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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & MS. PADMAVATHY S, AM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Ld. CIT(A)/NFAC, Delhi dated 09.12.2022 for AY 2018-19.
2. At the outset, the Ld. AR of the assessee pointed out that the adjustment made by the CPC u/s 143(1) of the Income Tax Act, 1961 (hereinafter “the Act”) disallowing the Employee’s Contribution towards PF/ESIC for belated deposits is in line with the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (448 ITR 518). Therefore, he does not contest the action of the CPC on principle as such. However, his limited prayer is that this lapse (of not depositing the employee’s contribution within the due- date) was only in few months (Refer Chart infra). According to assessee, a careful perusal of the deposit of contribution in the relevant government account of PF/ESIC, it would reveal that assessee had been depositing more amount i.e. advance amount in the relevant 2 A.Y. 2018-19 Roche Products (India)
account of PF/ESIC which can be discerned from a perusal of the chart which is reproduced as under: - Roche Products (India) Pvt. Ltd AY. 2018- Sr. Month Sum received from Actual sum Amount to Excess Notes Due date Actual No. employees paid be paid amount for payment after paid payment date as per deducting TAR excess amount 1 Apr, 17 28,42,374 29,53,126 1,10,752 15-May-17 02-May-17 2 May, 17 28,44,081 28,76,186 27,33,329 1,42,857 15-Jun-17 30-May-17 3 June, 17 29,17,049 29,49,154 27,74,192 174,962 15-Jul-17 29-Jun-17 4 Jul, 17 29,00,674 29,14,759 27,25,712 189,047 15-Aug-17 01-Aug-17 5 Aug, 17 29,06,405 29,30,252 27,17,358 2,12,894 15-Sep-17 01-Sep-17 6 Sep, 17 27,22,439 28,65,587 25,09,545 15-Oct-17 03-Oct-17 3,56,042 7 Oct, 17 28,94,089 29,56,937 25,38,047 4,18,8990 15-Nov-17 -02-Nov-17 28,59,560 29,30,467 24,40,670 Amount paid 15-Dec-17 02-Jan-18 8 Nov, 17 4,89,797 in advance to an extent of Rs.4,18,890 has to be allowed as deduction 9 Dec, 17 28,64,695 55,14,468 23,74,898 31,39,570 15-Jan-18 04-Jan-19 10 Jan, 18 28,44,315 25,76,361 -2,95,255 28,71,616 The sum 15-Feb-18 20-Feb-18 deposited in advance is much more than the sum received from the employees. Hence the entire disallowance has to be deleted. 11 Fab, 18 28,98,290 26,674 26,674 Amount of 15-Mar-18 03-Apr-18 Rs.25,76,361/- 12 Mar, 18 28,90,710 29,32,529 228,90,710 41,819 15-Apr-18 03-Apr-18 Note: 1 For the Month of Nov 2017 (Sl No.8), A sum of Rs.4,18,890 has to be allowed as a deduction. Since payment was made in advance. The balance of Rs.24,40,670/- may be disallowed.
An excess sum of Rs.31,39,570 was already deposited in the EPF account which covers the entire sum received from employees for the month of Jan, 2018 (Sl No. 10) and balance of Rs.2,95,255/- has to be adjusted for the Month of Feb, 2018 (Sl No. 11). 3 A sum of Rs.25,76,361/- was deposited on EPF account on 20th Feb, 2018 (See pg 40 of the paper book). In addition to that Rs.2,95,255/- was already in excess in the account. So sum of Rs.28,71,616/- has to be allowed as deduction. Hence balance Rs.26,674/- which was paid post the due date has to be disallowed.
4. Total disallowance made by AO u/143(1) Rs.86,02,165/- Deduction has to be allowed as explained above Rs.61,34,821/- Balance disallowance may be upheld of Rs.24,67,344/- Prayer 3 A.Y. 2018-19 Roche Products (India) Direction may be given to the AO/CPC to verify the bank statement of assessee and grant deduction of amount to an extent of excess amount paid in the previous month and payment made before the due date.”
