M/S. NIRMAL ENVIRO SOLUTIONS PRIVATE LIMITED,BENGALURU vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BANGALORE

M/s. Nirmal Enviro Solutsions P. Ltd. vs ACIT, Circle - 3(1)(1) 26, 9th Cross, 16th Main Bengaluru BTM Layout, 1st Stage Bengaluru 560068 PAN – AADCN1064H (Appellant) (Respondent) Assessee by: Miss Sunaiana Bhatia, CA Revenue by: Shri Ganesh R. Ghale, Standing Counsel Date of hearing: 18.01.2023 Date of pronouncement: 18.01.2023 O R D E R Per: Chandra Poojari, A.M. – AY 2019-20 This appeal by the assessee is directed against the order of the CIT(A)/NFAC, Delhi dated 18.11.2022 for AY 2019-20.

1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2. The learned Commissioner of Income tax [Appeals] / National Faceless Appeal Centre [NFAC for short] is not justified in upholding the determination of total income of appellant in the Intimation u/s. 143[1] of the Act, at Rs. 65,16,369/- as against the returned income of Rs. 49,18,040/- and thereby making an addition of Rs. 15,98,331/- u/s.36[1][va] of the Act, allegedly based upon the disallowance indicated in the Tax Audit Report of the Chartered Accountant in Form 3CD, under the facts and in the circumstances of the appellant's case.

3. The learned Commissioner of Income tax [Appeals] / NFAC ought to have appreciated that there was no disallowance u/s 36[1][va] of the Act indicated in the Tax Audit Report as mere details of the payments made were set-out and therefore, the impugned addition made u/s. 143[1] of the Act is outside the scope of the adjustments capable of being made u/s 143[1][a][iv] of the Act and therefore, the same deserves to be deleted.

4. The learned Commissioner of Income tax [Appeals] / NFAC ought to have appreciated that the appellant had objected to the proposed addition to be made in response to notice issued u/s. 143[1][a] of the Act and the same was not considered before passing the impugned intimation under the facts and in the circumstances of the appellant's case.

5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234A, 234B and 234-C of the Act, as computed in the intimation u/s.143[1] of the Act, which under the facts and 3 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. in the circumstances of the appellant's case deserves to be cancelled.

6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.” AY 2019-20 This appeal by the assessee is directed against the order of the CIT(A)/NFAC, Delhi dated 11.11.2022 for AY 2019-20.

5. On appeal the NFAC, Delhi disallowed an amount Rs.31,08,160/- under Section 36(1)(va) of the Act. Against this the assessee is in appeal before this Tribunal as in earlier case.

