Prima-facie adjustment under section 143(1)(a) towards delayed payment of PF/ESIC is not valid: ITAT Jaipur




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Prima-facie adjustment under section 143(1)(a) towards delayed payment of PF/ESIC is not valid: ITAT Jaipur

 

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’A’ JAIPUR

BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM

ITA No. 357/JPR/2022

Assessment Year :2018-19

Paris Elysees India Private Limited A-135,                   Perfume                   Factory, Heerawala, RIICO Industrial Area, Jaipur.  

Vs.

 Deputy Commissioner of Income Tax,

Circle-7, Jaipur.
PAN/GIR No.: AABCP4088P
Appellant  Respondent

Assessee by :                                         Sh. Rohan Sogani (CA)

Revenue by  :                                       Shri James Kurian (CIT)

 

Date of Hearing                       :    14/02/2023

Date of Pronouncement            :    20/02/2023

ORDER

PER: RATHOD KAMLESH JAYANTBHAI, A.M.

This appeal is filed by the assessee aggrieved from the order of the National Faceless Appeal Centre, Delhi (Here in after referred as to “NFAC”), CIT(A) for the assessment year 2018-19 dated 29.07.2022, which in turn arises from the order passed by the Centralized Processing Center [here in after ‘CPC’] passed under Section 143(1) of the Income tax Act, 1961 (in short ‘the Act’) dated 27.12.2019.

2.           The assessee has marched this appeal on the following grounds:

  1. In the facts and circumstances of the case and in law, ld. AO)CPC) has erred in passing order under section 143(1) of the Income Tax Act, 1961, without following the procedure as laid down under such section. The action of the ld. AO(CPC) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire such order, being illegal and void ab initio.

  

  1. In the facts and circumstances of the case and in law, National Faceelss Appeal Centre / CIT(A) erred in confirming the action of the AO(CPC) in disallowing the Employee contribution of Rs. 4,62,183/-, under Section 36(1)(va), w.r.t. PF/ESI, when the same was deposited by the assessee firm, before the due date of filing the return of income. The Action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire addition made by Ld. AO(CPC) and confirmed by ld. CIT(A).”

  

3.           The brief fact of the case is that the assessee filed its Return of Income for A.Y. 2018-19 on dated 31.10.2018. The declaring a total income of Rs.69,87,730/-. The return was processed u/s 143(1) on 12.11.2019 making adjustment of Rs.4,62,183/- under section 36(1)(va) of Income Tax Act, 1961.

4.            Aggrieved by the said adjustment made by the CPC, the assessee has filed this appeal before the CIT(A). Basically, the assessee has raised two grounds before the ld. CIT(A) one technical ground challenging the adjustment done by the CPC and the other ground on merit. The relevant finding of the ld. CIT(A) is reiterated here in below on both grounds:

 

“4.6 Since the delay in such payment of employee contribution to PF/ESI beyond the due dates as prescribed u/s. 36(1)(va) clearely falls within the ambit of prima facie adjustments to be carried out u/s. 143(1)(a)(iv) the disallowance made by CPC u/s. 143(1) on this issue is found to be in order and does not merit any inference. Accordingly, the ground raised by the appellant is not acceptable and is dismissed.

“5.48 From the discussions above, it is also clear that the clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal also. The amendment clarifies that provisions of section 43B does not apply and deemed to have never been applied for the purpose of determining the due date for employee’s contribution to PF/ESI. From the above judicial decisions and also the unambiguous wording of the now amended provisions of section 36(1) and 43B, it is clear that the employee’s contribution can be allowed as a deduction only if it had been paid within the prescribed due dates under the relevant welfare funds and this position of law is and has always been the case and the clarifications brought about by the amendment clearly apply retrospectively. The case laws relied on by the appellant which were rendered prior to the clarificatory amendments, therefore are not applicable to the present case. Therefore, the sum of Rs 4,62,183/- being the employee’s contribution to the PF and ESI, not deposited by the appellant within the due date as per the respective Act in accordance with the section 36((1)(va) of the IT Act, 1961, cannot be allowed and accordingly, this ground is dismissed”

5.           As the assessee company, aggrieved from the order of the ld. CIT(A) has preferred an appeal before us on the grounds as reiterated here in above para 2. To support the grounds taken by the assessee the ld. AR of the assessee relied upon the written submission and the same is reiterated here in below :

