TMI Blog2023 (5) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Thus reporting of payment beyond this due date in the tax audit report constituted disallowance of expenditure indicated in the audit report but not taking into account in the computation of total income in the return as is sine qua non for disallowance of Section 143(1)(a)(iv). We thus respectfully follow the same and vacate the addition as summarily made by the A.O, CPC u/s.143(1)(a) - Decided in favour of assessee. - Shri Ravish Sood, Judicial Member For the Assessee : Shri Nitin Goyal, CA. For the Revenue : Shri Piyush Tripathi, Sr. DR. ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 27.09.2022, which in turn arises from the intimation issued by the Centralized Processing Center (CPC)/A.O. under Sec. 143(1) of the Income-tax Act, 1961 (in short the Act ) dated 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee appellant. Albeit the assessee after filing of the appeal before the CIT(Appeals) ought to have remained vigilant about the fate of the same, but, then, the veracity of his claim that he was oblivion of the order of the CIT(Appeals) that was dropped in his e-mail box; on being tested on the touchstone of the ground reality that there is lack of computer literacy amongst the masses, thus, cannot be dubbed as an afterthought or an eye wash. Apart from that, it is stated by the assessee that the delay subsequent to the first week of December, 2022, had occasioned for two fold reasons, viz. (i). that his counsel at the relevant point of time had remained busy with the finalization of the scrutiny assessment cases; and (ii). that due to certain financial constraints he could not immediately deposit the appeal fees. Considering the fact that the assessee had candidly come forth with the multi-facet reasons that had resulted to the delay of 41 days in filing of the present appeal, which on being considered in the backdrop of the fact that he does not carry a blemished image as that of an assessee who habitually fails to effect timely compliance of the statutory obligations du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the aforementioned addition could not have been made by the A.O in the garb of a prima facie adjustment u/s.143(1)(a) of the Act. Elaborating on his aforesaid contention, it was the claim of the Ld. AR that the assessee s chartered accountant as per the mandate of law had at Sr. No. 20(b) of his audit report only furnished details of the employees shares of contribution as referred to in Section 36(1)(va), i.e the respective amounts a/w. dates of deposit. It was submitted by the ld. A.R that the A.O merely on the basis of the aforesaid details provided by the auditor could not have made an addition of the same to the assessee s returned income u/s.143(1)(a) of the Act. Our attention was drawn by the Ld. AR to Sr. No. 20(b) of the audit report in Form 3CD. Carrying his argument further, it was submitted by the Ld. AR, that, even otherwise, on the date when the return of income of the assessee was processed u/s. 143(1) of the Act, i.e. on 21.02.2020, the issue as to whether or not the delayed deposits of the employee s share of contributions towards labour welfare funds, which were though deposited by the assessee-employer beyond the due date prescribed under the relevant Acts b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontributions towards ESI and EPF as referred in Section 36(1)(va) of the Act, therefore, no infirmity did emerge from the order of the A.O, who while processing the return of income u/s.143(1) of the Act had rightly held the said amount as the income of the assessee. 11. We have given a thoughtful consideration to the aforesaid contentions of the Ld. Authorized Representatives of both the parties in the backdrop of the orders of the lower authorities, and have also considered the judicial pronouncements that have been pressed into service by them. 12. Admittedly, the issue as to whether or not, the delayed deposits of employees share of contribution towards labour welfare funds, i.e. ESI and EPF by the assessee-employer were liable to be held as the income of the assessee u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act, as was the view of the department; or the same were saved by the provisions of Section 43B of the Act, i.e to the extent such deposits were made not later than the due date of filing of the return of income of the assessee as prescribed under sub-section (1) of Section 139 of the Act, was a highly debatable and had finally only recently been settled by the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjusted by way of intimation under section 143(1)(a), would lead to arbitrary and unreasonable intimations being issued, leading to chaos. In fact, I find that the aforesaid issue in hand had been deliberated at length by the ITAT, Mumbai in the case of Kalpesh Synthetics (P) Ltd. Vs. DCIT (supra). The Tribunal while dealing with the various facets of the aforesaid issue, had held, that no such addition of the delayed deposits of the employee s share of contribution towards labour welfare funds could have been made in the hands of the assessee while summarily processing its return of income u/s.143(1)(a) of the Act, observing as under: 4. