2021 (12) TMI 1069 - AT - Income Tax

Late payments towards EPF and ESI under section 36(1)(va) - Payment before furnishing the return of income u/s 139(1) - HELD THAT - As relying on RAJA RAM VERSUS THE ITO WARD 3 AND SANCHI MANAGEMENT SERVICES PRIVATE LIMITED VERSUS THE ITO WARD 5 (2) CHANDIGARH 2021 (11) TMI 370 - ITAT CHANDIGARH the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) of the Act in both the years under consideration prior to the amendment made by the Finance Act 2021 w.e.f. 1.4.2021 vide Explanation 5 are deleted. - Decided in favour of assessee.

Issues Involved:
1. Contravention of Section 250(6) of the Income Tax Act, 1961 by CIT(A).
2. Addition under Section 36(1)(va) for late deposit of ESI and PF.
3. Authority of AO (CPC) to make additions under Section 143(1).
4. Retrospective applicability of the explanation inserted by Finance Act, 2021 under Section 36(1)(va).

Detailed Analysis:

1. Contravention of Section 250(6) of the Income Tax Act, 1961 by CIT(A):
The assessee contended that the CIT(A) erred in passing the order in contravention of Section 250(6) of the Income Tax Act, 1961. However, the judgment did not delve into this issue in detail, focusing instead on the substantive issues related to the additions made under Section 36(1)(va).

2. Addition under Section 36(1)(va) for late deposit of ESI and PF:
The primary grievance of the assessee was the disallowance of Rs. 1,12,940/- made by the A.O. due to late payments towards EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961. The assessee argued that the contributions were deposited before the due date of filing the Income Tax Return under Section 139(1). The ITAT, referencing previous judgments, noted that similar issues had been adjudicated, where it was held that deposits made before the filing of the return of income should not be disallowed. The Tribunal cited multiple precedents, including decisions from the ITAT Jodhpur Bench and the ITAT 'B' Bench, Kolkata, which supported the assessee's position that contributions deposited before the due date for filing returns should not be disallowed.

3. Authority of AO (CPC) to make additions under Section 143(1):
The assessee argued that the AO (CPC) lacked the authority to make additions under Section 143(1) for the assessment year in question. The Tribunal did not specifically address this procedural issue, instead focusing on the substantive matter of whether the contributions were deposited in a timely manner.

4. Retrospective applicability of the explanation inserted by Finance Act, 2021 under Section 36(1)(va):
The CIT(A) had held that the explanation inserted by the Finance Act, 2021, under Section 36(1)(va) was retrospective. The assessee contended that this explanation was prospective and not applicable to the year in question. The Tribunal, referencing various judgments, including those from the ITAT Hyderabad 'SMC' Bench and the Hon'ble Calcutta High Court, concluded that the explanation was prospective and applicable from 01.04.2021. Thus, it should not affect the assessment year under consideration. The Tribunal reiterated that contributions deposited before the due date for filing returns should not be disallowed, even if deposited after the due date under the respective statutes.

Conclusion:
The ITAT concluded that the disallowances made by the A.O. and sustained by the CIT(A) were not justified since the contributions were deposited before the due date of filing the return of income under Section 139(1). The appeals of the assessees were allowed, and the disallowances were deleted. The Tribunal's decision was consistent with multiple precedents, emphasizing that the amendments introduced by the Finance Act, 2021, were prospective and not applicable to the assessment years in question.

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