“BRIEF FACTS

  1. Assessee appellant is a company registered under the provisions of Companies Act, 1956/2013. The assessee company is engaged in the manufacturing of During the year, the assessee company filed its return of income on 31.10.2018, declaring total income of Rs 69,87,730.
  2. The return of the assessee company was processed u/s 143(1) vide Intimation dated 12.11.2019 wherein ld. AO (CPC) made disallowance of Superannuation fund and ESI of Rs. 4,62,183, resulting into demand of Rs 1,47,439.
  3. The assessee company preferred appeal against such Intimation u/s 143(1) dated 11.2019 before National Faceless Appeal Center (“NFAC”), in which the said disallowances have been confirmed. The present appeal has been preferred by the assessee company against the order of NFAC.

GROUNDS OF APPEAL

GROUND NO. 2: DISALLOWANCE u/s 36(1)(va) AMOUNTING TO Rs. 4,62,183

In view of the judgement of Checkmate Services Private Limited Vs CIT- I (Supreme Court), it has been clarified that the amendment brought by Finance Act, 2022 is prospective in nature. Hence, the same is not discussed in detail.

GROUND NO. 1: ADJUSTMENT BEYOND SCOPE OF SECTION 143(1)

  1. ASSESSING OFFICER & NATIONAL FACELESS APPEAL CENTRE Ld. AO (CPC), while processing the return of income of the assessee company, made adjustment on account of disallowance of expenditure indicated in the Audit Report u/s 143(1)(a)(iv). The same is decided against the assessee company by the NFAC.
  1. SUBMISSION
  • The adjustment made while processing the return of income is illegal because the case of the assessee company does not fall under 143(1)(a)(iv).
  • Section 143(1)(a)(iv)
  • It is submitted that u/s 143(1)(a)(iv) only a claim/expenditure whose disallowance has been indicated in the audit report but the same not been taken into account in computing the total income in the return can be adjusted while processing the return of

 

  • Attention is drawn towards the fact in Section 143(1)(a)(iv), ‘increase in income’ has been added vide Finance Act, 2021

w.e.f. 1.4.2021. It is submitted that the present processing was done on 12.11.2019 and that too for AY 2018-19. The present addition amounts to increase in income in view of Section 2(24)(x). The right to increase in income u/s 143(1)(a)(iv) has been conferred only w.e.f. 1.4.2021. Thus, invoking this clause for making adjustment in the returned income is without jurisdiction.

 

  • In the case of assessee company the auditor in clause 20(b) provided details of contribution received from employees for various funds as referred to in section 36(1)(va). Thus, only factual reporting, which was mandated, was done and no opinion was expressed regarding the disallowance. Otherwise also no disallowance can be made on the basis of mere reporting in Audit Report. The disallowance can be made only on the basis of relevant law and taking into account judicial view in that regard.

 

  • It is submitted that in the present case, it has been reported by the tax auditor the following contributions with respect to employee’s contribution to ESI/PF Details are as under:

 

Superannuation Fund

 

Month

  

Employee’s Contribution

  

Due Date of payment under Relevant Law

  

Actual payment Date
April-17 44,573 15.05.2017 19.05.2017
May-17 41,113 15.06.2017 21.06.2017
June-17 41,772 15.07.2017 21.07.2017
October-17 41,590 15.11.2017 30.11.2017
November-17 42,300 15.12.2017 16.12.2017
December-17 42,872 15.01.2018 31.01.2018
January-18 45,027 15.02.2018 20.02.2018
February-18 44,953 15.03.2018 17.03.2018
March-18 47,600 15.04.2018 16.04.2018
Total 3,91,800

Employees State Insurance

 

Month

  

Employee’s Contribution

  

Due Date of payment under Relevant Law

  

Actual payment Date
April-17 7,685 15.05.2017 19.05.2017
May-17 7,710 15.06.2017 21.06.2017
June-17 7,579 15.07.2017 21.07.2017
October-17 8,796 15.11.2017 30.11.2017
November-

17

 8,010 15.12.2017 16.12.2017
December-

17

 7,785 15.01.2018 31.01.2018
January-18 8,242 15.02.2018 20.02.2018
February-18 8,364 15.03.2018 17.03.2018
March-18 6,212 15.04.2018 16.04.2018
Total 70,383
  • It is further submitted that in the clause 20(b), the auditor is required to report the details of the contribution not the amount of disallowance or any late payments made to the respective Screenshot evidencing the same is as under:

 

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  • It is evident from the above screenshot that no disallowance has been made but only the dates of payments of employee’s contribution have been reported. Ld. AO(CPC) simply matched the due dates of payment and actual date of payment while processing the return of income and any difference between the said dates has been assumed to be disallowance. But in actual scenario there is no disallowance but only difference in due date and actual date of payment.

