The Income Tax Appellate Tribunal (ITAT) in Delhi adjudicated a significant case involving Stallion Security, New Delhi, and the Deputy Commissioner of Income Tax (DCIT), Centralised Processing Centre (CPC), Bengaluru for the assessment year 2018-19.
The case centered on the disallowance of Rs. 24,27,015 for delayed payments made by Stallion Security towards Provident Fund (PF) and Employees’ State Insurance (ESI). This was challenged after the National Faceless Appeal Centre (NFAC) upheld the initial disallowance by the CPC on the grounds that payments were not made within the statutory due dates.
The contention was whether the amendments to sections 36(1)(va) and 43B of the Income Tax Act, introduced by the Finance Act 2021, should impact assessments retrospectively or prospectively. The Commissioner (Appeals) had interpreted these amendments as having retrospective effect, thereby justifying the disallowance for Stallion Security.
The tribunal, led by Shri Saktijit Dey, examined the retrospective applicability of these legislative amendments. The main argument by the assessee’s counsel was based on precedent set by the ITAT’s earlier decisions, notably Mr. Vansh Jain vs. DCIT, asserting that such amendments should be applied prospectively from AY 2021-22 onwards.
The bench found that the disallowance of deductions for payments made before the due date of return submission under section 139(1) of the Act was contrary to established legal principles. The tribunal highlighted that amendments to tax statutes with punitive or adverse implications should not be applied retrospectively unless explicitly stated by the legislature.
The ITAT ruled in favor of Stallion Security, allowing the appeal and ordering the deletion of the disallowance. This decision underscores the judiciary’s stance on the prospective application of tax law amendments and reinforces the principles protecting taxpayer rights against retroactive legislative changes.
The ruling was pronounced on January 21, 2022, setting a precedent for similar cases regarding the timing of statutory contributions towards employee welfare funds.
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