This case review examines the appeal of Ram Singh Rana against the decision of the National Faceless Appeal Centre (NFAC) upheld by the ADIT, CPC, Faridabad. The case pertains to the assessment year 2019-2020 and involves the disallowance of employees’ contributions to the Employees’ State Insurance (ESI) and Provident Fund (PF) which the appellant claims were unjustly disallowed.
The appellant, represented by Shri Ajay Kumar Gupta, advocate, contested the disallowance of employees’ contributions to PF and ESI that were remitted to the government account before the due date of filing income tax returns. The appeal challenged both the procedural aspects of the Income Tax Act’s application and the interpretations of recent legislative amendments impacting such contributions.
During the proceedings, the Centralized Processing Centre (CPC) Bangalore and subsequently, the ld. CIT (Appeals) / NFAC in Delhi sustained the initial disallowance. The appellant argued that the amendments brought by the Finance Act, 2021 to sections 36(1)(va) and 43B of the Income Tax Act are prospective and not applicable for the assessment year in question, contradicting the respondent’s claim of their retrospective applicability.
The Tribunal analyzed previous judgments and statutory amendments, noting significant precedents like the decision in CIT vs. AIMIL Ltd. and the Supreme Court’s ruling in CIT vs. Alom Extrusions Limited. These cases supported the appellant’s position that contributions made before the due date of filing returns should not be disallowed.
The Tribunal, led by Shri Challa Nagendra Prasad and Dr. B.R.R. Kumar, ultimately ruled in favor of the appellant. It directed the CPC to delete the disallowance of employees’ contributions to ESI and PF, affirming that these were indeed remitted before the due date for filing of the return of income. This decision reinforces the stance that procedural fairness and adherence to the judicial precedents are paramount in tax assessment disputes.
The case signifies a critical reassessment of how amendments to tax laws are applied and emphasizes the need for clarity in their retrospective or prospective application. This ruling not only impacts the appellant but also sets a significant precedent for other similar cases in the assessment year 2019-2020 and potentially beyond.
Order pronounced in the open court on September 12, 2022.
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