 

  • Hence, when there is no disallowance, provisions of section 143(1)(iv) cannot be
  • It is further submitted that provisions of section 143(1)(a)(iv) can be invoked with reference to other clauses like, for example, the following wherein the auditor is required to express his opinion with reference to disallowance:
    1. clause 21(b)-Amounts inadmissible under section 40(a),
    2. clause 21(d)-Disallowance/deemed income under section 40A(3),
    3. clause 21(f)-Any sum paid by the assessee as an employer not allowable under section 40A(9)

 

  • Reliance is placed on the recent judgement of Hon’ble ITAT, Delhi Bench in the case of Garg Heart Centre & Nursing Home Private Limited ITA No.1700/Del/2022 wherein it has been held that “At the very least, Revenue should have given due consideration to the fact that the issue was highly debatable and As already discussed earlier, adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, is beyond the scope of section 143(1) of Income Tax Act. Revenue was clearly in error, in making the aforesaid adjustments u/s 143(1) of Income Tax Act on a debatable and controversial issue”

 

  • Reliance is placed on the judgement of Hon’ble ITAT, Mumbai Bench in the case of Kalpesh Synthetics (P.) Vs. DCIT,

 

CPC Bengaluru [2022] 137 taxmann.com 475

  • “In the light of this ground reality, an auditee being presumed to have accepted, and concurred with, the audit observations, just because the appointment of auditor is done by the assessee himself, is too unrealistic and incompatible with the very conceptual foundation of independence of an auditor. On the one hand, the position of the auditor is treated so subservient to the assessee that the views expressed by the auditor are treated as a reflection of the stand of the assessee, and, on the other hand, the views of the auditor are treated as so sacrosanct that these views, by themselves, are taken as justification enough for a disallowance under the scheme of the Act. There is no meeting ground in this inherently contradictory approach. Elevating the status of a tax auditor to such a level that when he gives an opinion which is not in harmony with the law laid down by the Hon’ble Courts above- as indeed in this case, the law, on the face of it, requires such audit opinion to be implemented by forcing the disallowance under section 143(1), does seem incongruous.”

 

  • Same ratio has been laid down by Hon’ble ITAT, Mumbai Bench in the case of P.R. Packaging Service vs. ACIT-25(3), Mumbai ITA 2376/Mum/2022, wherein under identical set of facts, as in the case of the assessee company, additions made w.r.t Section 36(1)(va), under Section 143(1) were deleted by Hon’ble ITAT, Mumbai Bench, holding such adjustment in the processing to be outside the scope of Section 143(1)(a)(iv). The said decision has been rendered by Hon’ble ITAT, Mumbai Bench subsequent to the decision of Hon’ble Supreme Court in Checkmate Services Private Limited (Supra).

 

  • It is further submitted that the processing of return of income was made e. on 12.11.2019. On that date it was clear that if the amount of employees’ contribution to ESI and PF is deposited before the due date of filing of return of income, no disallowance u/s 36(1)(va) can be made. Reliance is placed on the following decisions:

Hon’ble Supreme Court

  • CIT Rajasthan State Beverages Corporation Ltd. (2017) 392 ITR 2 (St.)
  • CIT vs State Bank of Bikaner and Jaipur SLP 16249/2014

In above cases SLP of department has been dismissed and as a result of the same it has been upheld that PF and ESI cannot be disallowed if paid after due date under respective Act but paid before filing of return of income u/s 139(1) of the Act. Hon’ble Jurisdictional High Court:

  • CIT State Bank of Bikaner & Jaipur [2014] 43 taxmann.com 411 (Rajasthan):
  • “…22. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub- section (1) of Section 139 of the IT Act.

 

  1. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act.”

