M/s. Bangalore Pharmaceutical and Research Laboratory Private Limited, Bangalore V. Assistant commissioner of Income-Tax, Circle-1(1)(2), Bangalore

ITA 491/BANG/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5437 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-11-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 06-07-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; TDS
• Section: 263; 43B; 139; 244A; 143(1); 246A; 44AB; 43; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., VICE PRESIDENT AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No.491/Bang/2023 Assessment year : 2018-19 Bangalore Pharmaceutical & Research Laboratory Pvt. Ltd., No.163, Reservoir Street, Basavangudi, Bengaluru – 560 004. PAN : AAACB 5712H Vs. The Assistant Director of Income Tax, CPC / ACIT, Cir.1(1)(2), Bengaluru. APPELLANT RESPONDENT Appellant by : Shri Anil Kumar, H., CA Respondent by : Shri Subramanian S., Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 07.11.2023 Date of Pronouncement : 09.11.2023 O R D E R Per Laxmi Prasad Sahu, Accountant Member This appeal is filed by the assessee against the DIN & Order No.ITBA/NFAC/S/250/2023-24/1052798830(1) dated 12.05.2023 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC] for the AY 2018-19. 2. The brief facts are that the assessee company filed its return of income declaring total loss of Rs.67,33,356 claiming refund of ITA No.491/Bang/2023 Page 2 of 22 Rs.54,90,669. The return was processed by CPC and intimation u/.s 143(1) was issued on 04.10.2019 determining returned loss at Rs.64,20,173 (Rs.3,13,183 lesser than returned loss) on account of disallowance of Rs.3,13,183 u/s. 36(1)(va) for delayed deposit of employees contribution to Provident Fund (PF) and ESI. The assessee filed rectification application which was disposed of vide order dated 14.02.2020 where the current year loss was redetermined at Rs.64,20,173 and interest u/s. 244A was computed at Rs.3,56,889 against Rs.5,21,607 in the intimation u/s. 143(1). The assessee filed another i.e., second rectification application which was disposed by CPC by order dated 07.03.2020 wherein current loss continued to be the same at Rs.64,20,173 and interest u/s. 244A at Rs.3,56,889. A third rectification application was filed by the assessee on 22.6.2020 which was rejected by the CPC vide order dated 14.07.2020. 3. On appeal, the CIT(Appeals) dismissed the grounds pertaining to disallowance of employees’ contribution to PF & ESI. Aggrieved, the assessee is in appeal before the Tribunal. 4. The assessee has raised the following grounds:- “1. The learned CIT-A erred in holding that the CPC has the power to make adjustments u/s. 143(1)(a) despite the limitations under Rule 8 of the Central Processing of Returns Scheme, 2011.and the inability of the CPC to process the rectification petition. ITA No.491/Bang/2023 Page 3 of 22 2. The learned CIT-A erred in relying upon the order of the Chennai Tribunal in preference to the judgement of the Hon'ble Supreme Court in CIT-1 vs Raghuvir Synthetics Ltd [2017] 394 ITR1(SC) cited before her in holding that the CPC could ignore the jurisdictional High Court decisions in favour of the appellant at the time of processing the return. 3. The learned CIT-A erred in holding that the CPC could make the adjustments u/s. 143(1) (a) (ii) and 143(1)(a)(iv) when the auditor in his audit report had clearly stated that no amount is disallowable u/s. 36(1)(va) for the reason that Form 3 CD asks the auditor to report the date of payment and not the date of credit to the employees’ account which is the basis for disallowance u/s 36(1)(va) and also the jurisdictional High Court decisions. 4. The learned CIT-A erred in holding that the issue on which the CPC has made the adjustment is not a debatable matter considering the facts and circumstances of the case. 5. The learned CIT-A erred in not giving a finding in her order that the CPC should dispose of the rectification petitions u/s. 154 on the intimations passed by it and should not transfer it to any other Income Tax Authority for rectification. 6. The learned CIT -A erred in not giving a finding in her order that the act of the Central Processing Centre treat rectification petition u/s. 154 transferred to another authority as “disposed”, is bad-in-law. Accordingly the Honourable Bench Respondent be directed to delete the adjustment of Rs. 3,13,183 added to the returned income u/s. 36(1)(va) and give a finding on the issues raised in grounds No 6 and 7 in the interests of justice and fairplay.” 