Case Law Details
360 Realtors LLP Vs ADIT (ITAT Delhi)
ITAT Delhi held that amendments to section 36(1)(va) by Finance Act 2021 are retrospective or prospective is debatable and controversial and any adjustments u/s 143(1) of Income Tax Act by way of intimation, on debatable and controversial issues, is beyond the scope of Section 143(1).
Facts-
The first issue is regarding addition of Rs.58,72,654/- made u/s 36(1)(va) of Income Tax Act, 1961. These payments by way of employees’ contribution to ESI/Provident Fund were deposited by the assessee after the specified date prescribed under the relevant laws governing ESI and Provident Fund. However, payments were deposited by the assessee well before due date of filing of return of income under Section 139(1) of Income Tax Act. The assessee filed appeal before Ld. CIT(A) on 27/02/2021, which was disposed of by the CIT(A) vide impugned appellate order dated 15/12/2021; wherein the CIT(A) confirmed the aforesaid additions amounting to Rs.58,72,654/; taking the view, that amendment to section 36(1)(va) of the Act, by way of insertion of Explanation-2 brought in by Finance Act, 2021; is retrospective in nature, and is applicable for AY 2019-20. Aggrieved, the assessee has filed this present appeal.
Conclusion-
Amendments to section 36(1)(va), by way of insertion of explanation-2 brought in by Finance Act 2021 is prospective in nature.
Held that 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.
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.
FULL TEXT OF THE ORDER OF ITAT DELHI
(A) This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), New Delhi [Ld. CIT(A)”, for short], dated 15/12/2021 for Assessment Year 2019-20. Grounds taken in this appeal are as under:
“1. On the facts and circumstances of the case, the order passed by the National Faceless Appeal Centre [NFAC] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the order passed by NFAC is bad both in the eye of law and on facts as the same having been passed in gross violation of principle of natural justice.
3. On the facts and circumstances of the case, the order passed by NFAC is bad both in the eye of law as the Faceless appeal scheme,2020 itself is bad in law being in violation of principle of natural justice and hence liable to be quashed.
4. On the facts and circumstances of the case, the order passed by NFAC is bad both in the eye of law as the Faceless appeal scheme,2020 under which this order has been passed itself is in violation of provisions of the Income Tax Act and Rules framed therein and hence liable to be quashed.
5. On the facts and circumstances of the case, the order passed by NFAC is bad in law having being passed in violation of the faceless appeals scheme and hence liable to be quashed.
6. On the facts and circumstances of the case, the order passed by NFAC is bad in law having being passed without giving opportunity of being heard physically.
7. On the facts and circumstances of the case, the order passed by NFAC is bad in law having being passed without giving opportunity of being heard through video conferencing.
8. On the facts and circumstances of the case, NFAC has erred both on fact and in law in confirming the action of the learned AO(CPC) making the disallowances by exercising its powers beyond the scope of section 143(1) of the Income Tax Act.
(i) On the facts and circumstances of the case, NFAC has erred both on facts and in law in confirming the addition of Rs.58,72,654/- made by the AO(CPC) on account of late deposit of employees’ contribution towards provident fund and Employees State Insurance Fund.
(ii) That the above disallowance has been confirmed ignoring the contention of the assesse that employees’ contribution towards provident fund and ESI Fund would qualify for deduction prescribed under even if paid after due date Provident Fund Act and ESI Fund but before due date of filing of return in view of section 43B of the Income Tax Act.
(iii) That the above disallowance has been confirmed ignoring the fact that the amendment by Finance Act, 2021 will not apply retrospectively.
10. On the facts and circumstances of the case, NFAC has erred both on facts and in confirming the addition ignoring the various judicial pronouncements assesse in this regard.
11. On the facts and circumstances of the case, NFAC has erred both on facts and in not adjudicating the issue of adjustment of Rs. 53,05,295/- on account of interest on TDS, Interest on GST and Interest on PPF made by the AO(CPC).
12. On the facts and circumstances of the case, NFAC has erred both on facts and in not adjudicating the issue of TDS credit of Rs. 44,32,501/-disallowed by the AO(CPC).
13. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
(B) Although the appellant has filed numerous grounds of appeal, essentially there are three issues in dispute. The first issue is regarding addition of Rs.58,72,654/- made u/s 36(1)(va) of Income Tax Act, 1961 (“IT Act”, for short). These payments by way of employees’ contribution to ESI/Provident Fund were deposited by the assessee after the specified date prescribed under the relevant laws governing ESI and Provident Fund. However, payments were deposited by the assessee well before due date of filing of return of income under Section 139(1) of Income Tax Act. The aforesaid addition of Rs.58,72,654/- was made by way of adjustments u/s 143(1) of Income Tax Act; vide intimation dated 08/02/2021. The assessee filed appeal before Ld. CIT(A) on 27/02/2021, which was disposed of by the Ld. CIT(A) vide impugned appellate order dated 15/12/2021; wherein the Ld. CIT(A) confirmed the aforesaid additions amounting to Rs.58,72,654/; taking the view, that amendment to section 36(1)(va) of the Act, by way of insertion of Explanation-2 brought in by Finance Act, 2021; is retrospective in nature, and is applicable for AY 2019-20.
(C) Aggrieved, the assessee has filed this present appeal in Income Tax Appellate Tribunal (“ITAT” for short) against the aforesaid impugned appellate order dated 15/12/2021 of the Ld. CIT(A). At the time of hearing before us, the Ld. Authorized Representative (“AR” for short) for the assessee submitted that the Ld. CIT(A) should have deleted the additions, instead of sustaining the aforesaid additions amounting to Rs.58,72,654/-. The Ld. Sr. DR relied upon the impugned appellate order dated 15/12/2022 of the Ld. CIT(A).
