SAHRUDAYA HEALTH CARE (KARIMNAGAR) PRIVATE LIMITED,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(1), HYDERABAD

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ITA 661/HYD/2020Status: DisposedITAT Hyderabad29 November 2021AY 2018-195 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The ITAT held that if the employee's PF and ESI contributions are paid before the due date of filing the return of income under Section 139(1), no disallowance is warranted. Therefore, the disallowance made by the AO was directed to be deleted.

What were the facts?

The assessee inadvertently disallowed employee's contribution to PF and ESI in their return of income. The AO made an addition based on this disallowance. The CIT(A) initially allowed the appeal on the ground that the assessee had already disallowed it, but later dismissed an additional ground seeking allowance of the claim.

What were the issues?

Whether the disallowance of employee's contribution to PF and ESI, when paid before the due date of filing the return, is justified. Whether an assessee can seek allowance of a claim that was inadvertently disallowed in the return.

Which sections of the Income-tax Act were involved?

Section 2(24)(x),Section 36(1)(va),Section 139(1),Section 44AB,Section 143(1),Section 250

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD

Before: SHRI CHANDRA MOHAN GARG & SHRI LAXMI PRASAD SAHU

For Appellant: Ms. Mansi Modi
For Respondent: Shri Rohit Mujumdar
Hearing: 11/10/2021Pronounced: 29/11/2021

& 662/H/2020 A.Ys.: 2018-19 & 2019-2020 Sahrudaya Health Care Vs. Dy. Commissioner of (Karimnagar) Pvt. Ltd., Income-tax, Hyderabad. Circle – 3(1), Hyderabad. PAN – AAWCS 2706 E (Appellant) (Respondent) Assessee by: Ms. Mansi Modi Revenue by: Shri Rohit Mujumdar Date of hearing: 11/10/2021 Date of pronouncement: 29/11/2021 O R D E R PER BENCH: Both these appeals filed by the assessee are directed against CIT(A) - 3, Hyderabad’s separate orders dated 16/09/2020 for AYs 2018 & 2019-20 involving proceedings u/s 143(1) of the Income Tax Act, 1961.

2.

In both the appeals, the assessee’s substantial ground is about the disallowance of employees contribution to PF and ESI.

:- 2 -: & 662/Hyd/2020 Sahrudaya Health Care (Karimnagar) Pvt. Ltd., Hyd.

3.

Briefly the facts of the case as taken from AY 2018-19 are that while processing the return of income, the AO observed that as per the information furnished in the tax audit report u/s 44AB of the Act, forming part of the return of income, there was a delay of payment of employee’s contribution of ESI and PF of Rs. 14,74,969/-. Accordingly, the AO made an addition of the said amount of Rs. 14,74,969/- by invoking the provisions of section 2(24)(x) rws 36(1)(va) of the Act.

4.

When the assessee preferred an appeal before the CIT(A), the CIT(A) allowed the original grounds of appeal filed by the assessee with regard to disallowance of employees contribution to PF and ESI by the AO on the ground that the assessee itself has already disallowed the same while filing the return of income, therefore directed the AO to delete the addition of Rs. 14,74,969/- made by AO towards employees contribution to PF & ESI to avoid double addition.

4.1 The Assessee has raised an additional ground before the CIT(A), which is as under: “The appellant while filing the ROI for the subject AY has inadvertently disallowed the employees’ contribution to PF & ESI amounting to Rs. 14,74,969/- as the law relating to the same was vivid. The law is laid by the decisions rendered by various courts on the :- 3 -: & 662/Hyd/2020 Sahrudaya Health Care (Karimnagar) Pvt. Ltd., Hyd. allowance of employee’s contribution to PF & ESI u/s 43B of the Act. Henceforth, the appellant has filed an additional ground before your Honours for allowance of the claim in authority of your powers u/s 250 and u/s 2651 of the Act. The appellant submits that the disallowance was merely on account of misconception of law at the time of filing of ROI for the subject AY and the treatment was righteously given effect in the ROI for the subsequent year i.e. 2019-20. In support, the assessee relied on the judgement of the Hon’ble Supreme Court in the case of Jute Corpn. Of India Vs. CIT [1991] 187 ITR 688 and National Thermal power Co. Ltd. Vs. CIT [1988] 229 ITR.” 4.2 The CIT(A) dismissed the additional ground raised by the assessee by holding that the belated payment of employees contribution to PF and ESI to the extent of Rs. 14,74,969/- is subject to tax u/s 2(24)(x) r.w.s. 36(1)(va) of the Act.

5.

Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT.

6.

We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The law is settled on this issue if the assessee has paid the PF and ESI payments before the due date of filing of return income u/s 139(1) of the Act, no disallowance is warranted as held by the :- 4 -: & 662/Hyd/2020 Sahrudaya Health Care (Karimnagar) Pvt. Ltd., Hyd.

coordinate bench of this Tribunal in the case of Vijaya Electricals Ltd., Hyderabad in & 1534/Hyd/2017 for AYs 2013-14 & 2014-15 vide order dated 27/05/2021. Respectfully, following the above decision of the coordinate bench, we set aside the order of the CIT(A) and direct the AO to delete the disallowance of Rs. 14,74,969/- made towards employee’s contribution to PF & ESI. Accordingly, the grounds raised by the assessee on this issue are allowed.

7.

As the facts and grounds are materially identical in AY 2019-20 to that of AY 2018-19, following the decision therein, we allow the grounds of appeal of the assessee in this AY also.

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