4. From the aforesaid provisions, it is very clear that the said clause (iv) would come into operation when the Tax Auditor had suggested for a disallowance of expense or increase in income, but the same had not been carried out by the assessee while filing the return of income. As stated supra, the tax auditor had not stated in the instant case to disallow Employees Contribution to Provident Fund wherever it is remitted beyond the due date under the respective Act. Hence, in our considered opinion, the said action of the Ld.CPC Bangalore in disallowing the employees’ contribution to Provident Fund while processing the return under section 143(1) of the Act is against the provisions of the Act as it would not fall within the ambit of prima facie adjustments. Our view is further fortified by the co-ordinate bench decision of this Tribunal in the case of Kalpesh Synthetics Pvt Ltd vs DCIT reported in 195 ITD 142 (Mum). The relevant portion of the decision is reproduced below:- “6. Coming to the mechanism of application of section 143(1), we find that the first proviso to section 143(1) mandates that "no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode" and, under the second proviso to section 143(1), “the response received from the assessee, if any, shall be considered before making any adjustment, and 5 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made”. The scope of permissible adjustments under section 143 (1)(a) now is thus much broader, and, as long as an adjustment fits the description under section 143(l)(a) (i) to (v), read with Explanation to section 143(1), such an adjustment, subject to compliance with first and second proviso to section 143(1), is indeed permissible. I however, important to take note of the fact that unlike the old scheme of 'prima facie adjustments' under sec 143(l)(a), the scheme of present section 143(1) does not involve a unilateral exercise. The very fact that an opportunity of the assessee being provided with an intimation of 'such adjustments' [as opposed under sec 143(1)], in writing or by electronic mode, and "the response received from the assessee, if any" to be "considered before making any adjustment" makes the process of making adjustments under section 143(1), under the pre legal position, an interactive and cerebral process. When an assessee raises objections to proposed adjustment under section 143(1), the Assessing Officer CPC has to dispose of such objections before proceeding further in the matter - one way or the other, and such disposal of objections is a quasi judicial function. Clearly, Assessing Officer CPC has the discretion to go ahead with the proposed adjustment or to drop the same. The call that the Assessing Officer CPC has to take on such objections has to be essentially a judicious call, appropriate to facts and circumstances and in accordance with the law, and the Assessing Officer CPC has to set out the reasons for the same. Whether there is a provision for further hearing or not, once objections are raised before Assessing Officer CPC and the Assessing Officer CPC has to dispose of the objections before proceeding further in the matter, this is inherently a quasi judicial function that he is performing, and, in performing a quasi judicial function, he has to set out his specific reasons for doing so. Disposal of objections cannot be such an empty formality or meaningless ritual that he can do so without application of mind and without setting out his specific reasons for rejecting the same. Let us, in this light, set out the reasons for rejecting the objections. The Assessing Officer-CPC has used a standard reason to the effect that "As there has been no response/the response given is not acceptable, the adjustment(s) as mentioned below are being made to the total income as per provisions of section 143(l)(a)", and has not even struck off the portion inapplicable. To put a question to ourselves, can casually assigned reasons, which are purely on a standard template, can be said to be sufficient justifications quasi judicial decision that the disposal of objections inherently is? The answer must be emphatically in negative. It is important to bear in mind the fact that intimation under section 143(1) is an appealable order when consideration of objections raised by the assessee is an integral part of the process of finalizing intimation under section 143(1) unless the reasons for such rejection are known, a meaningful appellate exercise can hardly be carried out. When the first appellate authority has no clue about the reasons which prevailed the Assessing Officer- CPC, in rejecting the submissions of the assessee, because no such reasons are indicated by the Assessing Officer CPC anyway, it is difficult to understand on what basis the first appellate authority in judgment over correctness or otherwise of such a rejection

6 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. of submissions. Whether the statute specifically provides for it or not, in our considered view, the need for disposal of objections by way of a speaking order to be read into it as the Assessing Officer CPC, while disposing of the objections raised by the assessee is performing a quasi judicial function, and the soul of a quasi judicial decision making is in the reasoning for coming to the decision taken by the quasi judicial officer. While on this aspect of the matter, we may usefully refer to the observations made by the Hon'ble Supreme Court, in the case of Union Public Service Commission v. Bibhu Prasad Sarangi [2021] 4 SCC 516. While these observations are in the context of the judicial officers, these observations will be equally applicable to the decisions by the quasi judicial officers like us as indeed the Assessing Officer CPC. In the inimitable words of Hon'ble Justice Chandrachud, Hon'ble Supreme Court has made the following observations: Reasons constitute the soul of a judicial decision. Without them, one is left with a shell. The shell provides neither solace nor satisfaction to the litigant. We are constrained to make these observations what we have encountered in this case is no longer an isolated aberration. This has become a recurring henomenon………….How judges communicate in their judgments is a defining characteristic of the judicial process. While it is important to keep an eye on the statistics on disposal, there is a higher value involved. The quality of justice brings legitimacy to the judiciary 7. These observations of Their Lordships apply equally, and in fact with much greater vigour, to the judicial functionaries as well. Viewed thus, reasons in a quasi judicial order constitute the soul of the judicial decision. A quasi judicial order, without giving reasons for arriving at such a decision, is contrary to the way the functioning of the quasi judicial authorities is envisaged. A quasi judicial order, as a rejection of the objections against the proposed adjustments under section 143(1) inherently is, can hardly meet any judicial approval when it is devoid of the cogent and specific reasons, and when it is in a standard template text format with clear indications that there has not been any application of mind as even the inapplicable portion template text, i.e. whether there was no response or whether the response is unacceptable, has not been removed from the reasons assigned for going ahead with the proposed adjustment under section 143(1). In any event, there is no dispute that the precise and proximate reasons for disallowance in all these cases admittedly are the inputs based on the tax audit report. The question then arises about the status and significance of the tax audit report. Can the observations in a tax audit report, by themselves, be justifications enough for any disallowance of expenditure under the Act? As we deal with this question, we are alive to the fact section 143(l)(a)(iv) specifically an adjustment in respect of "disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return". It does proceed on the basis that when a tax auditor indicates a disallowance in the tax audit report, for this indication alone, the expense must be disallowed while processing under section 143(1) by the CPC. It is nevertheless important to bear in mind the fact that a tax audit report is prepared by an independent