 

  • CIT Jaipur Vidyut Vitran Nigam Ltd. [2014] 49 taxmann.com 540 (Rajasthan) [PB 11-12]
  • “6. In our view no substantial question of law arises out of the orders of the Tribunal as it is an admitted fact that the entire amount was deposited by the respondent- assessee at least on or before the due date of filing of the returns under s. 139 of the IT Act and being a concurrent finding of fact by the respective authorities and in the light of the judgments rendered by this Court in the case of CIT v. State Bank of Bikaner & Jaipur/Jaipur Vidyut Vitran Nigam Ltd. [2014] 363 ITR 70/43 taxmann.com 411 of even date wherein it has been held that if the amount has been deposited on or before the due date of filing the return under s. 139 and admittedly it was deposited on or before the due date then the amount cannot be disallowed under s. 43B of the IT Act or under s. 36(1)(va) of the Act. In fact in the above matters one of the parties is same as in the present appeals, therefore, the issue is no more res Integra in the light of judgments of this Court referred to supra and, in our view, no substantial question of law arises out of the impugned orders of the Tribunal, which may require attention of this Court.

 

  • In view of the above the law prevailing as on the date of processing did not authorize CPC to take a different view that too by way of adjustment by processing the return u/s 143(1).

 

  • In view of above the adjustment made by ld. AO (CPC) is illegal and without jurisdiction. Relief may please be granted by quashing such adjustment.”

6.           In addition to the written submission the ld. AR of the assessee also relied upon the following judicial precedent to support the grounds raised before us:

  • Garg Heart Centre & Nurshing Home Private Limited ACIT in ITA No. 1700/Del/2022 dated 25.08.2022.
  • Kalpesh    Synthetics    (P.)    Ltd.    vs.    DCIT    (2022)    137 taxmann.com 475( Mumbai Trib.).
  • M/s    R   Packaging    Service    vs.   ACIT   in   ITA    No. 2376/Mum/2022 dated 07.12.2022.

7.           The ld. AR of the assessee thus relying to written submission and judicial decision vehemently argued that the adjustment made by the CPC are outside the purview of the law prevailing on the year under question and at the same time fairly admitted that the after the decision of the apex court in the case of Checkmate Services there is no scope of not considering the claim had the case of the assessee been subjected to scrutiny u/s. 143(3) of the Act. The related to considering this adjustment as income of the assessee is also prospective in nature and the related amendment made in Finance Act, 2021. The fact that the auditor has not considered this adjustment as disallowable has clearly in his audit report make the following remark:-

Where any of the requirement in the Form is answered in the negative or with qualification, give reasons therefore

Sl No. Qualification type Observation/Qualification
1. Creditors under Micro, Small and Medium Enterprises Development Act, 2006 are not ascertainable. No information available
2. Others We have relied upon on judicial pronouncement for depositing of PF and

ESI of employees share before filing the
return.
3. Others GST returns are subject to confirmation

The ld. AR of the assessee further submitted that in the form no. 3CD the related information was only directed to be submitted and it has no relevance of making the disallowance by the tax auditor and for that the ld. AR of the assessee drawn our attention to the form no.3CD as extracted:-

20 a Any sume paid to an employee as bonus or commission for services rendered, where such sum was otherwise payable to him as profits or dividend. [Section 36(1)(ii)}
S No. Description Amount
1. Bonus 450630
20 b Details of contribution received from employees for various funds as referred to in section 36(1)(va)
S.

No.

 Nature of fund Sum received from employees Du date for payment The actual amount paid The actual date of payment to the

concerned authorities
1. Superannuation

Fund

 44573 15/05/2017 44573 19/05/2017
  • The AR of the assessee also drawn our attention to clause no. 21(b) (the same is extracted here in below ) where in also the tax auditor has not suggested any disallowance.