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 5. In our considered view, it is quite evident, from a careful look at the related statutory provisions, that there is a material difference in the scheme of processing the income tax return under section 143(1)(a) as it stands now vis- -vis as it stood at the point of time when Khatau Junkar judgment (supra) by Hon ble jurisdictional High Court was delivered. That was the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage or ratio or fraction. On the second point, it is useful to bear in mind the fact that the scheme of Section 143(1)(a) thus permits the processing of the income tax return in the manner that the total income or loss of the assessee is computed after making the adjustments for (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) 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; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80- IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) 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 . The adjustments under clause (vi) above are no longer permissible after 1st April 2018. Clearly, thus, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take on such objections has to be essentially a judicious call, appropriate to facts and circumstances and in accordance with the law, and the Assessing Officer CPC has to set out the reasons for the same. Whether there is a provision for further hearing or not, once objections are raised before the Assessing Officer CPC and the Assessing Officer CPC has to dispose of the objections before proceeding further in the matter, this is inherently a quasi-judicial function that he is performing, and, in performing a quasi-judicial function, he has to set out his specific reasons for doing so. Disposal of objections cannot be such an empty formality or meaningless ritual that he can do so without application of mind and without setting out specific reasons for rejecting the same. Let us, in this light, set out the reasons for rejecting the objections. The Assessing Officer- CPC has used a standard reason to the effect that As there has been no response/the response given is not acceptable, the adjustment(s) as mentioned below are being made to the total income as per provisions of Section 143(1)(a) , and has not even struck off the portion inapplicable. To put a question to ourselves, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is important to keep an eye on the statistics on disposal, there is a higher value involved. The quality of justice brings legitimacy to the judiciary. 7. These observations of Their Lordships apply equally, and in fact with much greater vigour, to the quasi-judicial functionaries as well. Viewed thus, reasons in a quasi-judicial order constitute the soul of the quasi-judicial decision. A quasi-judicial order, without giving reasons for arriving at such a decision, is contrary to the way the functioning of the quasi-judicial authorities is envisaged. A quasi-judicial order, as a rejection of the objections against the proposed adjustments under section 143(1) inherently is, can hardly meet any judicial approval when it is devoid of the cogent and specific reasons, and when it is in a standard template text format with clear indications that there has not been any application of mind as even the inapplicable portion of the template text, i.e whether there was no response or whether the response is unacceptable, has not been removed from the reasons assigned for going ahead with the proposed adjustment under section 143(1). In any event, there is no dispute that the precise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, 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. Learned Departmental Representative s contentions in this regard that the observations made in the tax audit report, in the light of the specific provisions of Section 143(1)(a)(iv), must prevail- more so when the tax auditor is appointed by the assessee himself, is clearly unsustainable in law. While Section 143(1)(a)(iv) does provide for a disallowance based purely on the indication in the tax audit report, inasmuch as it permits disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return , and it is for the Hon ble C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in such a situation, cannot be reason enough to disregard the binding views of the Hon ble jurisdictional High Court. To that extent, the provisions of Section 143(1)(a)(iv) must be read down. What essentially follows is that the adjustments under section 143(1)(a) in respect of disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return is to be read as, for example, subject to the rider except in a situation in which the audit report has taken a stand contrary to the law laid down by Hon ble Courts above . That is where the quasi-judicial exercise of dealing with the objections of the assessee, against proposed adjustments under section 143(1), assumes critical importance in the processing of returns. It is also important to bear in mind the fact that what constitutes jurisdictional High Court will essentially depend upon the location of the jurisdictional Assessing Officer. While dealing with jurisdiction for the appeals, Rule 11(i) of the Central Processing of Returns Scheme 2011 states that Where a return is processed at the Centre, the appeal proceedings relating to the processing of the return shall l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit report but not taking into account in the computation of total income in the return as is sine qua non for disallowance of Section 143(1)(a)(iv). When the due date under Explanation to Section 36(1)(va) is judicially held to be not decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is indicative of the disallowance of expenditure in question. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. 10. In view of the detailed discussions above, we are of the considered view that the impugned adjustment in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
