M/S. BHARTI MANAGEMENT SERVICES LIMITED,MUMBAI vs. THE COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(2), BANGALORE

O R D E R

Per Laxmi Prasad Sahu, Accountant Member :

The learned CIT(A) has erred in law and in facts by upholding the total loss of the Appellant at INR 75,25,22.938 as against the returned loss of INR 77,25,22,938 computed by the Appellant. The CPC and CIT(A) have erred in law and facts, in not considering the response submitted by the Appellant in response to the notice issued by CPC (reference no: CPC/1819/G22/1919483575 dated 3 September 2019 and CPC/1819/G22/1964531570 dated 18 November 2019). B. Provision for payment of Gratuity Fund The CPC and CIT(A) have erred in law and in facts by disallowing an amount of INR 1,32,52,000towards provision for contribution towards approved gratuity fund under Section 40A(7) of the Act ignoring the revised Form 3CD filed by the Appellant. The Learned CIT(A) and the CPC have failed to appreciate that once the contribution is made towards an approved gratuity fund. the same is allowable under Section 40A(7) of the Act and therefore. the claim made by the Appellant needs to be allowed. The CPC and Learned CIT(A) have ignored the documentary evidence of approved gratuity fund and the revised Form 3CD and thus the order of the Learned CIT(A) is bad in law.

C. Contribution to Provident Fund ("PF") and Employees State Insurance Fund ("ESI") The CPC and CIT(A) have erred, in law and facts, by not recognising that the disallowance pertaining to employee's contribution towards PF and ESI has been remitted within the due date of filing the return of income ("ROI") for the subject AY. The CPC and CIT(A) have erred, in law and facts, by not considering the applicable facts of the case while computing income under Section 143(1) of the Act. The adjustment made by the CPC is out of the purview of the provisions of Section 143(1) of the Act. The learned CIT(A) has erred in law and in facts in confirming the same.

The Appellant submits that the addition of INR 1.78.88,476 to the total income made by the learned CIT(A) be deleted. on the above grounds. All the above grounds are without prejudice to each other. The Appellant craves for leave to add, amend, vary, omit or substitute or withdraw any of the aforesaid grounds at any time before or at the time of hearing of the matter with the Income Tax Appellate Tribunal. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case.

2. The brief facts of the case are that the assessee filed return of income on 30.11.2018 declaring a loss of Rs.77.25 Crores after processing of return under section 143(1) of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The loss was determined at Rs.77.46 Crores and return was processed on 05.02.2020. The disallowance was made towards provision for payment of gratuity fund of Rs.1,32,52,000/- and disallowance under section 36(1)(va) r.w.s. 2(24)(x) of the Act and ESI / PF of Rs.46,36,476/-.

3. Aggrieved from the above order, the assessee filed appeal before the CIT(A) and also submitted detailed written synopsis which has been incorporated by the CIT(A) in his order. After considering the submissions of the appeal, the CIT(A) dismissed the appeal of the assessee.

4. Aggrieved from the above order, assessee filed appeal before the Tribunal. During the course of hearing, learned AR reiterated the submissions made before the CIT(A) and he submitted that the certificate for approved gratuity fund was filed before the CIT(A) but he did not consider in his order. The return was also revised which has also not been considered. The matter may be send back to the AO for afresh consideration. Earlier, it was wrongly reported in Form No.3CB which has been corrected by the assessee later on but the CIT(A) did not consider it. The assessee paid the amount within the due date of filing of the return of income. Therefore, the disallowance should not be made. Further, in respect of delayed deposit of ESI and PF, it was also paid within the due date of the filing of the income and reiterated the case laws relied on before the CIT(A).

5. On the other hand, the learned DR relied on the order of the lower authorities and he submitted that the learned CIT(A) has rightly dismissed the appeal of the assessee on both the counts. The assessee had not submitted any details regarding payment of approved gratuity fund and further in respect of ESI and PF, he submitted that the issue is covered by the judgment of the Hon’ble Supreme Court of India in the case of Checkmate Services Pvt. Ltd., Vs. CIT reported in 448 ITR 518. Therefore, the order of the CIT(A) should be upheld.

6. After hearing both the sides and perusing the material on record and orders of the authorities below, we note that in the case of disallowance regarding payment of Rs.1,32,52,000/-, contribution towards approved gratuity fund, both the parties agreed to remit the issue to the file of the AO for examination of the issue afresh. Before us, the assessee has also not filed any documents in support of its claim. Therefore, considering the prayer of the assessee, we remit the issue to the file of the AO for the verification of the payment towards approved gratuity fund and decide the issue as per law. The AO should afford reasonable opportunity of being heard to the assessee.

7. Further, in respect of ground Nos.7, 8 and 9 regarding payment towards PF and ESI, this issue has also been settled by the judgment of the Hon’ble Supreme Courtin the case of Checkmate Services Pvt. Ltd., (supra), as cited by the learned DR. Therefore, we uphold the order of the CIT(A) for disallowance of PF & ESI employee’s contributions. As far as the contention of the assessee that no disallowance can be made u/s. 143(1)(a) of the Act towards employees contribution to EPF and ESI is concerned, we find that this issue has been settled by the Hon’ble Madras High Court in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. DCIT reported in (2022) 138 taxmann.com 571 wherein it was held as under:- “7. The scope of an 'intimation' under section 143(1)(a) of the Act, extends to the making of adjustments based upon errors apparent from the return of income and patent from the record, Thus to say that the scope of 'incorrect claim' should be circumscribed and restricted by the Explanation which employs the term 'entry' would, in my view, not be correct and the provision must be given full and unfettered play. The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purposes of section 143(1)(a) of the Act.”

In view of the above judgment, the contention of the assessee that no disallowance could be made u/s. 143(1)(a) of the Act towards employees contribution to EPF and ESI is rejected.