7 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. professional. The fact that the tax auditor is appointed by the assessee himself does not dilute the independence of the tax auditor. The fact remains that the tax auditor is a third party, and his opinions cannot bind the auditee in any manner. As a matter of fact, no matter how highly placed an auditor is, and even within the Government mechanism and with respect to CAG audits, the audit observations are seldom taken an accepted position by the auditee - even when the auditor is appointed by the auditee himself. These are mere opinions and at best these opinions flag the issues which are required to be considered by the stakeholders. On such fine point of law, as the nuances about the manner in which Hon'ble Courts have interpreted the legal provisions of the Income Tax Act in one way or the other, these audit reports are inherently even less relevant - more so when the related audit report requires reporting of a factual position rather than express an opinion about legal implication of that position. In the light of this ground reality, an auditee being presumed to have accepted, and concurred with, the audit observations, just because the appointment of auditor is done by the assessee himself, is too unrealistic and incompatible with the very conceptual foundation of independence of an auditor. On the one hand, the position of the auditor is treated so subservient to the assessee that the views expressed by the auditor are treated as a reflection of the stand of the assessee, and, on the other hand, the views of the auditor are treated as so sacrosanct that these views, by themselves, are taken as justification enough for a disallowance under the scheme of the Act, There is no meeting ground in this inherently contradictory approach. Elevating the status of a tax auditor to such a level that when he gives an opinion which is not in harmony with the law laid down by the Hon'ble Courts above- as indeed in this case, the law, on the face of it, requires such audit opinion to be implemented by forcing the disallowance under section 143(1), does seem incongruous. Learned Departmental Representative's contentions in this regard that the observations made in the tax audit report, in the light of the specific provisions of section 143(l)(a)(iv), must prevail- more so when the tax auditor is appointed by the assessee himself, is clearly unsustainable in law. While section 143(l)(a)(iv) does provide for a disallowance based purely on the "indication" in the tax audit report inasmuch as it permits "disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return", and it is for the Hon'ble Constitutional Courts above to take a call on the vires of this provision, we are nevertheless required to interpret this provision in a manner to give it a sensible and workable interpretation. When the opinion expressed by the tax auditor is contrary to the correct legal position, the tax audit report has to make way for the correct legal position. The reason is simple. Under Article 141 of the Constitution of India, the law laid down by the Hon'ble Supreme Court unquestionably binds all of us and the Hon'ble Supreme Court has, in numerous cases- including, for example, in the case of East India Commercial Co. Ltd. v. Collector of Customs 1962 taxmann.com 5. speaking through Hon'ble Justice Subba Ra observed, inter alia, as follows:

8 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. ………Under article 215, every High Court shall be a Court of record and shall have all the powers of such a Court including the power to punish for contempt of itself. Under article 226, it has a plenary power to issue orders or writs for the enforcement of the fundamental rights and for any other purpose to any person or authority, including in appropriate cases any Government, within its territorial jurisdiction. Under article 227 it has jurisdiction over all Courts and Tribunals throughout the territories in relation to which exercises jurisdiction. It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that Court and start proceedings in direct violation of it. If Tribunal can do so, all the subordinate Courts can equally do so, for there is no specific provision, just like in the case of the Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working: otherwise, there would be confusion in the administration of law and respect for law irretrievably suffer”