5. The assessee has also filed additional grounds as follows:- “7. Without prejudice to the above, as regards making adjustment without complying the conditions of Section 143(1): ITA No.491/Bang/2023 Page 4 of 22 7.1. The Learned Commissioner (Appeals) is not justified in upholding the action of Central Processing Centre in making adjustment under Section 143(1), without complying with the conditions therein in as much as the Central Processing Centre has made the impugned adjustment without considering the reply furnished by the Appellant objecting the impugned adjustment. 7.2. The Learned Commissioner (Appeals) is not justified in upholding the action of Central Processing Centre in perversely stating that the Appellant did not reply to the proposition notice, when in fact Appellant had filed reply objecting the impugned adjustment. 7.3. The lower authorities have failed to appreciate that merely issuing notice and calling for response does not comply with the principles of natural justice. 7.4. Without prejudice to the above, the lower authorities have failed to appreciate that there is a violation of second proviso to section 143(1)(a) for the reason that CPC being an inanimate body cannot address the grievance of the appellants. 8. Without prejudice to the above, as regards the due date specified under Section 36(1)(va) 8.1. The Learned Commissioner (Appeals) is not justified in upholding the action of Central Processing Centre in making adjustment under Section 143(1), of Rs. 3,13,183 on the ground that there was delayed remittance of the employee’s contributions to the Employees Provident fund or Employees Insurance Fund when no due dates are specified in the respective Acts or Rules or Standing Orders for the credit to the employees’ account in those funds. 8.2. Without prejudice to the above the Learned Commissioner (Appeals) is not justified in upholding the action of Central Processing Centre in making adjustment under Section 143(1)(a) in disallowing Rs. 2,95,391 being the employees’ contribution to the Employees Provident Fund when the same have been remitted within April 30th, the due date under Rule 43 of the Employees’ Provident Fund for furnishing contribution cards to enable credit ITA No.491/Bang/2023 Page 5 of 22 of the monthly payments made to the fund to the individual employees’ accounts in the fund. 8.3. Without prejudice to the above the Learned Commissioner (Appeals) is not justified in upholding the action of Central Processing Centre in making adjustment under Section 143(1) in disallowing Rs. 17,792 being the employees’ contribution to the Employees Insurance Fund when the employees do not have accounts in the fund earning interest and the amounts have been otherwise remitted before the due date of submission of half yearly returns under Rule 26 of the Employees State Insurance Scheme. 9. Without prejudice to the above, as regards non- applicability of sub-Clause (iv) to Section 143(1)(a): 9.1. The Learned Commissioner (Appeals) is not justified in upholding the invocation of sub-Clause (iv) to Section 143(1)(a), when conditions of said Clause are not satisfied. 9.2. The lower authorities have failed to appreciate that the instant case is a case of ‘deduction’ not being in the nature of ‘expenditure’ and therefore, section 143(1)(a)(iv) cannot be invoked. 9.3. The lower authorities have failed to appreciate that there is no indication of disallowance of expenditure in the audit report, and in the absence thereof, sub-Clause (iv) to Section 143(1)(a) would not apply. 10. Without prejudice to the above, as regards non- applicability of amendments to Section 143(1)(a)(iv) made by Finance Act, 2021 w.e.f. 01.04.2021 to the impugned AY 2018-19: 10.1. Without prejudice to the above, disallowance cannot be made by invoking Clause (iv) to Section 143(1)(a) as amended by Finance Act, 2021 w.e.f. 01.04.2021, which inserted the phrase “or increase in income”, though it is not even the case of the department that the said phrase is applicable to the case of the Appellant. ITA No.491/Bang/2023 Page 6 of 22 10.2. Without prejudice to the above, the impugned sum cannot be treated as ‘increase in income’ as the effect of denial of deduction under section 36(1)(va) is only to reiterate the sum already regarded as income under section 2(24)(x). 10.3. Without prejudice to the above, amendments to section 143(1)(a) by Finance Act’ 2021 are not applicable to assessment years prior to AY 2021-22. 10.4. Without prejudice to the above, amended sub-Clause (iv) to section 143(1)(a) is applicable only to those returns of income which have been filed on or after 01.04.2021. 