This document provides a detailed analysis of ITA 1685/DEL/2021, where Nestor Pharmaceuticals Limited challenged disallowances made under Section 143(1) and subsequent appeal decisions by CIT(A) and ITAT for the assessment year 2018-19.
The primary dispute in ITA 1685/DEL/2021 concerns the disallowance of Rs. 41,18,565 by the CPC, Bangalore, which the appellant contends was made without jurisdiction and beyond the scope of provisions of section 143(1). The disallowance related to delays in the deposit of employees’ contributions to EPF and ESI, which the CPC adjusted against the assessee’s declared income.
The appellant appealed to the CIT(A), which upheld the CPC’s adjustments. The case was then escalated to the Income Tax Appellate Tribunal (ITAT), where significant legal discussions focused on the appropriateness of the disallowance and the proper application of related tax laws, particularly Section 36(1)(va) of the IT Act.
The ITAT’s decision referenced the judgment of the Delhi High Court in PCIT vs Pro Interactive Service (India) Pvt. Ltd., which clarified the legislative intent concerning the timeliness of payments affecting deductibility. The tribunal directed the assessing officer to delete the disallowance, thus favoring the assessee’s arguments.
The tribunal’s decision to allow the appeals for both assessment years underlines the importance of adhering to procedural correctness and the legislative intent behind tax provisions. This case highlights the necessity for tax authorities to consider established judicial precedents before making disallowance decisions that impact an assessee’s tax liabilities significantly.
The resolution of ITA 1685/DEL/2021 provides critical insights into the handling of disallowance under Section 36(1)(va) and the importance of timely deposits of employees’ contributions for tax compliance. The tribunal’s reliance on higher judicial pronouncements ensures consistency in the application of the law, offering a significant precedent for similar cases.
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