THODRNCHATH CHANDRAN,BANGALORE vs. INCOME-TAX OFFICER, WARD-6(3)(1), BANGALORE

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ITA 602/BANG/2023Status: DisposedITAT Bangalore03 November 2023AY 2018-194 pages
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What did the Tribunal hold?

The tribunal upheld the principle that belated employees' contribution to ESI/PF cannot be allowed as a deduction, following the Apex Court's decision in Checkmate Services Pvt. Ltd. However, the matter was restored to the AO to examine a limited submission regarding a mistake in the audit report.

What were the facts?

The assessee's return was processed under section 143(1), and an addition was made for belated employees' contribution to ESI and PF. The assessee argued that these contributions were paid before the due date for filing the return of income.

What were the issues?

Whether belated employees' contribution to ESI/PF is deductible and whether the matter should be remanded to the AO for examination of a specific audit report discrepancy.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 36(1)(va),Section 43B,Section 139(1),Section 250

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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE

Before: SHRI GEORGE GEORGE K & SHRI LAXMI PRASAD SAHU

For Appellant: Shri. G. Sathyanarayana, CA
For Respondent: Shri. Subramanian S, JCIT(DR)(ITAT), Bengaluru
Hearing: 06.11.2023Pronounced: 06.11.2023

O R D E R Per George George K, Vice President:

This appeal at the instance of the assessee is directed against CIT(A)’s order dated 31.10.2022 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.

2.

The solitary issue that is raised is whether CIT(A) is justified in confirming the addition made under section 143(1) of the Act with regard to employees’ contribution to ESI and PF on account of belated payment of the same under the respective statutes.

3.

Brief facts of the case are as follows:

For the Assessment Year 2018-19, return of income was filed by the assessee disclosing taxable income of Rs.50,23,554/-. The return was processed under section 143(1) of the Act vide intimation dated 12.02.2020. In the said intimation issued by the CPC (Centralized Processing Centre), an addition of Rs.94,74,958/- was made under section 36(1)(va) of the Act on the ground that amounts received from the employees on account of ESI/PF were not credited to the account on or before the due date stipulated under the ESI/PF Act.

4.

Aggrieved by the intimation issued under section 143(1) of the Act, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, it was submitted that assessee has paid the employees’ contribution to ESI/PF before the due date of filing of the return of income under section 139(1) of the Act. The CIT(A) rejected the claim of the assessee by relying on the judgment of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd., reported in 448 ITR 518 (SC).

5.

Aggrieved by the order of CIT(A), assessee filed the present appeal before the Tribunal. Assessee has raised several grounds. However, the limited submission made by learned AR before the Tribunal was that there was a mistake in the audit report. It was stated in the audit report that by mistake both employer’s and employees’ contribution were reported for disallowance. It was prayed that in the interest of justice and equity, the matter may be restored to the AO to examine the limited issues.

6.

The learned DR supported the order of the CIT(A).

7.

We have heard the rival submissions and perused the material on record. The Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd., (supra) had categorically held that when assessee had not paid employees’ contribution to ESI/PF within the due dates stipulated in the ESI/PF Act, the same cannot be allowed as a deduction. In view of the Hon’ble Apex Court’s judgment, we hold that employees’ contribution not paid within the due dates specified under ESI/PF Act cannot be allowed as a deduction under section 43B of the Act.

8.

However, the limited prayer of the assessee is that employer’s and employees’ contribution has been wrongly reported together and disallowance under section 36(1)(va) of the Act has been made. To examine this limited prayer of the assessee, the issue is restored to the files of the AO. Assessee is directed to furnish the necessary details and shall not seek unnecessary adjournments in the matter. It is ordered accordingly.

9.

In the result, appeal filed by the assessee is partly allowed for statistical purposes.

Pronounced in the open court on the date mentioned on the caption page.

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