10.5. The law prevailing as on the date filing of return of income has to be applied and therefore sub-Clause (iv) to section 143(1)(a) as amended by Finance Act’ 2021 cannot be invoked. 11. Without prejudice to the above, as regards non- applicability of Clause (ii) to Section 143(1)(a): 11.1. Sub-Clause (ii) to Section 143(1)(a) does not apply, though it is not even the case of the department that sub-clause (ii) is applicable to the case of the Appellant. 11.2. The pre-conditions for application of sub-Clause (ii) to Section 143(1)(a) are not existing in the instant case in as much as there is no incorrect claim made in return, which is apparent from any information in the return. 12. Without prejudice to the above, as regards non- applicability of Section 143(1)(a) when the issue is debatable: 12.1. The Learned Commissioner (Appeals) is not justified in upholding the action of making adjustment under Section 143(1)(a) with respect to the issue which is debatable. 12.2. The Learned Commissioner (Appeals) has failed to appreciate that though the decision in Checkmate Services (P.) Ltd. v. CIT [2022] 448 ITR 518 (SC) operated retrospectively, it did not remove the debate or ambiguity or doubt that existed at the time adjustment under section 143(1) was carried out. ITA No.491/Bang/2023 Page 7 of 22 12.3. Without prejudice to the above, the Learned Commissioner (Appeals) has failed to appreciate that the decision in Checkmate Services [supra] dealt only with the allowance/disallowance of employee’s contribution to PF & ESI remitted beyond the due date under Section 36(1)(va), the “due date” i.e. the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the Employees’ Provident fund or Employees Insurance Funds are debatable matters. 12.4. Without prejudice to the above, the Learned Commissioner (Appeals) has failed to appreciate that the decision in Checkmate Services [supra] did not deal whether the aforesaid allowance/disallowance can be made in the intimation under Section 143(1)(a). 12.5. The Learned Commissioner (Appeals) has failed to appreciate that subsequent to the decision of Checkmate Service (supra), even the issue as to whether the subject addition can be made under Section 143(1)(a)(ii) or under Section 143(1)(a)(iv) is still debatable. 13. Without prejudice to the above, disallowance cannot be made by invoking Explanation 2 to Section 36(1)(va) r.w. Explanation 5 to Section 43B inserted by Finance Act, 2021 prospectively w.e.f. 01.04.2021, much before issuing the impugned intimation. 14. The Learned Commissioner (Appeals) is not justified in not following decisions of various Benches of ITAT, wherein in identical facts and circumstances, the similar addition made in intimation under section 143(1) was deleted even post decision in Checkmate Services [supra].” 6. The ld AR submitted that the above additional grounds were inadvertently missed out in the original appeal memorandum and not malafide or wilful and the same may be admitted. ITA No.491/Bang/2023 Page 8 of 22 7. After hearing both the sides, we find that these grounds are necessary for adjudication of the appeal and following the Hon’ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383 (SC), the additional grounds are admitted for adjudication. 8. The ld.AR submitted written synopsis as under:- “SYNOPSIS OF THE ORAL AND WRITTEN SUBMISSIONS Ground No 3 Additional Grounds No 8.1..8.2 and 8.3 ( See detailed submission in paragraphs 7 and 8 of the paperbook ( pages 106 to 124 and Annexures 8 and 9) 1. Section 36(1)(va) obliges an employer to credit the employees accounts, with the employees' contribution on or before the "due date" mentioned under the respective acts for such credit. Date of remittance of the employees' contributions to the Fund on or before the due date for remittance is not the criteria for deduction u/s 36(1)va).. As it is now understood to be their own money, it has to be paid into their accounts in the fund on or before the due date for credit to their account under the said enactment. 2. There is no such "due date" mentioned either under the EPF Act or ESI Act. In the case of ESI the employee does not have an account in the fund to which his contribution could be credited. Hence prima facie the provision is not workable. 