Arihant Automobile, Jabalpur V. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre

ITA 59/JAB/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9397 (ITAT-JABALPUR)
• Duration Of Justice: 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2019-2020
• Appeal Filed On: 26-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND GUGALIA
• Keywords: Retrospective amendment
• Section: 2; 43B; 37(1); 143(1); 139(1)

Judgement Text

ITA No. 59/Jab/2021(AY 2019-20) Arihant Automobiles v. ITO 1 IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR (SMC) (through Virtual Hearing) BEFORE SH. SANJAY ARORA, HON'BLE ACCOUNTANT MEMBER ITA No.59/JAB/2021 Assessment Year: 2019-20 Arihant Automobiles, Jabalpur (M.P.) [PAN: AAHFA 2701P] vs. Income Tax Officer, Ward - 1(2), Jabalpur, (M.P.) (Appellant) (Respondent) Appellant by Sh. Arvind Gugalia, Partner &AR Respondent by Sh. S.K. Halder, Sr. DR Date of hearing 31/01/2022 Date of pronouncement 31/01/2022 ORDER Per Sanjay Arora, AM This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre Delhi (‘CIT(A)’ for short) dated 24/06/2021, partly allowing the assessee’s appeal contesting the processing of its’ return of income for the Assessment Year (AY) 2019-20 under section 143(1) of the Income Tax Act, 1961 (‘the Act’ hereinafter) vide Intimation dated 25/02/2020. 2. At the very outset, it was submitted by Sh. Gugalia, one of the partners of the assessee-firm, duly authorized, that the only issue in appeal is the disallowance of the employee’s contribution to the Employee Provident Fund and Employee State Insurance Fund on account of its delayed deposit with the prescribed authority, u/s. 36(1)(va) of the Act, even as the same has been within ITA No. 59/Jab/2021(AY 2019-20) Arihant Automobiles v. ITO 2 the due date of filing the return of income for the relevant assessment year. The first appellate authority has, ignoring a number of decisions in its favour cited by the assessee before it holding of no disallowance being exigible under the circumstances, proceeded to confirm the disallowance as made by the AO while processing of the return u/s. 143(1), which admits of only prima facie adjustments. Sh. Halder, the ld. SR. DR, would submit that disallowance has been on merits, relying on decisions by the Hon’ble High Courts, cited at paras of the impugned order. He, however, could not answer the query by the Bench as to how, in the absence of any decision in the matter by the Hon’ble jurisdictional High Court, could an adjustment be made u/s. 143(1) in view of a cleavage of judicial opinion in the matter. He also could not advance any argument in defense on the Bench clarifying to him that it would place reliance on its’ recent decision in Nikhil Mohine v. Dy. CIT (in ITA Nos. 37 & 38/Jab/2021, dated 18/11/2021), deciding the matter in favour of the assessee. 4. I have heard the parties, and perused the material on record. 4.1 At the very outset it was observed by the Bench that the appeal is delayed by a period of 126 days. The assessee has, however, placed on record a condonation petition dated 16/12/2021, which attributes the delay to the technical glitches at the portal of the Department where the appeal is to be instituted and, further, toward which the assessee had in fact also raised a grievance with the relevant cell of the Department, i.e., on its’ e-portal, to though no response therefrom. The petition is supported by documents as well as by an affidavit dated 22/01/2022 by Sh. Arvind Gugalia, a partner in the assessee-firm. The assessee’s case qua condonation is self-speaking, to which Sh. Halder could not furnish any satisfactory response. This Tribunal is in regular receipt of matters where the assessee’s contend of delay in furnishing documents on account of non/malfunctioning of the Revenues’ e-portal. The explanation, supported by material, is reasonable, and the delay is accordingly condoned. ITA No. 59/Jab/2021(AY 2019-20) Arihant Automobiles v. ITO 3 4.2 Coming to the merits of the case, it is an admitted fact that the impugned contributions are the employee’s (as opposed to employer’s) contributions to the relevant employee welfare fund and, thus, covered