Retrospective Effect of Amendment to Sec 36(1) is Debatable and Controversial Issue: ITAT deletes Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT), Allahabad Bench comprising Shri Saktijit Dey, JM&ShriAnadee NathMishra, AMhas held that the retrospective effect of the amendment to section 36(1) is a debatable and controversial issue and deletes the addition made by way of adjustments u/s 143(1) of the Income Tax Act.

Thepayments by way of the employee’s contribution to ESI/Provident Fund were deposited by the assessee after the specified date prescribed under the relevant laws governing ESI and Provident Fund and deposited by the assessee before the due date of filing of return of income under Section 139(1) of Income Tax Act. The aforesaid additions totalling Rs. 29,52,674/- were made by way of adjustments u/s 143(1) of the Income Tax Act. The assessee filed an appeal before CIT(A), which was disposed of by confirming the additions amounting to Rs. 29,52,674/- by the inference that the amendment to section 43B of Income Tax Act and amendment to section 36(1)(VA) of Income Tax Act,by Finance Act, 2021 are retrospective in nature, and are applicable for Assessment Year 2018-19.

The additions amounting to an aforesaid total of Rs. 29,52,674/- by way of adjustments and intimation u/s 143(1) of Income Tax Act in respect of payments of Employee’s contribution to ESI/Provident. It observed that any adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, are beyond the scope of Section 143(1) of Income Tax Act and the aforesaid amount of Rs. 29,52,674/- could not have been added to the assessee’s income as on 14.11.2019

The Tribunal observed in the cases of CIT vs. AIMIL Ltd. 321 ITR 508 (Delhi), and CIT vs. P.M. Electronics Ltd. 313 ITR 161 (Delhi) Delhi High Court held that delayed payments ofemployee’s contribution of provident fund and does not constitute assessee’s income and continue to hold good for Assessment Year 2018-19. In such a scenario, the aforesaid additions of Rs. 29,52,674/- deserves to be deleted.

The Tribunal while setting aside the impugned order held that the addition was beyond the scope of Section 143(1) of the Income Tax Act as it was a debatable and controversial issue and the appeal was partly allowed for statistical purposes.Shri Manoj Kumar and Shri Ramdhan Meena appeared on behalf of the appellant and the respondent respectively.

To Read the full text of the Order CLICK HERE

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