3. However, the Appellant submits that a proper understanding of the obligations and the due date for credit under the EPF Act and ESI Act would indicate that the Appellant has effectively credited the employees' contributions to the accounts of the respective employees in the Funds on or before the due date as referred to in Section 36(1)(va). As it has met his obligations as an employer under Section 36(1)(va,)in terms of ITA No.491/Bang/2023 Page 9 of 22 the Supreme Court judgement in Checkmate Services (P) Ltd it is entitled to the full deduction available under Section 36(1)(va). Ground No 1 .5 and 6 ( See detailed submission in paragraph 1 of the paperbook ( pages 1 to 9 and Annexures 1,2,3 and 4 and Annexures-10 to 17) 4.a) The return now processed is an incomplete return, permitted to be filed under Section 139D without all the documents required to accompany the returns so that it is not held as defective u/s. 139 (9). b) No adjustment should be made on such incomplete return, as Section 143(1) refers to the processing of the return filed under Section 139 and such a return can only be a complete return with all the documents required to accompany the return. Parliament never envisaged any adjustment to be made on the processing of an incomplete return filed under Section 139D). 5. CPC got jurisdiction to process returns only vide the notification under Section 143(1A). 6. A perusal of Section 143(1) shows that there is no role in making adjustment assigned to/ conferred on an Assessing Officer in processing of returns under Section 143(1). Hence there is no Assessing. Officer as defined under Section 2(7A) read with Section 120(1) who could be stated to have jurisdiction over processing of a return to whom the return could be transmitted for further processing if it could not be processed at CPC. Accordingly, it can be reasonably concluded that this incomplete return was not processed under Section 143(1) by the Respondent but by the Central Processing Centre which is headed by a Commissioner. The Respondent has only communicated the result of the processing. 7. The Central Processing Centre is not empowered under the scheme notified under section 143 (1A) to make any adjustment to the returned income u/s. 143 (1)(a) (i) to (vi). It can only determine the tax payable or refund due after credit of TCS,TDS per data uploaded by deductors and tax payment challans ITA No.491/Bang/2023 Page 10 of 22 reported through authorised banks. Hence the adjustment made is beyond the powers of CPC. b) This is 'further confirmed by the order under u/s. 154 under appeal that CPC is unable to process the rectification request filed . c) However, learned CIT(A) has not dealt with rule 8 of the Scheme in her order. 8. a) Under Section 154 only the Income Tax Authority which passed the order could rectify the said order. However, CPC when informed through rectification petition u/s 154 that its action was against the judgement of the jurisdictional High Court transferred the matter to the jurisdictional A.O. b) When fresh application under Section 154 was filed with a letter to CPC it passed the order u/s154 which is now under appeal and directed appellant to approach jurisdictional A.O. for relief. b) CPC erred in holding that as it had transferred the rectification rights to the jurisdictional A.O. it could not rectify the appellants rectification petition and hence could dismiss appellants rectification. c) As per Rule 9 of the Scheme notified u/s. 143 (1A) CPC cannot transfer a rectification petition to another authority. This has not been dealt with by the learned CIT(A) in her order. d) CPC cannot also without transfer of the rectification petition, transfer the rectification rights to the jurisdictional AO and direct the applicant to approach the jurisdictional AO. e) It is pertinent to mention that no further action has been taken by the jurisdictional AO to act upon the rectification petition though rectification rights and petition stated to have been transferred to him by CPC. This is evidenced by Annexure-10). Additional Ground No 7 ( Paragraph 2 of the written submissions. Pages 9 to 16 Intimation u/s 143(1) and Annexures 5 and 6) ITA No.491/Bang/2023 Page 11 of 22 9. The intimation under Section 143(1) is a non speaking intimation as to why CPC found the response of the appellant to the communications of the appellant as not satisfactory. This adds further support to Ground No 1 that CPC has traversed beyond its mandate under the Scheme notified under Section 143(1A). Ground No.2, 3, Additional Ground no 9 ( Paragraph 3 of the written submissions, Pages 16 to 58., Intimation u/s 143(1) and Annexures 7) 10. CPC further erred in assuming jurisdiction under Section 143(1)(a)(iv) on the following grounds: a) Clause 20(b) of Form 3CD is not aligned with Section 36(1)(va) b) Clear indications by the auditor in his report in Form 3CA (Pages 156-157 of the paper book Volume 1) that no disallowance could be made based on information in clause 20(b) of the report for the following reasons: i) The