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Kalyaniwalla & Mistry LLP vs. The Assistant Director Of Income Tax - (Income Tax Appellate Tribunal) (10 Aug 2022)

No debatable issue can be considered while doing adjustment under Section 143(1)(a) of IT Act


Direct Taxation

The assessee-company filed its return of income under Section 139(1) of Income Tax Act, 1961 (IT Act) declaring total income at Rs. 6,34,38,721 under the normal provisions. The said return was processed under Section 143(1) of the IT Act in which the adjustment of Rs 2,82,895 was made to the return on account of deemed income under Section 36(1)(va) read with Section 2(24)(x) of the IT Act for late deposit of employee's contribution to P.F. and E.S.I. in accordance with timelines as specified in statutes governing P.F. and E.S.I. respectively.

Against this intimation, assessee filed an appeal before the CIT (A). The CIT (A)(NFAC) also confirmed the intimation processed under Section 143(1) of IT Act. Against this order of NFAC, Assessee Appellant instituted an appeal before Income Tax Appellant Tribunal.

On perusal of the order of CIT (A), he himself admitted that issue is a debatable one. It's an established position of law, no debatable issue can be considered while doing adjustment under Section 143(1)(a) of IT Act. Supreme Court in the matter of C.I.T vs. Raghuvir Synthetics Ltd. held that, A.O. is duty bound by the decision of the jurisdictional High Court and any view contrary to the jurisdictional High court is a mistake.

Further, both the lower authorities relied upon the amendment made by Finance Act, 2021 to Section 36(1)(va) and 43B, as per CIT(A), this amendment is curative in nature and retrospective in application. On this issue, jurisdictional ITAT and various coordinated benches held that, the amendment made by the finance Act, 2021 to Section 36(1)(va) and Section 43B are prospective in nature, effective from assessment year 2022-23.

Thus, the CIT (A) has erred in applying amended provisions of Section 36(1)(va) read with Section 43B to disallow assesses claim of deduction. The impugned order of CIT (A) is set aside. Appeal filed by the assessee is allowed.


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