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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
M/s Guruji Infrastructure Vs. ADIT, CPC Private Limited, Bangalore 33, Plot 1088 Suraj Plaza, 560500 ‘A’ Wing, Chandulal Park, Station Road Bhayandar (West), Thane- 401101 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAECG3499G Appellant .. Respondent [ Appellant by : Dinkle Haria & Simoni Chouhan Respondent by : Suresh D. Gaikwad Date of Hearing 13.07.2023 Date of Pronouncement 24.07.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the ld. CIT(A) NFAC, dated 03.03.2023 for A.Y. 2018-19. The assessee has raised the following grounds before us:
1. NATURAL JUSTICE 1.1 It is submitted that, in the facts and the circumstances of the case, and in law, the appellate order so framed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi ("NFAC") ['Ld. CII (A)'] be held as bad and illegal, as: (i) The same is framed in breach of the principles of natural justice; and P a g e | M/s Guruji Infrastructure Pvt. Ltd. Vs. ADIT, CPC (ii) The same is perverse, passed without application of mind to the facts on record 1.2 Without prejudice to the generality to the above, in the facts and the circumstances of the case, and in law, the order is bad in law as: (i) The same is passed without granting proper, sufficient and adequate opportunity of being heard to the Appellant; and (ii) The order is passed without application of mind to the facts and the submissions brought on record. WITHOUT PREJUDICE TO THE ABOVE 2. NO ADJUSTMENT CAN BE MADE UNDER INTIMATION US 143(1) OF THE ACT 2.1 In the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the action of the Central Processing Centre, Income Tax Department, ["the A.O" in passing the intimation us. 143 (1), by disallowing Rs.54,33,242/- claimed towards employees' contribution toward the provident fund and ESIC 2.2 While doing so, the Ld. CIT (A) failed to appreciate that: (i) Under section 143 (1) only an incorrect claim which is apparent return of income of the Appellant could be adjusted; and (ii) In any case and without prejudice, the claim of deduction is highly debatable in nature and, as such, no adjustment in this regard could have been made by the A.O. in an intimation u's. 143 (1) of the Act. 2.3 It is submitted that in the facts and the circumstances of the case, and in law, Ld. CIT (A) erred in confirming the action of the A.O. be held as bad in law.
3. FURTHER WITHOUT PREJUDICE TO THE ABOVE 3. DISALLOWANCE OF RS. 54,33,242/- ON ACCOUNT OF LATE PAYMENT OF THE EMPLOYEES' CONTRIBUTION TOWARDS PROVIDENT FUND/ ESIC. 3.1 It is submitted that the Ld. CIT (A) erred in confirming the disallowance of RS. 54,33,242/- made by Central Processing Centre, Income Tax Department, being the employees' contribution toward the provident fund and ESIC, on the ground that the same was not paid within the due date prescribed under the respective statues. 3.2 It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance was called for 33 Without prejudice to the above, in the alternative, assuming- but not admitting - that some disallowance was called for, the computation of the same is not in accordance with the law, is arbitrary and excessive.
P a g e | M/s Guruji Infrastructure Pvt. Ltd. Vs. ADIT, CPC 4. LIBERTY The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”
Fact in brief is that assessing officer made adjustment in the intimation passed u/s 143(1) of the Act by way of disallowance of delayed remittance of employee’s contribution to PF/ESI to the amount of Rs.54,33,242/- for assessment year 2018-19 on the ground that same was paid beyond the due date.