report in Form 3CD asks for the due date of payment and not the date of credit which is the basis for the allowance u/s 36(1)(va). ii) Jurisdictional High Court decision in favour of the appellant. c) It is a case of a deduction not being in the nature of "expenditure". d) No expenditure which is "disallowable" indicated in the audit report e) It is a case of disallowance "inferred" from the audit report and not a disallowance indicated by the auditor. Additional Ground no 10 and 13 ( Paragraph 4 . Pages 58 to 63 and paragraph 9 pages 124 to 133) 11. Amendments made to Section 36(1)(va) or Section 43B by Finance Act, 2021 are only prospective in nature and cannot be ITA No.491/Bang/2023 Page 12 of 22 applied in the processing of return prior to that date as held by all Tribunals before the order in Checkmate. The order in Checkmate does not change the situation. 12. a) CPC erred in making additions in contravention of Board Circular No.1814 dated 4-4-1989 not to make additions even if the Department does not accept certain judgements/orders against it. b) As per present Section 263 Orders made in contravention of any order, direction or instructions issued by the Board may be held to be erroneous and prejudicial to the interests of Revenue. Additional Ground No.11 ( Paragraph 5, Pages 63 to 73, Annexures 5 and 6 and Intimation u/s 143(1)) 13. The addition has been made under Section 143(a)(ii) and not Section 143(a)(iv). The submissions made indicate that the disallowance could not be made based on any information within the return. Ground No 4 and Additional Ground No 12( Paragraph 6, Pages 73 to 105) 14. The learned CIT-A erred in holding that at the time of processing of the return, the matter was not debatable so far as the Department was concerned. Ground No 2 ( See paragraph 3.10 to 3.13 pages 56 to 58) 15. The matter is not debatable insofar as the assessees in the State of Karnataka are concerned as the Supreme Court Judgement in Raghuvir Synthetics Ltd (394 ITR 1(SC) held that in matter of proceedings u/s. 143(1) jurisdictional High Court decision has to be followed and the jurisdictional High Court decisions were in favour of appellant at the time of processing the return and which led to the transfer of the rectification rights to the jurisdictional AO. ITA No.491/Bang/2023 Page 13 of 22 Additional Ground No 14 Paragraph 10 ( pages 134 to 137) 16. Lastly, if the above are not acceptable, in view of divergence in opinion even after Checkmate, the matter should be referred to a Special Bench. Cases in favour of appellant: P. R. Packaging Service vs ACIT 199 ITD 724 (Mum) Paris Elysees India Pvt Ltd ITA No. 357/JPR/2022 Jaipur Satpal Singh Sandhu ITA No. 4//RPR/2023 `SMC' Raipur Sanjay Kumar [2023] 152 taxmann.com 594 (Delhi - Trib.).” 9. The ld. DR relied on the order of the lower authorities and further submitted that the adjustment u/s 143(1)(a) can be made by the CPC , the CPC has noted that the there is prima-facie mistake on the part the assessee from the Form No. 3Cd report of the CA at Sr. No. 20(b) that the assessee has remitted the employees’ contribution belatedly on 16/06/2017, 16/01/2018, 21/07/2017, 18/08/2017 & 16/01/2018 which are beyond the due date as per the respective Act. and has not disallowed while computing income of the assessee, therefore, the adjustments made by the CPC is within the preview of section 143(1)(a) of the Act. . The ld. DR brought to our attention the latest decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. Vs CIT-1, [2022] 143 taxmann.com 178 (SC) where the Apex Court has held that Section 43B(b) does not cover employees' contributions to PF, ESI etc., deducted by employer from salaries of employees and that employees contribution has to be deposited within the due date u/s 36(1)(va) i.e. due dates under the relevant employee ITA No.491/Bang/2023 Page 14 of 22 welfare legislation like PF Act, ESI Act etc. failing which the same would be treated as income in the hands of the employer u/s.2(24)(x). 