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Judgment
K.S. Jhaveri, J.—The issue involved in these appeals are identical, therefore, they are being heard and decided together by this common judgment.
In Tax Appeal Nos. 248 of 2007 and 251 of 2007, the revenue has challenged the order dated 31.07.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad (for short "the Tribunal") in ITA Nos. 1353 and 1354/Ahd/2006, whereby the appeals preferred by the revenue were dismissed by the Tribunal.
In Tax Appeal No. 401 of 2007, the assessee has challenged the order 23.07.2007 passed by the Tribunal in ITA No. 1991/A/97, whereby the appeal preferred by the assessee was dismissed by the Tribunal.
In Tax Appeal Nos. 651 of 2007, 652 of 2007 and 654 of 2007 the revenue has challenged the common order dated 11.08.2006, passed by the Tribunal in ITA Nos. 1049/Ahd/2003, 1797/Ahd/2002, and 2503/Ahd/2003 whereby the appeals filed by the revenue were allowed only for the statistical purposes.
In Tax appeal No. 706 of 2007, the revenue has challenged the order dated 08.09.2006 passed by the Tribunal in ITA No. 2212/Ahd/2000, whereby the appeal preferred by the assessee was partly allowed by the Tribunal.
While admitting Tax Appeal Nos. 248 of 2007 and 251 of 2007, the Court had formulated the following substantial question of law:-
Whether the Appellate Tribunal is right in law and on facts in holding that proviso to section 43B instead by the Finance Act, 2003 was curative and retrospective in nature and thereby directing the Assessing Officer to verify the payment made to P.F. and ESI and to allow the same as per the amended provisions?"
While admitting Tax Appeal Nos. 401 of 2007, the Court had formulated the following substantial question of law:-
1.1. Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the addition of Rs. 6,30,314 on account of discrepancy between the stock declared in the statement to the bank and as worked out from the books of account as on 30.4.1992? 1.2. Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in upholding that the appellant was given an opportunity to explain the transaction and no evidence was produced by the appellant? 1.3. Whether, on the facts and circumstances of the case, there was any material with the Income Tax Appellate Tribunal to uphold the addition of Rs. 6,30,314 made by the Assessing Officer?
1.4. Whether, on the facts and circumstances of the case, the tribunal could have arrived at conclusion that the stock as on 30.4.1992 declared in the statements furnished to the Bank reflected true state of affairs?"
While admitting Tax Appeal Nos. 651 of 2007, 652 of 2007 and 654 of 2007, the Court had formulated the following substantial question of law:-
"Whether on the facts and in the circumstances of the case and in law was the Tribunal right in deleting the disallowance of belated payment of PF and ESIC, even though the specific provision in the form of proviso to section 43B of the I.T. Act existed in this regard?"
While admitting Tax Appeal No. 706 of 2007, the Court had formulated the following substantial question of law:-
"Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 4,72,986/- made u/s. 43B of the Act in respect of provident fund paid after the due date but before the filing of Income Tax Return?"
Learned advocate for the revenue has submitted that in view of the subsequent decision of this Court in the case of Commissioner of Income Tax II Vs. Gujarat State Road Transport Corporation, , all these appeals are required to be remanded to the appropriate authority for deciding the issue afresh. In the said decision, this Court held that any sum received by the assessee-employer from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of the Employees'' State Insurance Act, 1948, or any other fund for the welfare of such employees shall be treated as an "income". Under Section 36(1)(va), the assessee shall be entitled to the deduction in computing the income referred to in section 28 with respect to any sum received by the assessee from his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employees'' accounts in the relevant fund or funds on or before the "due date". As per the Explanation to section 36(1)(va) for the purpose of clause (x), "due date" means the date by which the assessee is required as an employer to credit the employees'' contribution to the employees account in the relevant fund under the Act, rule, order or notification issued thereunder or under any standing order, award, contract or service or otherwise. Section 43B is with respect to certain deductions only on actual payment. The deletion of the second proviso to Section 43B and the amendment in the first proviso to section 43B by the Finance Act, 2003, is required to be confined to section 43B alone and the deletion of the second proviso to section 43B by the amendment pursuant to the Finance Act, 2003, cannot be made applicable with respect to section 36(1)(va) of the Act. Therefore, with respect to any sum with respect to the employees'' contribution as mentioned in section 36(1)(va) of the Act, the assessee shall be entitled to the deduction of such sum towards of the employees'' contribution if it is deposited in the accounts of the concerned employees and in the concerned fund such as provident fund, employees'' State Insurance Contribution fund, etc., provided the sum is credited by the assessee to the employees'' account in the relevant fund or funds on or before the "due date" under the provident Funds Act, Employees'' State Insurance Act, rule, order or notification issued thereunder or under any standing order, award, contract or service or otherwise. There is no amendment in section 36(1)(va) and even the Explanation to section 36(1)(va) is not deleted and is still on the statute and is required to be complied with. Merely because the second proviso to section 43B which provided that even with respect to the employer''s contribution section 43B(b), the assessee was required to credit the amount in the relevant fund under the provident Funds Act or any other fund for the welfare of the employees on or before the due date under the relevant Act is deleted. It cannot be said that section 36(1)(va) is also amended or the Explanation to section 36(1)(va) has been deleted or amended. Therefore, if the assessee has not credit the employees'' Contribution to the employees'' account in the relevant fund or funds on or before the due date mentioned in the Explanation to section 36(1)(va), the assessee shall not be entitled to deduction of such amount in computing the income referred to in Section 28.
