IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC” MUMBAI BEFORE SHRI M. BALAGANESH (ACCOUNTANT MEMBER) AND SHRI PAVAN KUMAR GADALE (JUDICIAL MEMBER) ITA No. 2336/MUM/2021 Assessment Year: 2018-19 Shriniwas Mishra, C/o Mr. J.P. Mishra, 46/12, New A.B. Nagar South, Unnao, Uttar Pradesh-209801. Vs. Dy. Commissioner of Income Tax CPC, Bangalore-560500. PAN No. AGIPM 2309 L Appellant Respondent Assessee by : Mr. Nitesh Thakkar, AR Revenue by : Ms. Samruddhi Hande, DR Date of Hearing : 24/05/2022 Date of pronouncement : 26/05/2022 ORDER PER PAVAN KUMAR GADALE, JM The assessee has filed an appeal against the order of National Faceless Appeal Centre (NFAC) order passed u/s 143(1) and 250 of the Income Tax Act, 1961 (in short ‘the Act’). The Revenue has raised following grounds: Shriniwas Mishra ITA No. 2336/Mum/2021 2 1. The Id. CIT(A) has erred in confirming the addition of Rs.22,95,056/- being payment of Employees contribution towards Provident Fund and ESIC on the ground that the same have been paid late as per due date specified under the respective Act. It is submitted that the Employee's Contribution towards PF and ESIC of Rs. 22,95,056/- have been deposited, though after due date prescribed under the relevant Act, but before the due date of filing of return of income u/s 139(1) of the Income Tax Act. On facts and circumstances of the case, all the contributions deposited towards PF and SIC before due date of filing of return of income be allowed u/s 43 of the Income Tax Act and addition made by Ld. AO of Rs 22,95,056/- being incorrect and illegal be deleted in the interest of justice. The same be held accordingly. 2. The ld. CIT(A) has erred in confirming the addition of Rs.22,95,056/- on account of Employee's contribution towards Provident Fund and SIC by not following the decision of Hon'ble Bombay High Court in case of CIT Vs Ghatge Patil Transports Ltd - 53 taxmann.com 141. It is submitted that the jurisdictional High Court has clearly held that the payment of employees contribution towards Provident Fund and SIC are allowable as per the provisions of section 43B of Income Tax Act, 1961 and thus not to follow the decision of Hon'ble Jurisdictional high court is clearly a contempt court. In view of this, respectfully following decisions of Hon'ble Bombay High Court, the addition made of Rs.22 95.056/- be deleted. Shriniwas Mishra ITA No. 2336/Mum/2021 3 3. The ld. CIT(A) has erred in confirming the addition of Rs.22,95,056/- being payment of Employees contribution towards Provident Fund and ESIC by incorrectly interpreting the amended provisions of Sections 36(va) as well as 43B of Income tax Act vide Finance Act, 2021. It is submitted that Memorandum and Finance Bill clearly suggest that these amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2 021-22 and subsequent assessment years. In view of this, the amended provisions of Sections 36(va) as well as 43B vide Finance Act, 2021 will apply prospectively and not retrospectively to the year under consideration. i.e. AY 2018-19 and thus the addition made and confirmed of R 22,95,056/- by incorrect interpretation be strongly deserves to be deleted. 4. The Order passed by Ld. CIT(A) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now. 2. Brief facts of the case are that the assessee is engaged in the business of security agencies. The assessee has filed the return of income for the assessment year 2018-19 on 29.10.2018 declaring total income of Rs.27,33,280/- and the return of income was processed u/s 143(1) and intimation dated 17.05.2019 was received through E-mail Shriniwas Mishra ITA No. 2336/Mum/2021 4 where the Employees Contribution of Provident Fund (PF and ESIC) aggregating to Rs.22,95,056/- was disallowed u/s 36(1)(va) of the Act due to delay in deposit of PF and ESIC under respective Act and the total income was determined Rs.50,28,340/-. 3. 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 dismissed the appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Honble Tribunal. 4. 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 provisions/explanations are with effect from F.Y 1-4- Shriniwas Mishra ITA No. 2336/Mum/2021 5 2021.The Ld.AR relied on the judicial decisions and paper book and prayed for allowing the appeal. 5. 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. 6. 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 submitted that 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 Shriniwas Mishra ITA No. 2336/Mum/2021 6 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. 7. We considering the overall facts, circumstances and the submissions find on the similar issue, the Coordinate 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 Shriniwas Mishra ITA No. 2336/Mum/2021 7 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 sinequa 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, interms of the law laid down by Hon’ble Shriniwas Mishra ITA No. 2336/Mum/2021 8 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.” 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 1st 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 Shriniwas Mishra ITA No. 2336/Mum/2021 9 not the situation before us. We, therefore, see no need to deal with that aspect of the matter at this stage. 8. 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 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 Shriniwas Mishra ITA No. 2336/Mum/2021 10 disallowance and allow the grounds of appeal in favour of the assessee. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 26/05/2022. Sd/- Sd/- (M. BALAGANESH)) (PAVAN KUMAR GADALE ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 26/05/2022 Rahul Sharma, Sr. P.S. 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) ITAT, Mumbai