10. We have heard both the parties and perused the material on record. We notice that the Hon’ble Supreme Court in the case of Checkmate Services (supra) has considered the issue of whether the employees contribution paid before due date for filing the return of income u/s.139(1) whether otherwise allowable u/s.43B, putting to rest the contradicting decisions of various High Court. The relevant extract of the decision is as given below :– “52. When Parliament introduced Section 43B, what was on the statute book, was only employer’s contribution (Section 34(1)(iv)). At that point in time, there was no question of employee’s contribution being considered as part of the employer’s earning. On the application of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988- 89, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions – especially second proviso to Section 43B - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee’s income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that ITA No.491/Bang/2023 Page 15 of 22 on the one hand it brought into the fold of “income” amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time – by way of contribution of the employees’ share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers’ contribution (Section 36(1)(iv)) and employees’ contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees’ liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. 54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s ITA No.491/Bang/2023 Page 16 of 22 income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.” 11. In view of the above decision of the Hon’ble Supreme Court, we hold that the employees contribution to PF and ESI should be remitted before the due date as per explanation to section 36(1)(va) i.e., on or ITA No.491/Bang/2023 Page 17 of 22 before the due date under the relevant employee welfare legislation like PF Act, ESI Act etc., for the same to be otherwise allowable u/s.43B. Further we also rely on the decisions of the coordinate Bench in the case of Creative Textiles P. Ltd. in ITA No.409/Mum/2022 dated 31.05.2023 and in the case of Mindcrest (India) Pvt. Ltd in ITA No.1430/Mum/2021 dated 14.7.2023. We therefore see no reason to interfere with the order of the CIT(Appeals). The grounds taken by the assessee on this issue are dismissed. 12. In the written synopsis the ld. AR has raised issue that there is no such “due date” mentioned in the EPF & ESI Act. In the case of ESI the employee does not have an account in the fund to which his contribution could be credited. Hence prima facie the provision is not workable. This argument is not acceptable. For the sake of reference, we are reproducing the relevant provisions of the EPF Act. 1952., Section 38 which reads as under:- 38. Mode of payment of contributions:-(1) The employer shall, before paying the Member his wages in respect of any period or part of period for which contributions are payable, deduct the employee’s contribution from his wages which together with his own contribution as well as an administrative charge of such percentage 7[of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee and in respect of which provident fund contributions are payable as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contribution and administrative charge]: 8[Provided that if the payment is made by a cheque, it should be drawn only on the local bank of the place in which deposits are made]: Provided further that where there is no branch of the Reserve Bank or the 1[State] Bank of India at the station where the 2[factory or other establishment] is situated, the employer shall pay to the Fund the amount mentioned above by means of Reserve Bank of India 3[Governmental Drafts at par] separately on account of contributions and administrative charge. ITA No.491/Bang/2023 Page 18 of 22 4[(2) The employer shall forward to the Commissioner within twenty-five days of the close of the month, a monthly abstract in such form as the Commissioner may specify showing the aggregate amount of recoveries made from the wages of all the Members and the aggregate amount contributed by the employer in respect of all such Members for the month : Provided that an employer shall send a Nil return, if no such recoveries have been made from the employees : Provided further that in the case of any such employee who has become a Member of the Pension Fund under the Employees’ Pension Scheme, 1995, the aforesaid Form shall also contain such particulars as are necessary to comply with the requirements of that Scheme.] 5[(3) The employer shall send to the Commissioner within one month of the close of the period of currency, a consolidated Annual Contribution Statement in Form 6A, showing the total amount of recoveries made during the period of currency from the wages of each Member and the total amount contributed by the employer in respect of each such Member for the said period. The employer shall maintain on his record duplicate copies of the aforesaid monthly abstract and consolidated annual contribution statement for production at the time of inspection by the Inspector.] 