Amendment by Finance Act 2021 for disallowance u/s 43B retrospective or prospective is debatable – ITAT

Amendment by Finance Act 2021 for disallowance u/s 36(1)(va) read with u/s 43B retrospective or prospective is debatable & controversial – ITAT

ABCAUS Case Law Citation
ABCAUS 3588 (2022) (03) ITAT

Important case law relied referred:
CIT vs. Hindustan Electro Graphites Ltd. [2000] 243 ITR  0048 (SC)
Modern Fibotex India Ltd. & Anr. vs.  DCIT & Ors. [1995]  212  ITR  0496
ACIT vs. Haryana Telecom Pvt. Ltd. 14 taxman.com 122 (Delhi). 
George Williamson (Assam) Ltd.  vs. CIT & Anr. [2006] 286 ITR 0533 (Gauhati); 
CIT vs. AIMIL Ltd. 321 ITR 508 (Delhi); and CIT vs. P.M. Electronics Ltd. 313 ITR 161 (Delhi)
Tata Yadogawa Ltd. vs. CIT [2011[] 335 ITR 0053 (Jharkhand);
God Granites vs. Central Board of Direct Taxes & Ors. [1996] 218 ITR 0298 (Karnataka);
Swamy Distributors vs. ACIT & Ors. [2003] 180 CTR 0290; 139 Taxman
CIT vs. Eicher Goodearth Ltd. [2008] 296 ITR 0125 (Delhi);
Smt.  Shanta Chopra vs. ITO [2004] 271 ITR 0132 (Delhi);
Kvaverner John Brown Engg. (India) (P.)  Ltd.  vs. ACIT, [2008] 305 ITR 0103 (Supreme Court)
Shand Pipe Industry Pvt.  Ltd.  vs. DCIT (CPC)
Nikhil Mohine vs. DCIT
Gopalkrishna Aswini Kumar vs. Assistant Director of Income Tax [2022]
Continental Restaurant and Café Co. vs. Income Tax Officer [2021] 
TML Business Services Ltd. [2022] 93 ITR (Trib.) (S.N.) 35 (Mumbai)

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition by way of adjustments vide intimation u/s 143(1) of the Income Tax Act, 1961 (the Act).

The Assessing Officer made addition u/s 36(1)(va) of the Act towards payments by way of employees’ contribution to ESI/EPF deposited by the assessee after the  specified date prescribed under the relevant laws governing ESI and EPF by way of adjustments u/s  143(1)  of the Act. 

However, the payments had been deposited by the assessee well before due date of filing of return of income under Section 139(1) of the Act.

The Tribunal noted that section 36(1)(va) and 43B of Income Tax Act had been amended by the Finance Act, 2021.

However, whether these amendments are prospective in nature and applicable with effect from 01.04.2021 or retrospective in nature having applicability even before 01.04.2021, the Tribunal noted that many coordinate benches of ITAT has decided the issue in favour of the assessee and against Revenue specifically holding that the amendments are prospective in nature.

Following jurisdictional High Court, the Tribunal opined that the adjustments made by Revenue were unfair, unjust, and bad in law.

Further as laid by Hon’ble Supreme Court the Tribunal stated that it is also well settled that retrospective amendment cannot be invoked to make addition by way of adjustment and intimation u/s 143(1) of Income Tax Act.

The Tribunal concluded as under:

(i) Whether the said amendments to Income Tax Act by way of Finance Act, 2021 are retrospective or prospective, is debatable and controversial. 

(ii) Adjustments made by Revenue u/s 143(1) of Income Tax Act was unfair, unjust and bad in law. 

(iii) Addition by way of adjustment and intimation u/s 143(1) on debatable and controversial issues is beyond the scope of Section 143(1) of Income Tax Act. 

(iv) Addition by way of adjustment and intimation u/s 143(1) of Income Tax Act, on the basis of retrospective amendment to Income Tax Act is beyond the scope of Section 143(1) of the Act.  

The Tribunal held that the CIT(A) erred in law, in not deleting this addition.   

Accordingly, the Tribunal set aside the impugned appellate order and directed the Assessing Officer to delete the addition.

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