u/s. 2(24)(x) r/w s. 36(1)(va), as against s. 37(1) r/w s. 43B(b) and, two, the same stands deposited with the prescribed authority under the relevant Act by the due date of filing the return of income for the relevant previous year. The issue of their disallowance u/s. 36(1)(va) upon processing of the return u/s. 143(1) or per an amendment u/s. 154 of the Act, is covered in favour of the assessees falling within the territorial jurisdiction of the Honb’le High Court of Madhya Pradesh vide the decision by the Jabalpur Bench of the Tribunal in Nikhil Mohine (supra). The Tribunals’ decision in Nikhil Mohine 4.3 The Revenue has in the instant case, invoking section 2(24)(x) r/w s. 36(1)(va), added the employees’ contribution to the EPF and ESI Fund to the assessee’s returned income u/s. 143(1)(a) as the same stood deposited beyond the due date specified u/s. 36(1)(va), even as, admittedly, prior to the due date of filing the return of income u/s. 139(1) for the relevant year. Reliance stands placed by it on the decisions in CIT v. Gujarat State Road Transport Corporation [2014] 366 ITR 170 (Guj), CIT v. Merchem Ltd. [2015] 378 ITR 443 (Kerala); and Unifac Management Services (India) P. Ltd. v. Asst. CIT [2018] 409 ITR 225 (Mad). The matter stands examined at length by the Tribunal in Nikhil Mohine (supra), relied upon by the appellant, wherein, noticing, inter alia, the cited decisions, it held that in view of a cleavage of judicial opinion in the matter and the limited scope of an adjustment u/s. 143(1)(a), the same could not be decided on merits. The decisions by the Hon’ble High Courts holding the employee’s contribution as being covered by s. 43B(b), implying, in context, u/s. 37(1) r/w s. 43B(b), which were aplenty, it opined, could be validated only by disregarding the clear language of the relevant provisions, upheld constitutionally and not read down. The said decisions must nevertheless be respected, and no adjustment contrary thereto ITA No. 59/Jab/2021(AY 2019-20) Arihant Automobiles v. ITO 4 could be made u/s. 143(1); there being no decision by the Hon'ble jurisdictional High Court in the matter. The only manner, therefore, available for the Revenue to effect an adjustment u/s. 143(1)/154, is where the Explanations to section 36(1)(va) and s. 43B(b) inserted by Finance Act, 2021, which attempt to resolve the issue of the employee’s contribution to the employee welfare funds being governed by section 43B(b), i.e., to the exclusion of s. 36(1)(va), are held as retrospective. Legislative intent being the cornerstone and the sole determinant of any interpretative exercise, both the language of the provisions, as well as of the recently inserted Explanations thereto, introduced with a view to, as stated therein, remove any doubt in the matter, are unambiguously clear, so that s.36(1)(va) and s. 43B are applicable on different sums. Further, the stated date of the coming into effect (of the Explanations), i.e., 01/4/2021, it was explained, would though be of no moment in view of the express language deeming the stated position as applicable since inception; that being the reason for bringing the Explanations on the statute, as the amendments could otherwise have been effected through prospective clause/s to the relevant provisions. Rather, the tenor of the language employed, clearly giving the stated position a retrospective effect, necessarily requires the Explanations to be read as inserted from a later date. That is, the fact of insertion of the said Explanations w.e.f. a later date is consistent with the language giving it a retrospective effect and, thus, does not impinge adversely on it being regarded as so. Further still, noticing the settled legal position qua the test for determining retrospectivity, i.e., if the provision could be construed, without the aid of the subsequent amendment thereto, to take within its ambit the said amendment, the issue was also examined by the Tribunal on merits, i.e., for the said limited purpose, to find that the view canvassed by or on the assessee’s behalf could be sustained only by ignoring the existence of s. 36(1)(va) – which governs the deductibility of the