ltd, A/517, TTC Industrial Area MIDC, Mahape, Navi Mumbai- 400701 PAN-AAECS8022P vs Income-tax Officer, Circle 15(3)(2) Aaykar Bhavan, Mumbai- 400 020 APPELLANT RESPONDENT Assessee represented by Ms. Rupal Shah.AR Department represented by Shri. B.K. Bagchi.DR Date of hearing 10/05/2022 Date of pronouncement /05/2022 O R D E R Per: PAVAN KUMAR GADALE (JM): These are the appeals filed by the assessee against the separate orders of Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi passed under section 143(1) and 250 of the Income-tax Act, 1961. 2. Since the issues are common and identical in these appeals, hence are clubbed, heard and consolidated order is passed. 2 ITAs 1967 & 1968/Mum/2021 3. For the sake of convenience, we shall take up ITA No.1968/Mum/2021 for A.Y. 2018-19 as the lead case and facts narrated. The assessee has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals), hereinafter referred to as the "CIT (A)", has erred in confirming the order of the DCIT, CPC disallowing the claim of Rs. 10,58,135 towards contribution of Employees share in Provident fund and ESIC reported under Clause 20(b) where the dates of payment are after the date required under section 36(1 )(va) but before the due date of filing of return u/s 139(1). 2. On the facts and in the circumstances of the case, the CIT (A) thereby erred in denying the deduction of Rs. 10,58,135/- available to the appellant u/s. 43B(b) of the Income-tax Act, 1961, where deduction can be claimed for any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees if the same is paid before the due date for filing return under section 139(1) 3. Without prejudice to any of the Grounds above, the CIT (A) erred in confirming the disallowance of the impugned amount of Rs. 10,85,135/- as these expenses should be allowed under section 43B(a) where any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force should be allowed if the same is paid before the due date for filing return under section 139(1)” 4. At the time of hearing, the Ld.AR has filed the additional grounds of appeal as under:- “The order of DCIT, CPC is erroneous on the facts and in the law. On the facts and in the circumstances in the present case he ought to have accepted the returned income. The revenue has erred in invoking the provision of section 143(l)(a)(iv) of the Income Tax Act on the fallacy of presumption that the auditor has disallowed the employee contribution to EPF /ESI. In Form 3CD the auditor only reports date of payment of the contribution of the fund. The format of Form 3CD does not ask for amount of disallowance in Clause 20(b) where payment details are disclosed in respect of employee contribution to PF and ESIC Act.” 3 ITAs 1967 & 1968/Mum/2021 5. The Ld.AR submitted that this ground of appeal could not be raised before the Ld.CIT(A), and therefore, made an application for admission of the additional ground of appeal. After hearing the submissions of the Ld.AR and the Ld.DR, the additional ground of appeal is admitted. 6. The brief facts of the case are that the assessee company is engaged in business of manufacture of various types of laser machines and filed the return of income for the assessment year 2018-19 with a total income of Rs.71,21,740/- on 30/11/2018.The return of income was processed u/s 143(1) of the act and intimation dated 16/10/2019 was received through email where the employees’ contribution of provident fund (PF) of Rs. 10,58,135/- and ESIC Rs.3,35,129/- both aggregating to Rs.13,93,264/- was disallowed u/s 36(1)(va) of the Act due to delay in deposit of employees’ contribution to ESI and provident fund under the respective provisions of the Act and the total income was determined along with the other disallowances at Rs.1,63,22,030/-. 7. Aggrieved by the intimation, the assessee has filed an appeal before the CIT(A),whereas the CIT(A) has confirmed the addition in respect of the belated deposits of PF and ESIC contributions and granted relief in other grounds of appeal and partly allowed the appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Honble Tribunal. 8. At the time of hearing, the Ld. AR of the assessee submitted that the CIT(A) has not considered the facts, law and the asseessee is governed by the law applicable to said assessment year. Whereas the amended 4 ITAs 1967 & 1968/Mum/2021 provisions/explanations are with effect from F.Y 1-4-2021.The Ld.AR relied on the judicial decisions and prayed for allowing the appeal. 9. Contra, the Ld. DR submitted that the explanation 2 to Sec 36(1)(va) of the Act in finance Act 2021 was introduced and the amendment is applicable to the earlier years and supported the order of the CIT(A) appeal. 10. We heard the rival submissions and perused the material available on record. The Ld. AR’s contentions are that the assessee for the various reasons could not deposit the employees contribution to provident fund & ESIC within the time allowed under prescribed Act. Whereas, the assessee has deposited the amount before filing of the return of income U/sec139(1) of the Act. The Ld. AR referred to the chart at page 7 in CIT(A) order, whereas there is a delay in depositing the employees contribution to provident fund of Rs. 10,58,135 /-and the employees contribution to ESIC Rs.3,35,129/-.The assessee has complied with the provisions of Law and deposited the contributions before the due date of filling the Return of income U/sec139(1) of the Act which cannot be disputed. The Ld.DR submitted that the amendment is retrospective applicable but the Ld.AR submissions are that the amendment has come w.e.f 1-4-2021and the same is applicable prospectively. The fact remains that the provisions/explanation was introduced in the Finance Act 2021 w.e.f 1-4-2021. 