Provident Fund dues Paid after Due Date under Statute but before Filing ITR Deductible from Business Income: ITAT [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) has held that Provident Fund dues paid after due date under statute but before filing Income Tax Return (ITR) deductible from business income.

While processing the income tax return filed by the appellant Kalpesh Synthetics Pvt Ltd. based on information contained in column 20(b) of the tax audit report under section 44AB(a), there were certain delays in depositing the provident fund dues. The sum total of such, as perceived by the tax auditor, delayed payments, aggregating to Rs 4,24,634 , were sought to be disallowed under section 143(1). Aggrieved, the assessee carried the matter in appeal before the CIT (A) but without any success.

The assessee is aggrieved and is in appeal before ITAT.

The appellant submitted that it is a settled legal position, as binding on the Assessing Officer Centralized Processing Centre (CPC) in view of the situs of the jurisdictional Assessing Officer and in view of the judgment of jurisdictional High Court, is that the payments made beyond the due date under the relevant statute but before the due date of filing of the income tax return under section 139(1) cannot attract the disallowance for the reason of delay. Further submitted by the appellant counsel that it has referred to and relied upon the decisions of the coordinate benches holding that the insertion of Explanations to Section 36(1)(va) and 43B, by the Finance Bill 2021, is prospective in nature, and, accordingly, so far as the period prior to 1st April 2021 is concerned, such a disallowance cannot come into play. The disallowance is thus unwarranted.

The Tribunal observed that it cannot be open to the Assessing Officer CPC to take a view contrary to the view taken by the jurisdictional High Court, more so when his attention was specifically invited to the binding judicial precedents in this regard. The inputs in question in the tax audit report cannot be reason enough to make the impugned disallowance. Further observed by the Tribunal that while preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law.

The Coram of Mr. Pramod Kumar and Mr. Sandeep S Karhail while allowing the appeal has held that “we are of the considered view that the impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same”.

To Read the full text of the Order CLICK HERE

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