The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) following the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT-1 Civil Appeal No. 2833 of 2016 dated 12.10.2022 dismissed the appeal of the assessee. 4. During the course of appellate proceedings before us the ld. Counsel contended that assessee has mainly provided services to Government authority and to some private bodies and due to various administrative and technical difficulties, there was always delayed in receipt of employees details from the clients. The assessee has also placed copies of work order from the various department. Under the said circumstances, the payment were often delayed. On the other hand, the ld. D.R supported the order of lower authorities. 5. Heard both the sides and perused the material on record. We consider that vide the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT-1 Civil Appeal No. 2833 of 2016 dated 12.10.2023 the entire controversy is set at rest wherein it is held that employer have to deposit the employees contribution towards EPF/ESIC on or before the due date prescribed under the respective acts. The hon’ble Supreme Court held that it is essential condition for P a g e | M/s Guruji Infrastructure Pvt. Ltd. Vs. ADIT, CPC allowing the impugned deduction u/s 36(1)(va) that such amounts are deposited within the due date as prescribed in the specified Act. The ld. Counsel referred ITAT’s decision in the case of of the assessee itself vide for A.Y. 2020-21. We find that case was pertained to the circumstances when the due date was falling on Saturday/Sunday, however, the facts in the case of the assessee are distinguishable from those facts. Regarding the contention of the assessee that whether it is the month for the salary/wages due or month of the payment of the salary to be taken for the purpose of deposit of the PF/ESI contribution of the employee’s contribution in this regard, we find that the cases referred by the ld. Counsel are of no help in view of the decision of Hon’ble Madras High Court in the case of Radiators & Pressing Ltd. 263 ITR 620 wherein it is held that the term ‘every month’ in clause 38 of the provident fund scheme should be read as month in which the wages were actually earned i.e. salary payable. We find that coordinate bench of the ITAT in the case of Creative Textiles Mills Pvt. Ltd. Vs. DCIT CPC vide ITA No. 409/Mum/2022 A.Y. 2018- 19 dated 31.05.2023 after following the decision of Hon’ble Madras High Court as referred above has dismissed the appeal of the assessee. The relevant part of the decision is reproduced as under: “3.1 However, we find that the Hon’ble Madras High Court in the case of the Commissioner of Income-tax v. Madras Radiators & Pressing Ltd. 264 ITR 620 Madras has held that the term “every month” in clause 58 of the Provident Fund Scheme should be read as month in which the wages were actually earned i.e. salary payable. The relevant finding of the Hon’ble Madras High Court is reproduced as under: “4. In our considered opinion, we are of the view that the Tribunal is not correct in coming to the conclusion that there was some ambiguity in construing the expression "month" used in para 38 of the Scheme under the Provident Fund Act on the premise that the assessee used to pay the salary to its employees only on the 7th day of succeeding month under section 5 of the Payment of Wages Act. It is true that section 5 of the Payment of Wages Act provided for payment of wages in respect of certain categories of industries on or before the 7th day of succeeding month. However section 4 of the Act provided for fixation of wage period and also provided that no wage period shall extend one month.
P a g e | M/s Guruji Infrastructure Pvt. Ltd. Vs. ADIT, CPC 5. Para 29 of the Scheme under the Provident Fund Act provided that the contribution payable should be calculated on the basis of the basic wages and other allowances actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis. The expression "basic wages" is defined as all emoluments, which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him.
Para 30 of the Scheme of the Provident Fund Act imposed an obligation on the employer to remit both the shares of contributions in the first instance and para 32 empowered the employer to recover the employees' contributions from the wages of the employees. As per para 38 of the Scheme, the employer is required to remit both the contributions together with the administrative charges thereon within 15 days before the close of every month.
Thus as seen from the above provisions, it is clear that it is the responsibility of the employer to make payment of the contributions at the first instance irrespective of the fact, whether the wages are paid in time or not. Hence the actual payment of wages on the 7th day of succeeding month would not any way alter the situation and give room for interpreting that the "close of 15th day" has to be calculated from the end of the month in which the wages were actually paid. The payment of wages on the 7th day of succeeding month would not in any way alter the initial responsibility of the employer for making payment of contributions, which he is statutorily authorised to recover from the employees salary, whether the salary is paid in time or not. Hence the one and only reasonable conclusion is that the employer has to remit both the contributions to the Provident Fund within 15 days from the close of the month for which the employees earned their salary i.e., Salary payable. Our view has been fortified by the Division Bench of this court in Presidency Kid Leather (P) Ltd. v. Regional Provident Fund CIT (1997) 91 F.J.R. 661, wherein the Division Bench of this court held as follows : “As per para 38 of the Employees' Provident Funds Scheme, the employer is required to remit both the employees' as well as the employer's share of contributions together with administrative charges thereon before the close of the 15th of every month. Para 30 of the Scheme imposes an obligation on the employer to remit both the shares of contributions in the first instance and para 32 of the Scheme enables the employer to recover the employees contributions from the wages of the employees. The initial responsibility for making payment of the contributions lies on the employer irrespective of the fact whether the wages are paid in time or not. As such, the Provident Fund payments made after the due date will attract the penal damages under section 14B of the Act.” The Tribunal committed serious error in coming to the contrary conclusion. Hence the first two questions of law referred to us are answered in the negative against the assessee and in favour of the revenue.” (emphasis supplied externally)
P a g e | M/s Guruji Infrastructure Pvt. Ltd. Vs. ADIT, CPC 3.2 The Hon’ble High Court being higher in hierarchy of judiciary than the Tribunal, therefore, following the decision of the Hon’ble Madras High Court (supra), we reject the prayer of the Ld. Counsel of the assessee for restoring the matter back to the Assessing Officer. The grounds of appeal of the assessee are accordingly dismissed.
4. In the result, the appeal of the assessee is dismissed.”