(D) We have heard both sides. We have perused the materials on record. Relevant facts are not in dispute. It is not in dispute that employees’ contribution to ESI/Provident Fund, totaling the aforesaid amount of Rs.58,72,654/- was deposited by the assessee after the specified date prescribed under laws providing ESI/Provident Fund; but these payments were deposited by the assessee well before due date of filing of return of Income Tax prescribed u/s 139(1) of Income Tax Act. The aforesaid addition of Rs.58,72,654/- has been made by way of adjustment and intimation u/s 143(1) of Income Tax Act. The present appeal pertains to Assessment Year 2019-20.
(D.1) The issue before us is whether, the additions amounting to aforesaid total of Rs.58,72,654/- 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; it may be mentioned that the present appeal before us pertains to Assessment Year 2019-20; which is 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 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, having no application for the period prior to 01/04/2021. 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.
(D.1.1) 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 Year 2019-20, to which this appeal pertains. 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 Year 2019-20, to which this appeal pertains. In such a scenario, the aforesaid additions of Rs.58,72,654/- have no legs to stand; and the same deserves 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.
(D.1.2) 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 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 this present case before us, the additions have been made by way of adjustments vide intimation u/s 143(1) of Income Tax Act, dated 08/02/2021. As on 08/02/2021, the orders of Hon’ble Delhi High Court in favour of assessee and against Revenue on this issue in aforesaid cases of CIT vs. AIMIL Ltd. (supra); and CIT vs. P.M. Electronics Ltd. (supra) were available. Accordingly, the aforesaid amount of Rs.58,72,654/- could not have been added to assessee’s income as on 31/10/2019 in the light of these precedents of the Hon’ble Delhi Court in favour of the assessee. Therefore, we are of the view that the aforesaid adjustments made by Revenue on 31/10/2019, whereby the aforesaid amount of Rs.58,72,654/- was added to assessee’s income, were unfair, unjust, and bad in law. For this view, we 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 31/10/2019 on a debatable and controversial issue. We would 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.
(D.2) 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).
(D.2.1) In view of foregoing discussion, we come to the following conclusions:
(a) The fact that payments amounting to aforesaid Rs.58,72,654/- by way of employees contribution to provident fund and ESI were made by the assessee 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.
(b) Whether the aforesaid amendments to Income Tax Act by way of Finance Act, 2021 are retrospective or prospective, is debatable and controversial.
(c) Adjustments made by Revenue u/s 143(1) of Income Tax Act, whereby aforesaid additions of Rs.58,72,654/- were made, were unfair, unjust and bad in law.
(d) 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.
(e) 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.
(f) In the present case before us, addition of aforesaid amount of Rs.58,72,654/- has been made by way of adjustments and intimation u/s 143(1) of Income Tax Act, on a debatable and controversial issue, and Ld. CIT(A) did err in law, in not deleting this addition.
(E) In the light of the foregoing conclusions in paragraph (D.2.1) of this order, we are of the view that the aforesaid additions of Rs.58,72,654/- 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; and further, that the Ld. CIT(A) erred in law in confirming the aforesaid addition on a debatable and controversial issue. Accordingly, we direct the Assessing Officer to delete the aforesaid addition of Rs.58,72,654/-.
(E.1) By way of abundant caution, we hereby clarify that we have not expressed any view in this order, on whether the aforesaid amendments brought in by Finance Act, 2021 [whereby Explanation-2 was inserted in Section 36(1)(va) of Income Tax Act and Explanation-5 was inserted in Section 43B of Income Tax Act] are prospective or retrospective. In the light of our decision in foregoing paragraph (E) of this order; this issue is merely academic in nature; hence not decided.
(F) The second and third issues in this appeal are contained in grounds 11 and 12 of the appeal. Ground 11 of appeal pertains to the issue of adjustment of Rs.53,05,295/- on account of interest on TDS, interest on GST and interest on PPF. Ground 12 of appeal pertains to the issue regarding assessee’s claim of credit of tax deducted at source, amounting to Rs.44,32,501/- disallowed. These grounds were raised by the assessee in the appeal filed before the Ld. CIT(A). However, in the impugned appellate order dated 15/12/2021, the Ld. CIT(A) has not decided these issues. At the time of hearing before us, the representatives of both sides, the Ld. Authorized Representative for the assessee as well as the Ld. Sr. DR for Revenue, both submitted that aforesaid two issues contended in grounds 11 and 12 of the present appeal before us may be restored to the file of the Ld. CIT(A) with direction to decide these issue, which were raised in appeal filed by the assessee in the office of the Ld. CIT(A). In view of the foregoing, and as representatives of both sides are in agreement with this, we restore the issues regarding Rs.53,05,295/- on account of interest on TDS, interest on GST and interest of PPF; and the issue regarding assessee’s claim of credit of TDS amounting to Rs.24,32,501/- to the file of the Ld. CIT(A); with the direction to decide these issues on merits after providing reasonable opportunity to the assessee. For statistical purposes, grounds 11 and 12 are treated as partly allowed.
(G) In the result, this appeal of the assessee is partly allowed for statistical purposes.
This order was already pronounced orally on 22nd September, 2022 in Open Court, in the presence of representatives of both sides, after conclusion of the hearing. Now this order in writing is signed today on 26/09/2022.
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