The Assessee received contribution in Provident Fund and ESI Fund from its employees and deposited the sum after the due date prescribed in corresponding statutes but before the due date of filing of return of income under Section 139(1) of the Income Tax Act, 1961 (‘the Act’) for the relevant year.
The Assessing Officer (AO) made additions to the returned income of the Asseesee holding it to be deposited beyond the due date specified under Section 36(1)(va) of the Act. Against the order of the AO, the Assessee preferred an appeal before the CIT(A) but the same was dismissed. Aggrieved with the decision of the Ld. CIT(A), the Assessee filed an appeal before the Hon’ble ITAT of Delhi (‘ITAT’).
ITAT, in its order, held that the Finance Act 2021 amended the provisions of Section 43B and Section 36(1)(va) to restrict the practice of late deposit of employees money where the employers get unjustly enriched by keeping the money belonging to the employees. The ITAT relied on various judgements passed in the similar matter. The ITAT further held the amendment is prospective in nature and effective from Assessment year 2021-22. The fact is fairly covered in the memorandum issued to explain the amendments made introduced by Finance Bill, 2021.
From the judgement, it is quite clear that no addition could be made to the income of the Assessee if the sum deposited by the Assessee towards employee’s contribution pertains to Assessment year 2019-20 and earlier years.
Amendment in Section 36
Explanation 2.—For the removal of doubts, it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the “due date” under this clause.
Amendment in Section 43B
Explanation 5- For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the Assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies.
Case Law: Raj Kumar v. ITD, CPC, Bengaluru – [2022] 136 taxmann.com 234 (Delhi – Trib.)