13. It is clear from the above section “38” that the employer shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contribution and administrative charge. It is mandatory for every employer who are covered as per the Provident Fund/ESI Act to follow the rules and regulations. Sections 26 to 37 of the EPF Act are also relevant in this regard. Considering the above, we reject the arguments advanced by the ld. AR of the assessee. 14. The ld. AR has further raised issue that no adjustment can be made u/s 143(1)(a) of the Act. This issue has also been settled by the ITAT Chennai Bench in the case of Electrical India vs ADIT CPC in ITA NO. 789/Chny/2022, order dated 04/11/2022. The relevant portions of the decision are reproduced below:- ITA No.491/Bang/2023 Page 19 of 22 7. We find that the provisions of Section 2(24) enumerate different components of income. The income as defined therein includes any sum received by the assessee from his employees as contributions to any 18 provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees. It is thus clear that as soon as the Employer receives any contribution from its employees towards provident fund or ESI by way of deduction or otherwise, then the same is treated as income of the assessee. If the assessee deposit the same as per the mandate of Sec. 36(1)(va), the deduction of the same is allowed to the assessee otherwise the right to claim the deduction is lost forever. In other words, the contribution is first treated as deemed income of the assessee and thereafter, the deduction of the same is allowed to the assessee if the conditions of Sec.36(1)(va) are met. The CPC, as is evident, has denied this deduction to the assessee since the assessee did not fulfil the mandate of Sec.36(1)(va). It could also be seen that this is not an increase in income but disallowance of expenditure, the adjustment of which is covered u/s 143(1)(a)(iv) which provide that the disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return could be made while processing the return of income. The amendment made w.e.f. 01.04.2021 by insertion of words ‘increase in income’ would have no impact on such disallowance since it is only a disallowance of expenditure and the revenue is very well entitled to make such an adjustment u/s 143(1)(a)(iv). 8. The impugned adjustment, in our opinion, would also fall u/s 143(1)(a)(ii) since it is an incorrect claim which is apparent from any information in the return. The adjustment made by CPC flows from reporting made by Tax Auditor in Tax Audit Report in Form 3CD. As per statutory mandate, the assessee is required by law to get its accounts 19 audited u/s 44AB if its turnover crosses threshold turnover. The purpose of the audit is to enable the revenue to make correct computation of assessee’s income. A proper audit would, inter-alia, ensure that the claims for deduction are correctly made. The report is required to be furnished by the assessee along with return of income to enable revenue to make correct computation of income. The reporting made therein could certainly be available to CPC to make the adjustment of defaults reported therein since the same would be apparent from information contained in the return. As noted earlier, the contribution is first treated as income of the assessee and thereafter, the deduction of the same has to be claimed by the assessee. Therefore, the columns in the Profit & Loss Account in the return of income has to be filled in this manner only i.e., the contribution is to be first added to the income of the assessee and thereafter, the deduction of the same would be claimed by the assessee. In other words, the assessee would first add the same to its income and thereafter, it would claim deduction after crossing the hurdle of Sec.36(1)(va). Since the claim made by the assessee is inconsistent with the reporting made by Tax Auditor, it was an incorrect claim which CPC has rightly disallowed. ITA No.491/Bang/2023 Page 20 of 22 9. Another argument is that the debatable issues could not be subject matter of adjustment u/s 143(1). However, so far as the revenue is concerned, this issue is not debatable for the revenue. The revenue has always maintained a position that the claim is allowable to assessee only when the contribution is deposited as per the mandate of Sec.36(1)(va) otherwise not. Therefore, it is incorrect to say that the issue is debatable one. The Hon’ble Supreme Court has upheld the stand of the revenue. 