 

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  • The ld. AR of the assessee thus, based on the above contention submitted that the adjustment made by the CPC are outside the permissible adjustment as per the provision of law.
  1. Per contra, the ld. Sr. DR supported the contentions raised in the order of the ld. CIT(A) and vehemently argued that the disallowance are evidently not paid in time the same is disallowable and for that he has relied upon the decision of Hon’ble Apex Court in case of Checkmate Services P. Ltd. vs CIT Appeal No. 2833 of 2016 dated 12.10.2022.
  1. We have heard the rival contentions, perused the material on record. The ld. AR of the assessee in ground no. 1 argued that the adjustment made by the CPC are outside the permissible adjustment as provided under the Act and to support he has relied upon the various judicial decision. To decide the ground raised by the assessee we have persuaded the provision of section 143(1)
  1. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:—
  • the total income or loss shall be computed after making the following adjustments, namely:—
    • any arithmetical error in the return;
    • an incorrect claim, if such incorrect claim is apparent from any information in the return;
    • disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
    • disallowance of expenditure 68[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return;
    • disallowance of deduction claimed under 69[section 10AA or under any of the provisions of Chapter VI-A under the heading “C.— Deductions in respect of certain incomes”, if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or
    • addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:

 

Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:

 

Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:

 

Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;

The Bench noted that the ld. AR of the assessee demonstrated that the tax auditor has merely given the details as required in the form no 3CD and at the same time in 3CA has given his view that considering the favorable decision for ESI and PF they have considered the same as allowable and not considered the deemed income of the assessee. For which the ld. DR has not disputed that the details are already available on records of the revenue. On going the tax audit report and provision of section 143(1) of the Act we are of the considered view that the PF and ESI being the deemed income of the assessee as the same is collected from the employee salary and therefore, the same is not under the permissible adjustments. Taking into rival contentions placed before us and on perusing the record, we are of the considered view that the adjustment made by the lower authorities are outside the purview of Section 143(1) of the act. To support the view taken by us we have relied upon the detailed finding of the coordinate Delhi bench’s decision in the case of Garg Heart Center & Nursing Home Private Limited in ITA No. 1700/Del/2022. The relevant finding is reiterated here in below:-

 

“(C.1.1) We have heard both sides. We have perused the materials on record. Relevant facts are not in dispute. In all these appeals before us, the employees’ contribution to ESI/Provident Fund, were deposited by the respective assessees after the specified date prescribed under laws governing ESI/Provident Fund. However, these payments were deposited by the respective assessees well before the date of filing of return of Income Tax prescribed under section 139(1) of Income Tax Act. The aforesaid additions have been made to the income of the respective assessees by way of adjustment and intimation u/s 143(1) of Income Tax Act.

(C.1.2) The issue before us is whether, the aforesaid additions by way of adjustments and intimation u/s 143(1) of Income Tax Act in respect of payments of Employee’s contribution to ESI/Provident Fund, made by the assessee [payments made after stipulated dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return prescribed u/s 139(1) of Income Tax Act] are to be sustained or deleted. We are aware about amendments to section 36(1)(va) and 43B of Income Tax Act, brought into effect by Finance Act, 2021. As regards whether these amendments are prospective in nature and applicable with effect from 01.04.2021 or retrospective in nature having applicability even before 01.04.2021; we are aware of some reported orders of ITAT, passed after the aforesaid amendments were brought in by Finance Act, 2021; in which the issue in dispute for Assessment Years prior to Assessment Year 2021-22 (i.e. for periods before 01.04.2021) has been decided in favour of the assessee and against Revenue. Some such decisions are: Digiqal Solution Services Pvt. Ltd. vs. Assistant Director of Income Tax [2021] 92 ITR (Tribunal) 404 (Chandigarh) for Assessment Year 2019-20 (order dated 4th October, 2021); Shand Pipe Industry Pvt. Ltd. vs. DCIT (CPC), [2022] 93 ITR (Trib.) 54 (Bangalore) for Assessment Year 2018-19 (order dated 27th Dec., 2021); Mahadev Cold Storage vs. Jurisdictional Assessing Officer [2021] 190 ITD 273 for Assessment Year 2018-19 and 2019-20 in ITA Nos. 41 & 42/Agr/2021 (order date 14.06.2021); Nikhil Mohine vs. DCIT [2022] 93 ITR (Trib.) 658 (Jabalpur) for Assessment Year 2018-19 (order dated 18th Nov., 2021 of SMC Bench, Jabalpur); Gopalkrishna Aswini Kumar vs. Assistant Director of Income Tax [2022] 192 ITD 562 (Bangalore-Trib.) for Assessment Year 2019-20 (order dated 13.10.2021 in ITA No.359/Bang./2021); Continental Restaurant and Café Co. vs. Income Tax Officer [2021] 91 ITR (Trib.) (S.N.) 60 (Bangalore) for Assessment Year 2019-20 (order dated 11th October, 2021 of SMC Bench of Bangalore); and TML Business Services Ltd. [2022] 93 ITR (Trib.) (S.N.) 35 (Mumbai) for Assessment Year 2017-18 (order dated 29th Dec., 2021). In the cases of Continental Restaurant and Café Co. vs. ITO (supra), Nikhil Mohine vs. DCIT (Supra), Shand Pipe Industry Pvt. Ltd. vs. DCIT (supra); Digiqal Solution Services Pvt. Ltd. vs. Assistant Director of Income Tax (supra) and Gopalakrishna v/s ADIT (supra), the different Benches of Income Tax Appellate ITA No.1700 & Ors/Del/2022 & Ors Garg Heart Centre and Nursing Home Pvt. Ltd. & Ors. vs. ACIT Page 20 of 28 Tribunal have, in fact, specifically considered the aforesaid amendments brought to Income Tax Act by Finance Act, 2021; and have taken the view that the amendments are prospective in nature (i.e. applicable from AY 2021-12 onwards) having no application for the period prior to 01.04.2021 i.e. for assessment years prior to AY 2021-22. Even if Revenue does not accept the view, that the aforesaid amendments are prospective in nature having no application for Assessment Years prior to Assessment Year 2021- 22; it is clearly established in the light of aforesaid decisions of Income Tax Appellate Tribunal (ITAT); referred to in this paragraph earlier, that the issue whether the aforesaid amendments are prospective or retrospective, is at least debatable and controversial, on which a view in faour of the assessee (that the aforesaid amendments are prospective) can legitimately exist, even if such a view favorable to the assessee is contested by Revenue.

