DRISHTI LIFESAVING PVT. LTD,MUMBAI vs. CENTRALISED PROCESSING CENTRE, BENGALURU

ITA No. 1076/Mum/2022 is filed by the Drishti Lifesaving Pvt. Ltd. Mumbai (assessee /appellant) against the appellate order passed by the National Faceless Appeal Centre, Delhi [learned CIT (A)] for A.Y. 2019-20 on 1st November, 2021, wherein the appeal filed against the assessment order dated 7th May, 2020, passed under section 143 (1) of the Income-tax Act, 1961 (the Act) by the Assistant Director Of Income Tax, Central Processing Centre (learned Assessing Officer), wherein the return filed by the assessee on 22nd October, 2019, showing the business income at ₹235,27,317/- was recomputed at ₹341,13,335/- making disallowance of expenditure indicated in the

Assessee has raised following grounds of appeal: –

Brief facts of the case shows that assessee is a private limited company engaged in the business of beach safety and lifeguard services. It filed its return of income on 22nd October, 2019 declaring total income of ₹235,27,317/–. The return of the assessee was processed under section 143 (1) of the Act. In the intimation under section 143 (1) of the Act dated 7th May, 2020 sum of ₹105,44,018/– was disallowed, being sum received from employees and not credited to the account of the provident fund authorities before the due date prescribed according to the provident fund Act or respective acts . As

Later on, against the decision of the learned CIT (A) the appeal was preferred before the coordinate bench in ITA No. 1076/Mum/2022, wherein the order was passed on 30th June, 2022 allowing the appeal of the assessee and the disallowance under section 36 (1)(va) on account of employees contribution to provident fund and ESIC was deleted.

Subsequent to that the learned Assessing Officer preferred Miscellaneous Application in MA No. 42/Mum/2023 stating that after the decision of the honorable Supreme Court in case of checkmate services private limited Vs. CIT in Civil Appeal Number 2833 of 2016 dated 12th October, 2022 the order of the coordinate bench allowing the relief of ₹105,44,018/– deleting disallowance under section 36(1)(va) of the Act is erroneous and requires to be rectified. Consequently, MA No. 42/Mum/2023 was decided by the coordinate bench on 25th May, 2023 recalling order passed by the coordinate bench on 30th June, 2022. Therefore, now this is a recalled appeal to be decided.

However, now in view of the decision of honorable Supreme Court in checkmate services private limited versus CIT (2022) for 48 ITR 518, it is now clear that if the employees contribution is not paid before the due date as prescribed under the relevant Provident Fund Act, even if deposited before the due date of filing of income tax return by the assessee, is disallowable, the claim of the assessee is not sustainable.

The learned authorized representative submitted that on the date of filing of the return and passing of the intimation the jurisdictional High Court decision was in favor of the assessee. According to the decision of the honorable jurisdictional High Court in CIT versus Ghatge Patil transport Ltd 368 ITR 749 such deduction was allowable to the assessee if same is deposited before the due date of filing of the return of income. It was further stated that the jurisdictional High Court decision is binding on the revenue. Accordingly, it was submitted that the adjustment made was beyond the scope of section 143 (1) (a) read with section 143 (1) (a) (iv) of the Act and therefore the adjustment is not valid. It was further claimed that the assessing officer has no power to go beyond or behind the return either in allowing or in disallowing any such deduction /allowance or relief. This could be done unless the return of the accompanying documents or account show that the deduction claimed is prime facie i.e. inadmissible, such deduction cannot be disallowed at the intimation stage. He further submitted that if the learned assessing officer requires to make any addition he is bound to follow the procedure

The learned Departmental Representative vehemently supported the order of the learned CIT (A) and the adjustment made by the central processing Centre. He submitted that according to the provisions of section 143 (1) (a) (iv) where the total income or loss computed after making adjustment where the disallowance of the expenditure is indicated in the audit report but not taken into account in computing the total income in the return of income. He submitted that in the tax audit report prepared by the assessee and approved by the auditor categorically shows that that the above payment has been made beyond the due date prescribed. Therefore, the learned assessing officer has picked up that when the payment has been made beyond the due dates as stated in the assessee in its tax audit report itself, the central processing Centre is bound to make the disallowance of such amount because it is not taken into account in computing the total income in the return. This information that such sum is disallowable contained in the tax Audit report available along with return of

We have carefully considered the rival contention and perused the orders of the lower authorities. The fact shows that assessee has filed its return of income on 22/10/2019 wherein the business income was computed at ₹ 23,527,317. In intimation under section 143 (1) of the income tax act dated 7/5/2020 the sum was recomputed at ₹ 34,113,335. According to the statement of the assessee the disallowance is with respect to the payment of ₹ 10,544,018/– being employees contribution of provident fund and ESI deposited beyond the due date prescribed under the provident fund act respective act, but, before the due date of filing of the return of income. According to the provisions of section 36 (1) (va) read with section 2 (24) (x) any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of employees State insurance act, 1948 or any other fund for the welfare of such employees becomes the income of the assessee. Whenever such sum so received is credited by the assessee to the employees account in the relevant fund or funds on or before the due date, such sum is allowable under section 36 (1) (va) of the

However the assessee has raised an issue that on the date of filing of the return and the intimation, the jurisdictional High Court judgment was in favour of the assessee and therefore such adjustment could not have been made by the CPC. We find that according to the provisions of section 143 (1) (a)(iv) the CPC has made adjustment with respect to the disallowable amount indicated by the assessee in the statement of particulars required to be furnished under section 44AB of the income tax act 1961 i.e. form number 3CD. Therefore, the issue does not arise that the jurisdictional High Court judgment was in favour of the assessee at the time of passing of the intimation for the reason that disallowance has already been indicated by the assessee itself. While invoking clause(iv) of 143 (1) (a) the disallowance of such expenditure is indicated by the assessee itself.

The third contention of the assessee that the decision of the honourable Supreme Court in checkmate services private limited versus CIT was rendered in the context where the assessment was framed under section 143 (3) of the act and not under section 143 (1) (a) and therefore the ratio of the said decisions will not be applicable to the facts of the case of the appellant, is also deserves to be rejected at the threshold itself. The honourable Supreme Court decided the issue that if the employees contribution is not deposited within the due date prescribed under the respective provident fund/or other fund, the same is not allowable as deduction under section 36 (1) (va) of the act.

Further with respect to the collection of the employees’ contribution to the provident fund act, the employer is not a trustee but the obligation is cast upon employer deposits such sum as his own dues along with his own contribution. Even otherwise, the employees contribution becomes income of the assessee according to the provisions of section 2 (24) (x) of the act. Such sum is granted as deduction only when it is paid before the due date of respective act in terms of provisions of section 36 (1) (va) of the act.

Further honourable madras High Court in COMMISSIONER OF INCOME-TAX v MADRAS RADIATORS AND PRESSINGS LTD. [2003] 264 ITR 620 (Mad) wherein the second question was as under:-

Therefore, as the law is clear and not at all ambiguous, as held by the two honourable high courts, there is no reason to set-aside issue back to the file of the learned assessing officer to take any other due

Appeal of the assessee is dismissed.