10. The Hon’ble High Court of Madras in Southern Industrial Corporation vs. CIT (258 ITR 481) held that when a statutory provision is interpreted by the Apex Court in a manner different from the interpretation made in the earlier decisions by a smaller Bench, the order which does not conform to the law laid down by the larger Bench in the later decision which decision would constitute the law of the land and is to be regarded as the law as it always was, unless declared by the court itself to be prospective in operation, would clearly suffer from a mistake which would be apparent from the record. Therefore, in the present case, the law laid down by Hon’ble court is to be regarded as law of land and it was to be presumed that the law was always like that. 11. The case law of Hon’ble Supreme Court in Kvaverner John Brown Engg. (India) P. Ltd. V/s ACIT (305 ITR 103), as referred on behalf of assessee, deal with deduction u/s 80-O for which two interpretations were possible viz. the deduction could be computed at gross value or the same could be computed on net value. The same is not the case here. The action of revenue is in accordance with the law laid down by Hon’ble Supreme Court in the cited decision. In fact, Hon’ble High Court of Madras in Tamilnadu Magnesite Ltd. vs DCIT (303 ITR 71) held that where the amount was inadmissible in view of Sec.43B which overrides section 36(1) of the Act, the revenue was well within its power to make a prima facie adjustment in the computation of taxable total income while processing return of income under Section 143(1)(a) of the Act. The aforesaid decision supports our view. 12. The decision of Hon’ble High Court of Bombay in Bajaj Auto Finance Ltd. vs. CIT (93 Taxmann.com 63) as referred before us deals with case of debatable issue and hence distinguishable. The case law of 21 Chandigarh Tribunal in Lanjani Co-operative Agri Service Society Ltd. vs DCIT (ITA No.332/Chd/2021 dated 30.08.2022) relates with adjustment u/s 143(1)(a)(v) which is not the case here. The case law of Visakhapatnam Tribunal in S.V.Engineering Constructions India (P.) Ltd. vs DCIT (ITA No.130/Viz/2021 dated 23.09.2021) relies on another decision of Tribunal in Andhra Trade Development Corp. Ltd. (ITA No.434/Viz/2019 dated 05.05.2021) which deal with set-off of losses. In this decision, the bench also dealt with the merits of the case by following earlier view which has now been reversed by Hon’ble Supreme Court. The decision of Delhi Tribunal in SVS Guarding Services Pvt. Ltd. vs ITO (ITA No.231/Del/2022 dated ITA No.491/Bang/2023 Page 21 of 22 24.05.2022) held that the issue whether the amendment made by Finance Act, 2021 was retrospective or prospective was debatable and controversial and consequently, the adjustment was beyond the scope of Sec.143(1). Further the bench did not specifically examine the applicability of clauses (ii) and (iv) of Sec.143(1)(a) in that decision. The subsequent decision of the bench in 360 Realtors LLP vs. ADIT (ITA No.303/Del/2022 dated 26.09.2022) is substantially on same lines. All these case laws have been rendered before the recent decision of Hon’ble Supreme Court which has settled the law since its inception. Therefore, all these case laws do not render any assistance to the case of the assessee . 15. The Hon’ble High Court of Madras has also settled this issue in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. [2022]138 taxmann.com 571 (Madras) and held that the adjustment by the CPC u/s. 143(1)(a) can be made. This ground of the assessee is hence dismissed. 16. In ground No.5 & 6, the assessee has raised the issue regarding disposal of application u/s. 154 by the CPC. In this regard, it is clear from the Note to intimation u/s. 143(1)(a) as follows:- “If you consider that any part of the intimation/order requires amendment, you may request the same as per section 154 of the Income Tax Act, 1961 by filing an online application for rectification.” 17. According to the above note, the assessee may file online rectification application. Thereafter after passing order u/s. 154 the assessee should have filed appeal u/.s 246A of the Act. But in this case, the assessee has filed rectification application repeatedly with the CPC which was not the correct procedure. Therefore, the CPC has rightly rejected the rectification request of the assessee stating that ITA No.491/Bang/2023 Page 22 of 22 rectification request cannot be considered at CPC and to contact the jurisdictional AO for the same. Hence these grounds are dismissed. 18. The other issues raised by the assessee are academic in nature. 19. In the result, the appeal by the assessee is dismissed. Pronounced in the open court on this 09 th day of November, 2023. Sd/- Sd/- ( GEORGE GEORGE K. ) (LAXMI PRASAD SAHU ) VICE PRESIDENT ACCOUNTANT MEMBER Bangalore, Dated, the 09 th November, 2023. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.