Income Tax Appellate Tribunal: ACIT, Circle-13(1), New Delhi vs. Jagatjit Industries Ltd, New Delhi for Assessment Year 2020-21

Income Tax Appellate Tribunal: ACIT, Circle-13(1), New Delhi vs. Jagatjit Industries Ltd, New Delhi for Assessment Year 2020-21

Case Number: ITA 1725/DEL/2022

Appellant: ACIT, Circle-13(1), New Delhi

Respondent: Jagatjit Industries Ltd, New Delhi

Assessment Year: 2020-21

Result: Partly Allowed

Introduction

The Income Tax Appellate Tribunal (ITAT) delivered a significant ruling on the treatment of employees’ contribution to Provident Fund (PF) and Employee State Insurance (ESI) within the due date prescribed under section 139(1) of the Income Tax Act. This decision addresses the interpretation and application of amendments to section 36(1)(va) and section 43B brought in by Finance Act, 2021 and their impact on the assessment year 2020-21.

Background

In the case between Assistant Commissioner of Income Tax, Circle-13(1), New Delhi, and M/s Jagatjit Industries Ltd, the primary dispute was regarding the addition of the employees’ contribution to PF/ESI after the due dates prescribed under relevant laws but before the due date of filing the return under section 139(1). The amendments to section 36(1)(va) and section 43B of the Income Tax Act by Finance Act, 2021, were pivotal to the case. Both parties presented their arguments, with the appellant contending these amendments to be retrospective, justifying the additions to the assessee’s income.

Judgment and Analysis

The ITAT carefully examined the amendments and their legislative intent, acknowledging the differing interpretations between the appellant and respondent regarding the retrospective or prospective application of these amendments. Upon review, ITAT found the basis of the additions, made pursuant to section 143(1) adjustments, to be beyond the scope of what is permissible under this provision, emphasizing that such adjustments cannot stand on debatable and controversial issues. Ultimately, the ITAT directed the Assessing Officer to delete the additions concerning employees’ contributions made after the stipulated dates but before the return filing date under section 139(1).

Conclusion

This decision is pivotal for several reasons. Firstly, it clarifies the scope of adjustments that can be made under section 143(1), reinforcing that the Income Tax Department cannot make additions on debatable issues through this mechanism. Secondly, it sheds light on the prospective nature of amendments introduced by Finance Act, 2021, thereby providing relief to assessee in respect of the assessment years preceding AY 2021-22. The ruling in favor of Jagatjit Industries Ltd establishes a significant precedent for similar disputes, underscoring the need for clarity and fair interpretation of the law.

Income Tax Appellate Tribunal: ACIT, Circle-13(1), New Delhi vs. Jagatjit Industries Ltd, New Delhi for Assessment Year 2020-21