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Income Tax Appellate Tribunal, MUMBAI BENCH “ H”, MUMBAI
Before: SHRI VIKAS AWASTHY& MS. PADMAVATHY
सुनवाई की ितिथ/ Date of hearing : 11/07/2023 घोषणा की ितिथ/ Date of pronouncement : 11/07/2023 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 03/06/2022, for the Assessment Year 2018-19.
The assessee in appeal has raised five grounds assailing solitary issue of disallowance made u/s. 36(1)(va) of the Income Tax Act, 1961 [in short ’the Act”] for delayed payment/deposit of Employees contribution of Provident Fund (PF) and Employees State Insurance(ESI).
ITA NO.1889/MUM/2022(A.Y.2018-19)
The notice of hearing of appeal was sent to the assessee through RPAD. The same was duly served as is evident from the acknowledgement card available on record. Despite service of notice, no one appeared to represent the assessee. It seems that the assessee is not interested to defend the appeal. Thus, the appeal is decided with the assistance of ld. Departmental Representative and after considering material available on record.
Shri Prashant Mahajan representing the Department submitted that the Hon’ble Supreme Court of India in the case of Checkmate Services (P) Limited vs. CIT, 448 ITR 518 as laid the controversy to the rest. Hence, there is no ambiguity that the assessee is not eligible for claiming deduction in respect of Employees’ share of contribution towards PF and ESIC, if the contribution is made after the ‘due date’ has specified under the respective laws.
We have heard the submissions made by ld. Departmental Representative and have examined the orders of authorities below. In assessment completed u/s. 143(1) of the Act , a disallowance is made u/s. 36(1)(va) of the Act in respect of deposit of Employees’ share of Contribution towards Provident Fund and ESIC after the due date as specified under the respective Acts/scheme formulated under the relevant laws. It is no more res-integra that the Employees’ share of Contribution deposited beyond ‘due date’ specified under the respective Act, is not an allowable deduction u/s 36(1)(va) of the Act. The Hon’ble Apex Court has settled the issue in the case of Checkmate Services (P) Limited (supra).
The assessee has raised a ground stating that the CPC has no jurisdiction of making prima-facie adjustment u/s. 143(1) of the Act where there are judicial precedents. We are of the considered view that once, it is evident from the records that payments in respect of employees contribution to PF
ITA NO.1889/MUM/2022(A.Y.2018-19) and ESIC has been made beyond the “due date” as specified under the respective laws, the same has to be disallowed u/s 36(1)(va) of the Act. A perusal of section 143(1)(a)(ii) of the Act makes it clear that adjustment can be made in respect of an incorrect claim made that is apparent from the information in the return. The mandatory requirement before making adjustment is that intimation has to be given to the assessee. It is not disputed by the assessee that before making adjustment u/s. 143(1)(a) of the Act, notice was served on the assessee. Thus, disallowance was made after following due procedure under the Act. In so far as judicial precedents is concerned, the Hon’ble Apex Court in the case of Checkmate Services (P) Limited vs. CIT(supra) explained the law as it has always been. The Hon’ble Court also held that the decision rendered by the High Courts holding to the contrary do not lay down correct law. That means at no point of time there has been any change in the legal position or the intent of the legislature to put Employers contribution and Employees contribution under EPF Scheme & Regulations and under ESI Act on the same footing. The character of Employers contribution and Employees share of contribution deducted by the employer at the time of payment of wages is different. The Employer holds the amount of the Employees share of contribution after deduction from wages till the deposit of the said amount in Trust.
Another objection raised by the assessee is retrospective application of amendment made by the Finance Act, 2021. Dehors, the amendment, the Hon’ble Supreme Court of India in the case of Checkmate Services (P) Limited vs. CIT(supra) has explained the provisions of Act, prior to the Amendment. As mentioned earlier the Hon’ble Court has explained the law as it has always been. Thus, the said decision would operate retrospectively. Wherever, the Hon’ble
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Apex Court intended that the law explained by it would apply prospectively, it specifically states so in the judgment.