TMI Blog2023 (6) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by the Hon'ble High Court/Supreme Court would prevail over the tax audit report. As observed above, the law has been settled in the case of Checkmate Services Pvt. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] - The law declared by the Hon'ble Supreme Court is to be treated as if the same was the right interpretation since the date of the inception of the relevant provision and, therefore, even as per the decision of the Coordinate Bench of the Tribunal in 'Kalpesh Synthetics Pvt. Ltd. vs. DCIT' (supra), the issue is required to be decided in favour of the Revenue and against the assessee. - I.T.A. No. 63/Ran/2022 - - - Dated:- 15-5-2023 - Shri Sanjay Garg , Judicial Member And Shri Rajesh Kumar , Accountant Member None appeared on behalf of the appellant Shri Pranob Kumar Koley, Sr. DR, appeared on behalf of the respondent ORDER Per Sanjay Garg , Judicial Member : The present appeal has been preferred by the assessee against the order dated 15.06.2022 of the National Faceless Appeal Centre [hereinafter referred to as 'CIT(A)'] passed u/s 250 of the Income Tax Act (hereinafter referred to as the 'Act'). 2. No one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted citing relevant judgments, however CPC passed the order adding the same to the Income of the assessee thereby creating a total tax liability of Rs. 298812.00 against the assessed tax liability of 98151.00. 5. As a result of order under section 143(1) a net refund of Rs. 72257.00 was raised against the total refund of 272920.00 6. Appeal was preferred with CIT(A) through NFAC, citing the recent memorandum explaining the provision of Finance Bill, 2021 clearly states that the amendment to section 36(1)(va) is applicable from 1st April 2022, but the same was not taken into consideration and the appeal was rejected. 5. A perusal of the above grounds of appeal and statement of facts would show that the only issue raised in this appeal is relating to the disallowance of employees' contribution to PF/ESI u/s 36(1)(va) read with section 2(24)(x) of the Act. 6. Admittedly, the issue on merits has been set at rest by the recent decision of the Hon'ble Supreme Court in bunch of appeals with the lead case in 'Checkmate Services Pvt. Ltd vs. CIT' in Civil Appeal No.2833 of 2016 dated 12.10.2022. Earlier, there were divergent opinions of various High Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions of section 43B prescribing the due date as the date of filing of return of income in case the employers' contribution towards ESI/PF would not be applicable in case the employees' contribution as provided u/s 36(1)(va) of the Act and that the due date in respect of deposit of employees' contribution would be such as prescribed u/s 36(1)(va) of the Act. 7. It has been held time and again that law declared by a court will have retrospective effect, if not otherwise stated to be so specifically. It is also well settled proposition that whenever, a previous decision is overruled by a larger bench of the Supreme Court, the previous decision is completely wiped out and Article 141 will have no application to the decision which has already been overruled and the court would have to decide the cases according to the law laid down by the latest decision of the Hon'ble Supreme Court and not by the decision which has been expressly overruled. The above reasoning stems from the principle that when a court decides a matter, it is not as if it is making any new law but it is as if it is only restating what the law has always been. The reliance in this respect can be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the Tribunal is of the view that the tax auditor in the audit report had merely mentioned the due date for remittance of provident fund as per the Provident Fund Act and the actual date of payment made by the assessee. That the tax audit had not contemplated to disallow the employees' contribution to PF, wherever, it is remitted beyond the due date prescribed in the Provident Fund Act. That it was merely recording of facts and a mere statement made by the tax auditor in his tax audit. That the provisions of section 143(1)(a)(iv) of the Act would come into operation when the tax auditor had suggested for a disallowance of expenses or increase in income, but the same has not been carried out by the assessee while filing the return of income. The Coordinate Bench thus observed that the tax auditor in the said case had not said to disallow the employees' contribution to PF, wherever, it is remitted beyond the due date under the respective Act. The Coordinate Mumbai Bench of the Tribunal in the case of M/s. P R Packaging Service (supra), therefore, held that the said action of the ld. CPC, Bangalore/Assessing Officer in disallowing the employees' contribution to PF whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return. 4. From the aforesaid provisions, it is very clear that the said clause (iv) would come into operation when the Tax Auditor had suggested for a disallowance of expense or increase in income, but the same had not been carried out by the assessee while filing the return of income. As stated supra, the tax auditor had not stated in the instant case to disallow Employees Contribution to Provident Fund wherever it is remitted beyond the due date under the respective Act. Hence, in our considered opinion, the said action of the Ld.CPC Bangalore in disallowing the employees' contribution to Provident Fund while processing the return under section 143(1) of the Act is against the provisions of the Act as it would not fall within the ambit of prima facie adjustments. Our view is further fortified by the co-ordinate bench decision of this Tribunal in the case of Kalpesh Synthetics Pvt. Ltd vs. DCIT reported in 195 ITD 142 (Mum). 