AROMA AROMATICS & FLAVOURS,NEW DELHI vs. ACIT CIRCLE-28(1), NEW DELHI

The grounds of appeal are as under:-

Brief facts of the case are that the assessee filed return of income declaring an income of Rs.1,36,01,150/-. During the year under consideration, the assessee derived income under the head of “income from business and profession”. The assessment order came to be passed on 18.12.2019, by disallowing sum of Rs.1,82,761/- on the ground that the assessee is not entitled for deduction u/s 36(1)(va) of the Act due to failure on his part in depositing the employee’s contribution on or before due date. The assesse has preferred an appeal before the CIT(A) challenging the assessment order and the CIT(A) vide order dated 25.12.2019, dismissed the appeal filed by the assessee on the grounds mentioned above.

The Ld. Counsel for the assessee vehemently submitted that the CIT(A) erroneously confirmed the addition of Rs.1,82,761/-, which was deposited well within the due date in the relevant Act. Therefore, submitted that the CIT(A) has committed an error in confirming the addition made by the AO. Ld Counsel

On the other hand, the Ld. DR submitted that the assessee had made the actual payment after the due date, therefore, as per the recent judgment of the Apex Court in the case of Checkmate Services P. Ltd. vs. Commissioner of Income Tax in Civil Appeal No. 2833/2016 & other connected cases the Assessee’s appeal deserves to be dismissed.

We have heard the parties, perused the material on record.

During the assessment proceedings the Ld. Assessing Officer based on the details provided in para 20b of tax audit report found that the assessee had made defaults in deposit of employee’s contribution fund which are as under:

The Ld. AO was of the opinion that clause (va) of Sec. 36(1) provides for deduction of any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) apply, if such sum is credited by the assessee to the employees account in the relevant fund or funds on or before the due date. The Explanation to clause (va) clarifies that for the purposes of this clause, ‘due date’ means date by which the assessee is required as an employer to credit an employee’s contribution to the employee’s account in the relevant fund under any Act, rule, order or notification issued there under or under any standing order, award, contract of service or otherwise, accordingly, made addition of Rs.1,82,761/-.

It is now well settled law regarding delayed employee’s PF contribution payment in the hands of the assessee under the provisions of Income Tax. The Hon’ble Supreme Court in the case of Checkmate (supra) held that employers

In so far as payment for due date of deposit of provident fund i.e. 15.08.2016 which was paid on the very next day i.e. 16.08.2016, considering the fact that August 15th being Independence Day and the general holiday, the payment made on the next day deserves to be treated as the payment has been done on time. Accordingly, the addition of Rs.45921/- is hereby deleted.

In so far as remaining addition of Rs.1,06,840/- is concerned by considering the above factual matrix, we deem it fit to remand the matter to the file of Assessing Officer to examine as to whether assessee is entitled for the grace period as claimed by the Assessee or not and consider the issue denovo after providing opportunity of being heard to the assessee. Ordered accordingly.

In the result, the appeal filed by the assessee is partly allowed for statistical purpose.