Drawing our attention to Serial No. 8 (November), the Ld. AR pointed out that an amount in the form of advance to the extent of Rs.4,18,890/- has been deposited by assessee in excess, therefore, in the month of Nov, 2017, the said amount has to be allowed as deduction and balance amount of Rs 24,40,670/- may be disallowed. Likewise, in Serial No. 9, the excess deposit made in Dec, 2017 is Rs.31,39,570/-, therefore, deduction need to be given for the month of January 2018 and Rs 2,95,255/- for February 2018. Likewise, in the month of Feb, 2018, a sum of Rs 25,76,361/- & Rs 2,95,255/- (Total Rs 28,71,616/-) which should be allowed as deduction. Thus, according to the Ld. AR, from the working given under the Chart supra the assessee should be allowed deduction of Rs.61,34,821/- in place of Rs.86,02,165/- and balance disallowance of Rs 24,67,344/- be confirmed u/s 36(1)(va) of the Act.
The grounds of appeal
of the assessee is as under: - “The appellant objects to the order dated 9 December 2022 passed by the Hon’ble National Faceless Appeal Centre (NFAC), Dethi [‘ld. CIT(A)’] on the following grounds:
1. The ld. CIT(A) has erred in law and on facts in confirming upholding disallowance u/s 36(1)(va) of the Income Tax Act, 1961 (‘the Act’) in respect of delay in payment of employee’s contribution to provident fund amounting to Rs. 86,02,165/-. The ld. CIT(A) ought to have appreciated the following: a) Employee’s contribution to provident fund deposited before the due date of filing of return of income is allowable u/s 43B of the Act.
4 A.Y. 2018-19 Roche Products (India) b) Amendment to section 36(1)(va) of the Act vide Finance Act, 2021 is prospective and effective from 1 April 2021 i.e. AY 2021-22. c) Disallowance of employee’s contribution to provident fund u/s 36(1)(va) of the Act vide intimation u/s 143(1) is bad in law.
2. The Ld. CIT(A) has erred in passing order u/s 250 of the Act without granting personal hearing to the appellant and not following the procedure laid down under the Faceless Appeal Scheme, 2021. The Ld. CIT(A) failed to provide an opportunity of being heard thereby violating principles of natural justice.
3. Without prejudice to above grounds, the ld. CIT(A) has erred in law in disregarding the fact that there is error in amount of disallowance made towards employee’s contribution to provident fund to the extent of Rs. 61,34,821 and disallowance shall be Rs. 24,67,344/-.”
Before us, the assessee has only pressed ground no. 1 (supra), in the light of the Hon’ble Supreme Court decision in the case of Checkmate Services Pvt. Ltd. (supra) and pointed out that the assessee had deposited excess amount in the Employee’s Contribution towards PF/ESIC in the relevant funds which according to the assessee need to be adjusted in the following months as shown in the chart (supra), and in case if assessee succeeds, then the assessee would be able to get part-relief to the tune of Rs. 61,34,821/-. After hearing both parties, even though, we agree in principle with the action of the CPC/Ld. CIT(A) in disallowing the belated deposits in the relevant funds in Employees Contribution towards PF/ESIC, it is noted from perusal of the chart (supra) that assessee has deposited excess amount in few months in the relevant PF/ESI government account, which according to us should be adjusted in the following month/months; and the AO 5 A.Y. 2018-19 Roche Products (India) need to verify the facts as stated above and if it is found correct, then the benefit need to be granted to assessee. According to assessee, if excess deposit of Employee’s Contribution in the relevant fund is adjusted with the following months contribution as per law, then assessee would be entitled to part-relief to Rs.61,34,821/- which fact AO to verify and after examination of relevant documents need to be decided in accordance to law. Therefore, we set aside the impugned order of the Ld. CIT(A) and restore this issue back to the file of the AO with a direction to examine/verify the relevant documents and examine whether assessee has deposited excess amount of employee’s contribution in the relevant government account as asserted in the chart (supra) and if it is found to be correct then, suitable adjustment/deduction may be granted in accordance to law. Needless to say that proper hearing may be given to assessee and assessee is given liberty to file relevant documents to substantiate its claim in respect of Employee’s Contribution which has been discussed supra.