8. At this stage, it will be relevant to reproduce the relevant provisions of section 143(1) of the Act which is as under : 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20.(b) Details of contributions received from employees for various funds as referred to in section 36(1)(va): Sl. No. Nature of fund Sum received from employees Due date for payment The actual amount paid The actual date of payment to the concerned authorities 10. The contention raised on behalf of the assessee is that in the audit report, the auditor is required to report only the facts of due date of payment and the actual date of payment. That nowhere the auditor is required to indicate the amount of disallowance of expenditure on the above accounts. It has, therefore, been pleaded that when the CPC makes the adjustment by disallowing the late payment then it can be said that the revenue was not justified in invoking the provisions of section 143(1)(a)(iv) of the Act on the fallacy of presumption that the auditor has disallowed employees' contribution to ESI/PF. 11. Before proceeding further, it can be noted that the relevant word is 'indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of the assessee and this information itself indicates the allowance or disallowance which is required to be made while processing the return of the assessee. The auditor is not required in the prescribed form to specifically mention as to the what disallowance or to say as to what amount of disallowance is required to be made u/s 36(1)(va) of the Act, rather, the auditor is required to furnish the information and the said information is when correlated with the statutory provisions applicable, it may indicate for certain adjustment of disallowance which may be attracted in the case of the assessee. The information in the return of income/audit report is also required to be uploaded on line. The said online information of return of income/audit report is automatically compared with the preferred data relating to statutory provisions/compliances etc. as provided u/s 143(1) of the Act, and wherever the return/audit report data suggests of non-compliance etc., the software automatically picks the said default and report accordingly. However, before making such disallowance as is indicative from the tax audit report, the proviso to section 143(1) provides that no such adjustmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective contentions of the ld. representatives of the parties has upheld the adjustment made by the Assessing Officer/CPC u/s 36(1)(va) of the Act on account of late deposit of employees' contribution to ESI/PF. The Coordinate Chennai Bench has observed that the purpose of the audit is to enable the revenue to make correct computation of assessee's income. That a proper audit would, inter alia, ensure that the claims for deduction are correctly made. That the report is required to be furnished by the assessee along with return of income to enable revenue to make correct computation of income. That 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. The relevant part of the order of the Coordinate Bench of the Tribunal in the case of M/s. Electrical India (supra) is as under: 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 provident fund or superannuation fund or any fund set up unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, 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 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. 16. It is further noted that the aforesaid order of the Chennai Bench of the Tribunal in the case of M/s. Electrical India has been further followed by the Hyderabad 'SMC' Bench of the Tribunal in the case of Sudhakar Rao Dondapati vs. Ito vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 36(1)(va), however, that is subject to the law laid down by the courts and if the Jurisdictional High Court has interpreted the provisions in any other manner then the decision of the Hon'ble High Court would prevail over the indication given in the tax audit report. The above views of the Coordinate bench of the Tribunal in 'Kalpesh Synthetics Pvt. Ltd. vs. DCIT' (supra) in no manner is suggestive that the adjustment u/s 36(1)(va) cannot be made while processing the return u/s 143(1) of the Act, rather, the above view is limited to the proposition that if the law laid down by the High Court/Supreme Court is otherwise as compared to the factual information given in the audit report, then the law laid down by the Hon'ble High Court/Supreme Court would prevail over the tax audit report. Therefore, the Coordinate Mumbai Bench in the said case of Kalpesh Synthetics Pvt. Ltd. vs. DCIT (supra) has also mentioned time and again that in the audit report factual information is given, whereupon the Assessing Officer has to apply the prevailing law. As observed above, the law has been settled by the Hon'ble Supreme Court on the issue in the case of Checkmate Services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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