(C.1.3) Let us consider the two alternate views, one in favour of the assessee and the other in favour of Revenue; more closely. If the view in favour of the assessee, that the aforesaid amendments are prospective, is accepted; then the decisions of Hon’ble Delhi High Court, in the cases of CIT vs. AIMIL Ltd. 321 ITR 508 (Delhi); and CIT vs. P.M. Electronics Ltd. 313 ITR 161 (Delhi) continue to hold good for Assessment Years to which these appeals before us, pertain. Accordingly, the view taken by Hon’ble Delhi High Court in these cases, that delayed payments of employees contribution of provident fund and ESI [payment made after stipulated dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return prescribed u/s 139(1) of Income Tax Act] does not constitute assessee’s income, will continue to hold good for Assessment Years prior to 2021-22 to which these appeals pertain. In such a scenario, the aforesaid additions made to the income of the respective assessees, have no legs to stand; and the same deserve to be deleted. If, however, the contrary view advanced by Revenue is taken, that the aforesaid amendments are retrospective; then the question that will arise is whether such a debatable and controversial view can be invoked for making adjustments u/s 143(1) of Income Tax as per the intimation issued to the assessee u/s 143(1) of Income Tax Act.

(C.1.3.1) It is well settled that any adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, is beyond the scope of Section 143(1) of Income Tax Act. In this regard, we respectfully mention the order of Hon’ble Delhi High Court in the case of ACIT vs. Haryana Telecom Pvt. Ltd. 14 taxman.com 122 (Delhi). Similar view was taken by Hon’ble Courts in the cases of George Williamson (Assam) Ltd. vs. CIT & Anr. [2006] 286 ITR 0533 (Gauhati); Tata Yadogawa Ltd. vs. CIT [2011[] 335 ITR 0053 (Jharkhand); God Granites vs. Central Board of Direct Taxes & Ors. [1996] 218 ITR 0298 (Karnataka); Swamy Distributors vs. ACIT & Ors. [2003] 180 CTR 0290; 139 Taxman 0310 (Karnatka), CIT vs. Eicher Goodearth Ltd. [2008] 296 ITR 0125 (Delhi); Smt. Shanta Chopra vs. ITO [2004] 271 ITR 0132 (Delhi); Kvaverner John Brown Engg. (India) (P.) Ltd. vs. ACIT, [2008] 305 ITR 0103 (Supreme Court). In these present appeals before us, the additions have been made by way adjustments, vide intimations issued under section 143(1) of Income Tax Act. In view of the foregoing precedents, we are of the view that the aforesaid adjustments made by Revenue u/s 143(1) of IT Act were unfair, unjust, and bad in law. For this view, we also respectfully take support from the order of Agra Bench of ITAT, in the case of Mahadev Cold Storage vs. Jurisdictional Assessing Officer (supra). At the very least, Revenue should have given due consideration to the fact that the issue was highly debatable and controversial. As already discussed earlier, adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, is beyond the scope of section 143(1) of Income Tax Act. Revenue was clearly in error, in making the aforesaid adjustments u/s 143(1) of Income Tax Act on a debatable and controversial issue. We would also like to make respectful mention of order of Jabalpur Bench of ITAT in the case of Nikhil Mohine vs. DCIT (supra), in which similar view has been taken.