8. When the law enacted by the legislature has been construed in a particular manner by the Hon’ble jurisdictional High Court, it cannot be open to anyone in the jurisdiction of that Hon'ble High Court to read any other manner than as read by the Hon'ble jurisdictional High Court. The views expressed by the tax auditor in such a situation, cannot be reason enough to disregard the binding views of the Hon'ble jurisdictional Court. To that extent, the provisions of section 143(l)(a)(iv) must be read down. What essentially follows is the adjustments under section 143(1)(a) in respect of "disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return" is to be read as, for example, subject to the rider "except in a situation in which the audit report has taken a stand contrary to the law laid down by Hon'ble Courts above". That is where the quasi judicial exercise of dealing with the objections of the assessee against proposed adjustments under section 143(1), assumes critical importance in the processing of returns, also important to bear in mind the fact that what constitutes jurisdictional High Court will essentially depend upon the location of the jurisdictional Assessing Officer. While dealing with jurisdiction for the appeals, rule 11(1) of the Central Processing of Returns Scheme, 2011 states that "Where a return is processed at the Centre, the appeal proceedings relating to the processing of the return shall lie with Commissioner of Income Tax (Appeals) [CIT(A)] having jurisdiction over the jurisdictional Assessing Officer". Then situs of the CPC or the Assessing Office CPC is thus irrelevant for the purpose of ascertaining the jurisdictional High Court. Therefore, in the present case, whether the CPC is within the jurisdiction of Hon'ble Bombay High Court or not, as for the regular Assessing Officer of the assessee and the assessee are located in the jurisdiction of Hon'ble Bombay High Court, the jurisdictional High Court, for all matters pertaining to the assessee, will be Hon'ble Bombay High Court. In our considered view, it cannot 9 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. be open to the Assessing Officer CPC to take a view contrary to the view taken by the Hon'ble jurisdictional High Court- more so when his attention was specifically invited to binding judicial precedents in this regard. For this reason also, the inputs in question in the tax audit report can not be reason enough to make the impugned disallowance. The assessee must succeed for this reason as well.

9. What a tax auditor states in his report are his opinion and his opinion cannot bind the auditee at all. In light, when one considers what has been reported to be 'due date' in column 20(b) in respect of contributions received from employees for various funds as referred to in section 36(l)(va) and the fact that the expression ‘due date’ has been defined under Explanation (now Explanation 1) to section 36(1 )(va) provides that "For purposes of this clause, 'due date' means the date by which the assessee is required as an employer to credit employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise", one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just a factual report about the fact of payments and the fact of the due date as per Explanation to section 36(l)(va). This due date, however, has not been found to be decisive in the light of the law laid down by Hon'ble Courts above, and it cannot, therefore, be said that the reporting of payment beyond due date in the tax audit report constituted "disallowance of expenditure indicated in the audit report but taking into account in the computation of total income in the return" as is sine qua non for disallowance of section 143(l)(a)(iv). When the due date under Explanation to section 36(l)(va) is judicially held to be decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is "indicative" of the disallowance of expenditure in question. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon'ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well.

6. Hence we direct the Ld. Assessing Officer to delete the addition made in respect of employees’ contribution to Provident Fund, in the facts and circumstances of the instant case. Accordingly, grounds 1 to 3 raised by the assessee are allowed.”

4. On the contrary, ld. D.R. submitted that this issue is squarely covered by the order of the Tribunal in the case of Cemetile Industries Vs. ITO (14)1, Pune in ITA No.693/Pun/2022 dated 23.11.2022. Further, he relied on the order of coordinate bench of Bangalore in MP No.127/Bang/2022 dated 19.12.2022 in the case of M/s. Automac Diesels wherein held as under:- 6. After considering the rival submissions I notice that the Hon. ble Supreme Court in the case of Checimote Services (supra) has considered the issue of whether the employees' contribution paid before due date for filing the return of income u/s.139(1) of the Act otherwise allowable u/s.43 B of the Act and putting to rest the contradicting decisions of various High Courts. The relevant extract of the decision is as under:- "52. When Parliament introduced Section 43B, what was on the statute book, was only employer's contribution (Section 34(1)(iv)). At that point in time, there was no question of employee's contribution being considered as part of the employer's earning. On the application of the original principles of law it could have been treated only as receipts not amounting to income. When Parliament introduced the amendments in 1988-R9, inserting Section 36(1)(va) and simultaneously inserting the second proviso of Section 43B, its intention was not to treat the disparate nature of the amounts, similarly. As discussed previously, the memorandum introducing the Finance Bill clearly stated that the provisions - especially second proviso to Section 438 - was introduced tc ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and, avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, isevident from the use of different language. Section 2(24)(x) too, deems amount received from the 11 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. employees (whether the amount is received from the employee or by way of deduction authorized by the statute) os income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of "income" amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time - by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this this distinction between the employers’ contribution (Section 36(1)(iv)) and employees' contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 438 covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees' liability. These include liabilities such as tax liability, cess duties etc. or interest having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not he given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure.