employees’ contribution to the employee welfare funds, on the statute- book – clearly, an impermissibility. Another fundamental infirmity in the ITA No. 59/Jab/2021(AY 2019-20) Arihant Automobiles v. ITO 5 assessee’s argument is in regarding the employee’s contribution, deemed by the legal fiction of s. 2(24)(x) as the assessee-employer’s income, as an expense deductible u/s. 37(1), which could be so only where it is not recoverable – an impossibility, as the said deeming applied only on receipt thereof, again bringing s. 36(1)(va) into play for its deduction, and which would therefore have to be given effect to. This would be so even if the same was regarded, for the sake of argument, as covered by s. 43B, a non-obstante provision, inasmuch as s. 43B applied only qua deductions ‘otherwise allowable’, i.e., under any provision of the Act, rendering the question of law posed before the Hon’ble Courts, i.e., if the employee’s contribution to the employee welfare funds is exclusively covered u/s. 43B, itself, with respect, misplaced, if not irrelevant. The view being canvassed was, thus, it opined, viewed from any angle, wholly untenable. The view expressed by the Tribunal is in fact in agreement with that projected by the Board per its Circular (No. 22/2015, dtd. 17/12/2015), as also that canvassed per the impugned order with reference to the cited decisions, both explaining, as did the Explanatory Notes on the insertion of s. 36(1)(va) on the statute, the object of the said provision. It is this view, which in fact, as also noticed by the Tribunal, represented the uniform view across all the Hon’ble Courts prior to the deletion of the second proviso to s. 43B by Finance Act, 2003, w.e.f. 01/4/2004, which the Explanations to ss. 36(1)(va) and 43B by Finance Act, 2021 seek to statutorily clarify in view of the conflict of judicial opinion, passing thus the test of retrospectivity, even as unequivocally expressed per the unambiguous language thereof. The Explanations under reference were therefore clarificatory and, thus, retrospective. 4.4 The said Explanations, the Tribunal continued, had however been, as clear from a reference to the Notes on the Clauses to, and the Memorandum explaining the Provisions of, the Finance Bill, 2021, reproducing the same, proposed as prospective amendments. The amendments by way of Explanation ITA No. 59/Jab/2021(AY 2019-20) Arihant Automobiles v. ITO 6 5 to s. 43B and Explanation 2 to s. 36(1)(va), it concluded, are to therefore take effect only from AY 2021-22, and which view is unmistakable on a plain reading of the said documents. Decision 5.1 The impugned order is completely silent on, and there is no reference therein either to the said Explanations or if the same are retrospective, concerning itself only with the merits of the impugned additions, impermissible u/s. 143(1) in view of the conflict of judicial opinion and the absence of any decision by the Hon’ble jurisdictional High Court; none being brought to my notice by the parties, or otherwise found. No counter in this regard was also raised by Sh. Halder before me. 5.2 There is, in view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon’ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified (Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 (SC); CIT v. Aruna Luthra [2001] 252 ITR 76 (P&H)(FB)). No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine (supra). Any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee. 5.3 The impugned additions, therefore, could not have been made under the given facts and circumstances of the case, and are directed for deletion. I decide accordingly. ITA No. 59/Jab/2021(AY 2019-20) Arihant Automobiles v. ITO 7 6. In the result, the assessee’s appeal is allowed. Order pronounced in the Open Court on January 31, 2022 Sd/- (Sanjay Arora) Accountant Member Dated: 31/01/2022 Copy of the Order forwarded to: 1. The Appellant: Arihant Automobiles, 986 Wright Town, Jabalpur 482002, MP. 2. The Respondent: Income Tax Office, Ward 1(2), Jabalpur 3. The Pr. CIT-1, Jabalpur 4. The CIT(A), National Faceless Appeal Centre, Delhi 5. The Sr. DR, ITAT, Jabalpur 6. Guard File // True Copy //