5 ITAs 1967 & 1968/Mum/2021 11. We considering the overall facts, circumstances and the submissions find on the similar issue, the Co-ordinate Bench of this Hon’ble Tribunal in M/s Kalpesh Synthetics Pvt Ltd Vs DCIT. Cpc in ITA no 1785/Mum/2021.A.Y 2018-19 order dated 27.04.2022 has considered the facts, provisions of law and allowed the appeal and observed at Page10 Para 9 &10 which is read as under: 9 what a tax auditor states in his report are his opinion and his opinion cannot bind the auditee at all. In this light, when one considers what has been reported to be ‘due date’ in column 20 (b) in respect of contributions received from employees for various funds as referred to in Section 36(1)(va) and the fact that the expression ‘due date’ has been defined under Explanation (now Explanation 1) to Section 36(1)(va) provides that “ For the purposes of this clause, ‘due date’ means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise”, one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just a factual report about the fact of payments and the fact of the due date as per the Explanation to Section 36(1)(va). This due date, however, has not been found to be decisive in the light of the law laid down by Hon'ble Courts above, and it cannot, therefore, be said that the reporting of payment beyond this due date in the tax audit report constituted “disallowance of expenditure indicated in the audit report but not taking into account in the computation of total income in the return” as is sine qua non for disallowance of Section 143(1)(a)(iv). When the due date under Explanation to Section 36(1)(va) is judicially held to be not decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is “indicative” of the disallowance of expenditure in question. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon’ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. 6 ITAs 1967 & 1968/Mum/2021 10. In view of the detailed discussions above, we are of the considered view that the impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. As we hold so, we make it clear that our observations remain confined to the peculiar facts before us, that our adjudication is confined to the limited scope of adjustments which can be carried out under section 143(1) and that we see no need to deal with the question, which is rather academic in the present context, as to whether if such an adjustment was to be permissible in the scheme of Section 143(1), whether the insertion of Explanation 2 to Section 36(1)(va), with effect from 1 st April 2021, must mean that so far as the assessment years prior to the assessment years 2021-22 are concerned, the provisions of Section 43B cannot be applied for determining the due date under Explanation (now Explanation 1) to Section 36(1)(va). That question, in our humble understanding, can be relevant, for example, when a call is required to be taken on merits in respect of an assessment under section 143(3) or under section 143(3) r.w.s. 147 of the Act, or when no findings were to be given on the scope of permissible adjustments under section 143(1)(a)(iv). That is not the situation before us. We, therefore, see no need to deal with that aspect of the matter at this stage. 12 . We considering the ratio of judicial decision and the facts emanated in the course of hearing find that the amendment was brought in finance Act 2021 w.e.f 1-4-2021.The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee shall be applicable prospectively. We considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to assessment year 2018-19. The assessee has deposited the employee’s contribution of Provident fund & ESIC before the due date of return of 7 ITAs 1967 & 1968/Mum/2021 income u/sec 139(1) of the Act. Accordingly, we set-aside the order of the CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal in favour of the assessee. 13 . In the result, the appeal filed by the assessee is allowed. ITA 1967/Mum/2021 – A.Y. 2019-20 14. As the facts and circumstances in this appeal is identical to ITA No.1968/Mum/2021 except variance in figures and the decision rendered in above paragraphs will apply mutatis mutandis in this appeal also. Accordingly, grounds of appeal are allowed in favour of the assessee. 15. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open court on 17/05/2022 Sd/- sd/- (M. BALAGANESH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dt : 17 th May, 2022 Pavanan 8 ITAs 1967 & 1968/Mum/2021 灹ितिलिप 灹ितिलिप灹ितिलिप 灹ितिलिप अ灡ेिषत अ灡ेिषतअ灡ेिषत अ灡ेिषतCopy of the Order forwarded to : 1. अपीलाथ牸/The Appellant , 2. 灹ितवादी/ The Respondent. 3. आयकर आयु猴(अ)/ The CIT(A)- 4. आयकर आयु猴 CIT 5. िवभागीय 灹ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाड榁 फाइल/Guard file. BY ORDER, //True Copy// Asstt. Registrar / Senior Private Secretary ITAT, Mumbai