8. Keeping in view of the decision of the Hon'ble Supreme Court, I uphold that the addition can be made in respect of the employees' contribution in regard to PF/ESI, which has not been deposited within the stipulated date as per the respective Act, since in the case on hand, the assessee has not deposited the employees, contribution within the due date as per the respective Act. Therefore, the disallowance can be made as per section 36(1)(va) r.w.s. 2(24)(x) of the Act. Hence, respectfully following the judgment of Hon’ble Supreme court cited (supra), the arguments of the assessee is not acceptable. 8.1 The Ld. A.R. has also raised on the issue that the disallowance/addition cannot be made u/s 14-3(1(a) of the Act. A similar issue has been decided by the coordinate bench of the Tribunal in ITA No.188/Coch/2021 for the AY 2016- 17 vide order dated 28.07.2022 and also following the judgment of the Hon'ble Madras High Court, in which it has been held that the addition can be made u/s 143(1)(a) of the Act, the relevant para is as under: _ In this case the assessee filed his return of income belatedly and return was processed under Section 143(1)(a) of the Act by observing that "in schedule Chapter VI-A, under Part-C deduction in respect of certain incomes, in SL.No. 2.1 deduction is claimed under Section 80P however return is not filed within due date". Against this observation the assessee filed writ petition before the Hon'ble Madras High Court and the writ petition has been dismissed by observing as under: - 13 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. "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. 8.2 Respectfully following the above judgments, we reject the content ion raised by the assessee.

5. I heard the rival submissions an perused the materials available on record. The main contention of ld. AR is that the AO precluded from making any additions or disallowance u/s 143(1) of the Act other than the amount disclosed by assessee in audit report filed u/s 44AB of the Act. According to him, the assessee has disclosed these details in audit report filed u/s 44AB of the Act along with return of income as Annexure – G as answers to question No.26 u/s 44AB of the Act report showing the amount not paid on or before the due date of respective Act was at Rs.69,833/-, which was duly disallowed by the assessee itself. Hence, no further disallowance could be made. 5.1. On the contrary, ld. DR brought to my notice that the Annexure E which is relating to the answer to question No.20(b) in tax audit report showing the details of contribution received from employees for various funds as referred tin section 36(1)(va) of the Act that amount belatedly paid at Rs.13,48,410/- same was disallowed by AO u/s 143(1) of the Act and to be confirmed. In my opinion, the disallowance made by the AO is to be restricted to the expenditure of ESI & PF not paid within the due date of relevant provisions of the Act. The assessee has been listed these details in the Annexure E to tax audit report filed u/s 44AB of the Act along with return of income. Being so, I find no merit in the arguments of assessee’s counsel that AO cannot make disallowance u/s 143(1) of the Act with regard to belated payment of employees’ ESI & PF contribution within due date of respective Act and as held by the coordinate bench in the case of Cemetile Industries cited (supra) which is reproduced as under: 3. We have heard Sh. Pramod Singte, Ms. Deepa Khare, Sh. Sanket Joshi, Sh. Sharad A. Vaze, Sh. Mahavir Jain, Sh. M.K. Kulkarni, Sh. S.N. Puranik and Sh. Burhanuddin Vora (hereinafter commonly referred to as `the ld. AR’) and Sh. Suhas Kulkarni, the ld. Departmental Representative (DR). It is undisputed that the audit report filed by the assessee indicated the due dates of payment to the relevant funds under the respective Acts relating to employee’s share and the said amounts were deposited by the assessee beyond such due dates but before the filing of the return u/s 139(1) of the Act. The case of the assessee before the authorities below has been that such payments before the due date as per section 139(1) of the Act amounts to sufficient compliance of the provisions in terms of section 43B of the Act, not calling for any disallowance. Per contra, the Department has set up a case that the 14 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. disallowance is called for because of the per se late deposit of the employees’ share beyond the due date under the respective Act and section 43B is of no assistance.

4. Before proceeding further, it would be apposite to take note of the relevant statutory provision in this regard. Section 2(24) provides that `income’ includes: `(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees’. Thus, contribution by employees to the relevant funds becomes income of the employer. Instantly, there is no dispute as to the taxability of such income in the hands of the assessee. Once such an amount becomes income of the employer-assessee, then section 36(1)(va) comes into play for providing the deduction. This provision provides that: `(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.’. The term `due date’ for the purposes of this clause has been defined in Explanation 1 to this provision to mean: `the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise.’ Thus, it is axiomatic that deposit of the employees’ share of the relevant funds before the due date under the respective Acts is sine qua non for claiming the deduction. Au Contraire, if the contribution of the employees to the relevant funds is not deposited by the employer before the due date under the respective etc., then the deduction u/s.36(1)(va) is lost notwithstanding the fact that the share of the employees had already crystallized as income of the employer u/s.2(24)(x) of the Act.