(C.1.4) Further, it is also well settled that retrospective amendment cannot be invoked to make addition by way of adjustment and intimation u/s 143(1) of Income Tax Act. This view was taken by the Hon’ble Supreme Court in the case of CIT vs. Hindustan Electro Graphites Ltd. [2000] 243 ITR 0048 (SC), in which the view of Hon’ble Kolkata High Court in the case of Modern Fibotex India Ltd. & Anr. Vs. DCIT & Ors.[1995] 212 ITR 0496 (Calcutta) was approved. Same view was taken by the Hon’ble Madhya Pradesh High Court in the case of CIT vs. Satish Traders [2001] 247 ITR 0119 (Madhya Pradesh).

(C.2) In view of foregoing discussion, we come to the following conclusions:

  • The fact that payments by way of employees’ contribution to provident fund and ESI were made by the respective assessees after stipulated date prescribed under the relevant laws governing provident fund and ESI, but before the due date of filing of return of income prescribed u/s 139(1) of Income Tax Act; is not in dispute
  • Whether the aforesaid amendments to Income Tax Act by way of Finance Act, 2021 are retrospective or prospective, is debatable and controversial.
  • Adjustments made by Revenue u/s 143(1) of Income Tax Act, whereby aforesaid additions were made to the income of the respective assessee, were unfair, unjust and bad in law.
  • Addition by way of adjustment and intimation u/s 143(1) of Income Tax Act on debatable and controversial issues is beyond the scope of Section 143(1) of Income Tax Act. Revenue was clearly in error in making the aforesaid adjustments.
  • Addition by way of adjustment and intimation u/s 143(1) of Income Tax Act, on the basis of retrospective amendment to Income Tax Act is beyond the scope of Section 143(1) of Income Tax Act.
  • In the present appeals before us, additions of aforesaid amount have been made by way of adjustments and intimation u/s 143(1) of Income Tax Act, on a debatable and controversial issue. (C.2.1) In the light of the foregoing conclusions in paragraph

(C. 2) of this order and the preceding discussion, we are of the view that the aforesaid additions by way of adjustment and intimation u/s 143(1) of Income Tax Act, were beyond the scope of Section 143(1) of Income Tax Act. Accordingly, we set aside the impugned appellate orders of Ld. CIT(A) in the cases of Garg Heart Centre & Nursing Home Private Limited, Global Groupware Solutions Limited, Publix Realtors and Facilitators Private Limited, M/s Samarpit Surksha Private Limited, Ritu Mukherji, Manmohan Raizada, Girdhari Yadav, Dharamjit Singh, Virender Pratap Singh and Ansal API Infrastructure Limited respectively and direct the Assessing Officer to delete the additions made by way of adjustments/intimation u/s 143(1) of IT Act. For the same reasons, we uphold the impugned appellate order of Ld. CIT(A) in the case of M/s Jagatjit Industries Ltd.”

 

Respectfully following the above view the ground no 1 raised by the assessee is allowed.

  1. Since we have allowed the appeal of the assessee on technical ground. We have not decided the ground of the assessee on merits and that ground left open.

 

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 20/02/2023

Sd/-                                                                                                              Sd/-

(Sandeep Gosain)                                                                       (Rathod Kamlesh Jayantbhai)

Judicial Member                                                                              Accountant Member

Jaipur

Dated:-  20/02/2023

*Santosh.

Copy of the order forwarded to:

  1. The Appellant- Paris Elysees India Pvt. Ltd., Jaipur
  2. The Respondent- DCIT, Circle-7, Jaipur.
  3. 3. CIT
  4. CIT(A)
  5. DR, ITAT, Jaipu
  6. Guard File {ITA Nos. 357/JPR/2022}

By order,

Asst. Registrar




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