SHRI GOVIND SINGH, REWA vs. INCOME TAX OFFICER,WARD-1, SATNA

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

1. That the Intimation passed u/s 143(1) of the I.T. Act, 1961 on 26.04.2019 is illegal, invalid and bad in law.

2. The addition made u/s 143(1) of I.T. Act 1961 for belated payment of employees contribution to EPF and ESIC is illegal, invalid and bad in law.

3. The addition made by A.O. at Rs. 4,21,253/ - in respect to employee's contribution to EPF is unjustified, unwarranted and excessive.

4. The addition made by A.O. at Rs. 24,173/ - for belated payment of employees contribution to ESIC is unjustified, unwarranted and excessive.

5. The Id. CIT (A) NFAC erred and confirming addition made by Govind Singh A.O. CPC at Rs. 4,21,253/-in respect to employees contribution to EPF and Rs. 24,173/- for belated payment of employees contribution to ESIC; especially when; they are paid on the due date for instance due date falling for the month of July 2017. The due date for the month of July 2017 is on 15th August 2017 being payment made beyond due date even through it was within due date as per EPFO.

6. The action of the CPC in disallowing the employees' contribution to provident fund while processing the return under s. 143(1) is against the provisions of the Act as it would not fall within the ambit of prima facie adjustments under Clause (iv) of s.143(1)(a).

7. The A.O. erred in disallowing Rs. 10,670/ - in respect to fee on alc of delay in filing of GST return; failing to appreciate tha t the fee paid for delay in filing of GST return is an allowable expenditure.

2. The issue of ESI/PF payment has attained finality by the order of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-I, vide order dated 12 th October, 2022 wherein it was observed that employers have to deposit the employee's contribution towards EPF/ESI on or before the due date for availing deduction. In the cases before the Hon’ble Apex Court, the employers had belatedly deposited their employees' contribution towards the EPF and ESI, considering the due dates under the relevant provisions of the Act. The Assessing Officer ruled that by virtue of Section 36(1)(va) read with Section 2(24)(x) of the IT Act, such sums received by the appellants constituted "income". It was held that those amounts could not have been allowed as deductions under Section 36(1)(va) of the IT Act when the payment was made beyond the relevant due date under the respective acts. The Income Tax Appellate Tribunal and later the Gujarat High Court dismissed the challenge against this order of AO. In appeal, the court noted that the Hon’ble Kerala High Court has also ruled in favour of revenue on this issue whereas the Hon’ble High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi have favoured the interpretation beneficial to the Govind Singh assessee. The Hon’ble Apex Bench effectively reversed the judgment in Commissioner of Income Tax vs. Alom Extrusions Ltd. (1 SCC 489) relied upon by the assessee.

"In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43 B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is Govind Singh upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non- obstante clause under Section 43 B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction."