SHRI. BETTAMALENAHALLI JAWAREGOWDA BASAVARAJU,BENGALURU vs. INCOME TAX OFFICER, WARD-7(2)(2), BANGALORE

Briefly stated, the facts are that the assessee filed return of income on 29.09.2018 declaring income of Rs.41,24,830. The return was processed u/. 143(1) of the Act by making addition of Rs.30,49,654 towards late payment of employees’ contribution of PF and ESI after the due date as per respective statutes. On appeal, the CIT(Appeals) after discussing the issue in detail and relying on certain judgments dismissed the appeal of the assessee. Hence the assessee is in appeal before the Tribunal.

The ld. AR reiterated submissions made before the CIT(Appeals). He further submitted that the judgment of Hon’ble Supreme Court in the case of Checkmate Service P. Ltd. v. CIT, [2022] 143 taxmann.com 179 [SC] relied on by the ld. CIT(A) is not applicable to the present facts of the case since the actual payment made to the employees and reported in the Tax Audit Report are different. The ld. AR also submitted that the assessee is following mercantile system of accounting. In this regard, he submitted a chart containing details of EPF/ESI as follows:-

He further submitted that the coordinate Bench of the Tribunal in the case of MTR Maiya’s v. ITO in ITA No.95/Bang/2023 dated 02.05.2023 for AY 2018-19 has remitted back the similar issue to the AO for fresh consideration after following the decision of Calcutta Bench of Tribunal in the case of Kanoi Paper & Industries Ltd. [2002] 75 TTJ 48 (Cal). He also relied on the decisions of the Tribunal in the case of M. Krishnamurthy (ITA No.326/bang/2023 dtd. 19.07.2023) and Sentinel Consultants P. Ltd. (ITA Nos. 7 & 8/DEL/2023 dtd. 12.06.2023.

The ld. DR relied on the orders of lower authorities and submitted that the CIT(Appeals) has discussed the issue of adjustment u/s. 143(1) elaborately relying on various judgments and therefore there is no room for further discussion on this issue. He further submitted that the Hon’ble Supreme Court in the case of Checkmate Service P. Ltd. (supra) has decided the issue in favour of revenue in terms of disallowance u/s 36(1)(va) r.w.s.2(24)(x) of the I.T. Act.. Therefore the order of the lower authorities should be upheld.

Considering the rival submissions, we note that the CPC while processing the return proposed disallowance of late remittance of PF/ESI as per audit report in Form No. 3CD column No. 20(b) uploaded by the assessee, which was not responded by the assessee. Accordingly the CPC made disallowance of a sum of Rs.30,49,646. The CIT(Appeals) considered the submissions of the assessee that the adjustment is not contemplated u/s. 143(1) and after discussion in detail and relying on certain judgments rejected the plea of the assessee. This issue is settled by the judgment of the Hon’ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. v. DCIT reported in (2022) 138 taxmann.com 571 wherein it was held as under:-

Regarding the disallowance of late remittance of employees’ contribution to PF/ESI, the ld. AR further submitted a chart showing the details of remittance of PF/ESI i.e., actual date of salary payment to the employees, amount received from employees, the due date and the actual date of payment which has been extracted above. Considering the submissions of the ld. AR that the dates of payments of employees’ contribution to PF/ESI in the audit report and the actual dates are different, these details require verification with salary payment evidence (bank statement), cash book/bank book, journal entries passed in books of accounts, provisions made in books of account if any, etc. The difference in dates as mentioned in the tax audit report Form No. 3CD col. 20 (b) and the actual date of payments as submitted by the ld. AR which is reproduced above requires explanation and verification. Accordingly, we remit this issue to the file of AO for verification as directed above and decision as per law in the light of the decision in the case of MTR Maiya’s (supra). Needless to say that the assessee may be given reasonable opportunity of being heard and the assessee is directed to produce all the relevant documents to substantiate its claim and avoid seeking unnecessary adjournment for early disposal of the case.

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