Learned advocate for the revenue has also relied on the decision of this Court in the case of Alliance Industries v. Income Tax Officer, rendered in Tax Appeal No. 16 of 2001, more particularly paragraph No. 3, 4 and 5, which read as under:-
"3. The facts of the present case are that the return of income was filed by both the assessees showing income at Rs. 58,255/- and Rs. 34,700/- respectively. The return were processed u/s. 143(1)(a) and the cases are selected for scrutiny. In response to notice u/s. 143(2) the assessees have produced books of account. After considering the material on record, the assessment order came to be passed. Against the said order, an appeal before the CIT(A) has been preferred by the assessee which came to be allowed. Against the order of CIT(A), the Revenue has preferred an appeal before the ITAT is allowed, against which, the present Tax Appeals by the assessees before this Court. 4. Heard the learned advocates appearing for the parties and considered the submissions. The learned advocate for the appellant has contended that now the issue is covered by the decision of this Court in the case of Commissioner of Income Tax, Ahmedabad-III Vs. Riddhi Steel and Tubes (P.) Ltd., , and more particularly, para-9.1 and 9.2, which reads as under:
9.1 Again, the Court cannot be oblivious of the fact that the assessee had been subjected to statutory audit under the Companies Act, 1956 and also tax audit under the Income tax Act. No errors were found at any stage in the report submitted by these auditors and for the past eight years, the assessee had been following continuously/consistently the method of accounting, as provided under section 145 of the Act, valuing the closing stock and inventory, as provided under section 145A of the Act. The assessee was also subjected to Excise and VAT and the books of account were found genuine and no discrepancies were found even by the Excise Audit report for the period January 2009 to December 2009 which was carried out by the Excise Revenue Audit Team, wherein the Excise Department, after a detailed scrutiny of the books of account, stock register, excise records, accepted the books of account and other records maintained by the assessee to be true, correct; except finding few discrepancies in so far as inventory is concerned. 9.2 It is a settled law, as rightly held by the Tribunal, that only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities. If, for the purpose of fulfilling the margin requirements of the bank purely on inflated estimate basis, when the stock statement had reflected inflated value of the stock, in wake of otherwise satisfactory explanation, both for the purpose of value as well as quantity, we find no reason to interfere with the order of the Tribunal.
The learned advocate appearing for the respondent is not in a position to dispute the same. In that view of the matter, we are of the opinion that the appeals deserve to be allowed. The question is answered in favour of the assessee and against the Revenue. The order impugned in both the Tax Appeals passed by the Income Tax Appellate Tribunal are quashed and set aside. Both these appeals are allowed.
Thereafter, he relied upon the decision of this court in the case of Commissioner of Income Tax vs. JMC Projects (India) Ltd. rendered in Tax Appeal No. 451 of 2007, more particularly paragraph Nos. 3 to 6, which read as under-
(3) Mr. R.K. Patel, learned advocate appearing on behalf of the respondent, has invited the attention of the court to the decision of the Supreme Court in the case of Commissioner of Income Tax Kolkata-III Vs. Alom Extrusions Limited, to submit that the controversy involved in the present case stands concluded by the said decision. (4) Mr. M.R. Bhatt, learned Senior Advocate appearing on behalf of the appellant, is not able to dispute the aforesaid position. In the circumstances, it is not necessary to set out the facts and contentions in detail. (5) The Supreme Court in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. (supra) has observed that the omission of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, operated, retrospectively, with effect from April 1, 1988 and not prospectively from April 1, 2004. Earlier under the second proviso to section 43B as amended by the Finance Act, 1989, assessees were entitled to deduction only if the contribution stood credited on or before the due date given in the Provident Funds Act. This created further difficulties and on a representation made to the Finance Ministry one more amendment was made by the Finance Act, 2003. Though this amendment was made applicable with effect from April 1, 2004, the amendment was curative in nature and applied retrospectively with effect from April 1, 1988. When a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole. It was further held that if strict construction leads to a result not intended to be sub served by the object of the legislation, and if another construction is possible apart from the literal construction, then that construction should be preferred.
(6) The aforesaid decision of the Supreme Court would be squarely applicable to the facts of the case. In the circumstances, following the aforesaid decision, the question is answered accordingly, that is, in favour of the assessee and against the revenue. The Appellate Tribunal is right in law and on facts in deleting the disallowance made under section 43B of Rs. 51,05,963/- being late payment of the employer''s contribution to provident fund. The appeal is, accordingly, dismissed with no order as to costs.
Learned advocate for the revenue also relied on the following decisions of this Court:-
4(i) In the Case of ACIT Bharuch Circle v. Chetan Coach Builders Pvt. Ltd., rendered in Tax Appeal No. 220 of 2007.
(ii) In the case of Commissioner of Income Tax vs. Themis Medicare Ltd. rendered in Tax Appeal No. 785 of 2008 with Tax Appeal No. 786 of 2008.
Learned advocate for the assessee is not in a position to distinguish the proposition of law laid down in the decisions relied upon by learned advocate for the revenue.
We have heard learned advocates appearing for both the parties and perused the material on record. We have also perused the decisions relied on by the learned advocate for the revenue and find substance in the submission made by the learned advocate for the revenue that in view of the aforesaid decisions, the present appeals deserve to be remanded to the appropriate authority for deciding the issues afresh.
Accordingly, all these matters are remanded to the Assessing Officer for deciding the matters afresh. The order of Commissioner of Income Tax (Appeals) as well as the order of the Tribunal are quashed and set aside. The appeals stand disposed of accordingly. It is clarified that this Court has not expressed any opinion on the merits of the matters.