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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: SH. N. K. BILLAIYA & SH. ANUBHAV SHARMA
PER N. K. BILLAIYA, AM:
This appeal by the revenue is preferred against the order of the CIT(A)-27, New Delhi dated 27.06.2022 pertaining to A.Y.2019-20.
2. The grievance of the revenue read as under ;- 1. The Ld. CIT(A) has erred on facts and in law, by deleting the disallowance of Rs.5,45,033/- u/s 143(1) made by the CPC, Bangalore on account of late payment of PF and ESI.
The Ld. CIT(A) has erred on facts and in law in providing relief amounting to Rs.5,45,033/- by erroneously stating that the CPC, Bangalore does not fall under the prima facie adjustment on account of late payment of PF and ESI by not correctly interpreting the provisions of Section 143( 1 )(a)(ii) of the IT Act, 1961.
3. The Ld. C1T(A) has erred on facts and in law by not considering the provisions of Section 143(l)(a)(ii), where, total income or loss shall be computed after making an adjustment if such incorrect claim in apparent from any information in the return. 4. The Ld. CIT(A) has erred on facts and in law, is not correctly interpreting the provisions of Section 36(1 )(va) and Explanation to this clause which specifically provides for allowance of the employee’s contribution from the taxable income if such sum is credited to the employee’s account in the relevant funds(s) on or before the due date as per respective statue(s). 5. The Ld. CIT(A) has erred on facts and in law in not relying on the ruling of jurisdictional Delhi High Court in the case of CIT vs. Bharat Hotel Ltd. 410 ITR 417 (2019), in which this issue was decided in favour of the Revenue.
(a) The order of the Ld.CIT(A) is erroneous and not tenable in law and on facts.
(b) The appellant craves to add, alter of amend any/all of the ground of appeal before or during the course of the hearing of the appeal.
None appeared on behalf of the assessee inspite of notice we decided to proceed exparte. The DR was heard at length who placed strong reliance on the intimation dated 21.03.2021 framed u/s. 143 (1) of the Act.
We have carefully perused the orders of the authorities below. Vide intimation dated 21.03.2021 u/s. 143 (1) of the Act it was found that there is a delay in the deposit of employees Provident Fund and ESI which the assessee deposited after the due date under the relevant act.
When the matter was agitated before the CIT(A) the CIT(A) was of the opinion that only those adjustments are allowed u/s. 143 (1) of the Act where there are no two opinions and in so far as the issue relating to the payment of EPF and ESI is concerned there are judgments of various Hon’ble High Courts and Tribunals which are contrary in nature.
This issue is no more resintegra and there are no two opinions or contrary judgments in as much as this quarrel has been settled by the decision of the Hon’ble Supreme Court in the case of Check mate services Private Limited 143 taxmann.com 178.
In so far the powers for making impugned adjustment u/s. 143 (1) is concerned this Tribunal in 2250, 2197 and 2297/Del/2022 vide order dated 09.01.2023 has held as under :-
“13. The provisions of section 143(1)(a) read as under:
143(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of Section 143, such return shall be processed in the following manner, namely;- (a) The total income or loss shall be computed after making the following adjustments, namely;- (i) Any arithmetical error in the return; (ii) An incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) Disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) Disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) Disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading “C.-Deductions in respect of certain income , if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) Addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return;”
A perusal of the afore-stated provisions show that at every stage in sub-section (1) of the Act, the return submitted by the assessee forms the foundation, with respect to which, if any of the inconsistencies referred to in various sub-clauses are found, appropriate adjustments are to be made. It is an open secret that hardly 3 to 5% of the returns are selected for scrutiny assessment, out of which, more than 50% are because of AIR Information under CASS and the Assessing Officer cannot go beyond the reasons for scrutiny selection and such cases are called Limited Scrutiny cases and only the remaining returns are taken up for complete scrutiny u/s 143(3) of the Act.
Meaning thereby, that exercise of power under sub- section (2) of section 143 of the Act leading to the passing of an order under sub-section (3) thereof, is to be undertaken where it is considered necessary or expedient to ensure that the assessee has not understated income or has not computed excessive loss, or has not under paid the tax in any manner,
If any narrow interpretation is given to the decisions of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd [supra], it would not only defeat the very purpose of the enactment of the provisions of section 143(1) of the Act but also defeat the very purpose of the Legislators and the decision of the Hon'ble Supreme Court would be made redundant because there would be discrimination and chaos, in as much as, those returns which are processed by the CPC would go free even if the employees’ contribution is deposited after the due date and in some cases the employer may not even deposit the employees’ contribution and those whose returns have been scrutinized and assessed u/s 143(3) of the Act would have to face the disallowance.
This can neither be the intention of the Legislators nor the decision of the Hon'ble Supreme Court has to be interpreted in such a way so as to create such discrimination amongst the tax payers. Such interpretation amounts to creation of class [tax payer] within the class [tax payer] meaning thereby that those tax payers who are assessed u/s 143(3) of the Act would have to face disallowance because of the delay in deposit of contribution and those tax payers who have been processed and intimated u/s 143(1) of the Act would go scot- free even if there is delay in deposit of contribution and even if they do not deposit the contribution.
We are of the considered view that the ratio decidendi of the Hon'ble Supreme Court is equally applicable to the intimation u/s 143(1) of the Act and, therefore, the decision of the co-ordinate bench relied upon by the assessee is distinguishable. Therefore, respectfully following the binding decision of the Hon'ble Supreme Court [supra], all the three appeals of the assessee are dismissed and that of the revenue is allowed.
In the result, all the three captioned appeals of the assessee in 2250/DEL/202 and 2197/DEL/2022 are dismissed whereas the appeal of the Revenue in ITA No. 2293/DEL/2022 is allowed.
Respectfully following the decision of the coordinate Bench (supra), the appeal of the revenue is allowed.
Decision announced in the open court on 09.01.2023.