Case Number: ITA 1679/DEL/2020
Appellant: Jaman Lal, New Delhi
Respondent: ITO WARD – 62(2), New Delhi
Assessment Year: 2018-19
Result: Appeal allowed, disallowance deleted
Case Filed on: 2020-10-13
Order Type: Final Tribunal Order
Date of Order: 2022-04-18
Pronounced on: 2022-04-18
The case revolves around the disallowance of payment of employees’ contribution towards Provident Fund (PF) and Employee State Insurance (ESI) under section 36(1)(va) read with section 43B of the Income-tax Act, 1961. The appellant, Jaman Lal, filed the appeal against the order passed by the Commissioner of Income Tax (Appeals)-20, Delhi for the Assessment Year 2018-19.
The Centralized Processing Center (CPC) made a disallowance via intimation u/s 143(1) of the Act by enhancing the total income by Rs. 16,38,150 on account of disallowance of PF/ESI u/s 36(1)(va). The National Faceless Appeal Centre (NFAC) upheld the disallowance, referencing various judgments that the amendment brought by Finance Act, 2021 w.e.f. 01.04.2021 was retrospective and clarificatory.
Jaman Lal argued that the payment of employees’ contribution to PF/ESI, although made beyond the statutory date, was completed before the filing of the return of income, thus no disallowance should be made. This view is supported by numerous decisions of the Tribunal and High Courts, including the Delhi High Court, which held that if such payments are made before the due date of filing the return, no disallowance is warranted.
The Tribunal noted that the amendment brought by the Finance Act, 2021, adding Explanation 5 to section 43B and amending clause (va) of section 36(1), is prospective, effective from 01.04.2021, and cannot be applied retrospectively. Therefore, for AY 2018-19, the existing judicial precedents apply, which favor the appellant.
The Tribunal referred to several cases, including CIT vs. AIMIL Ltd., which established that payments made before the due date of filing the return u/s 139(1) are allowable. The decision in Flying Fabrication vs. DCIT also supported this view, indicating that disallowance based on retrospective application of the amendment was not justified.
In the case of Raj Kumar vs. ITD, CPC, Bengaluru, the Tribunal reiterated that amendments regarding the due date of deposit of employees’ contributions are prospective and thus allowed if paid before the due date of filing the return for periods prior to AY 2021-22.
The Tribunal concluded that the disallowance made by the CPC and upheld by NFAC was not in line with the established judicial precedents. Hence, the disallowance was directed to be deleted, and the appeal filed by Jaman Lal was allowed.
The order was pronounced on 18th April 2022, concluding the hearing. This decision reaffirms the importance of following established judicial principles and clarifies the application of amendments to tax laws.
Order:
The appeal filed by Jaman Lal is allowed, and the disallowance confirmed by the CIT (A) is deleted.
Author: Judicial Member, Shri Amit Shukla
Date: 18.04.2022
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