5. Adverting to the facts of the case, it is seen that the assessee claimed the deduction for the employees’ share for depositing the same in the relevant funds beyond the due date as given in Explanation 1 to section 36(1)(va) on the strength of section 43B. The latter section opens with a non-obstante clause and provides that a deduction otherwise allowable in respect of: `(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees’ shall be allowed only in that previous year in which such sum is actually paid. The first proviso to section 43B states that: `nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.’ The main provision of section 43B, providing for the deduction only on actual payment basis, has been relaxed by the proviso so as to enable the deduction even if the payment is made before the due 15 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. date of furnishing the return u/s 139(1) of the Act for that year. The claim of the assessee is that the deduction becomes available in the light of section 36(1)(va) read with section 43B on depositing the employees’ share in the relevant funds before the due date u/s 139(1) of the Act. This position was earlier accepted by some of the Hon’ble High Courts holding that the deduction is allowed even if the assessee deposits the employees’ share in the relevant funds before the date of filing of return u/s.139(1) of the Act. This was on the analogy of treating the employee’s share as having the same character as that of the employer’s share, becoming deductible u/s 36(1)(iv) read in the hue of section 43B(b). Recently, the Hon’ble Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) has threadbare considered this issue and drawn a distinction between the parameters for allowing deduction of employer’s share and employees’ share in the relevant funds. It has been held that the contribution by the employees to the relevant funds is the employer’s income u/s.2(24)(x), but the deduction for the same can be allowed only if such amount is deposited in the employee’s account in the relevant fund before the date stipulated under the respective Acts. The hitherto view taken by some of the Hon’ble High Courts in allowing deduction even where the amount was deposited in the employee’s account before the time allowed u/s.139(1), ergo, got overturned. The net effect of this Apex Court judgment is that the deduction u/s.36(1)(va) can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts and further that the due date u/s.139(1) of the Act is alien for this purpose.” 5.2 The coordinate bench of Bangalore in the case of Automac Diesels cited (supra) has decided the issue as follows: “On the rejoinder submitted by the ld.DR, the adjustments u/s 143(1)(a) of the Act can be made and in the section, it is very clear that which type of adjustments can he made. He also relied on judgment of the Hon'ble Madras High Court in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. Deputy Commissioner of Income-tax reported in (2022) 138 taxmann.com 571, wherein he also relied on the decision of the coordinate bench of the Tribunal in the case of M/s. IV Sanctum vs Asstt. Director of Income Tax CPC Bengaluru, in ITA No. 98.6/Bang/2022 vide order dated 24.11.22 for the AY 2O19- 20.” 5.3 This was squarely decided by the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT reported in 143 Taxmann.com178. 5.4 Further, the Hon’ble Madras High Court in the case of AA 520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. Deputy Commissioner of Income-tax reported in (2022) 138 taxmann.com 571 wherein held as under: _ In this case the assessee filed his return of income belatedly and return was processed under Section 143(1)(a) of the Act by observing that "in schedule Chapter VI-A, under Part-C deduction in respect of certain incomes, in SL.No. 2.1 deduction is claimed under Section 80P however return is not filed within due date". Against this observation the assessee 16 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. filed writ petition before the Hon'ble Madras High Court and the writ petition has been dismissed by observing 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. 5.5 Further, the coordinate bench of the Tribunal in MP No.117/Bang/2022 dated 30.11.2022 in the case of ACIT Vs. M/s. Sunrise Freight Movers Pvt. Ltd. wherein held as under: “5.6 Coming to the merit of the issues raised by the revenue in its miscellaneous petition, we not that Hon’ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange case 219 CTR (SC) 90 has held that nonconsideration of the decision of the jurisdictional high court/Supreme Court constitutes mistake apparent from record and is rectifiable within the meaning of section 254(2) of the Act. In Honda Siel Power Products Ltd. v. CIT 295 ITR 466, the Hon’ble Supreme Court explained the scope of rectification powers u/s/254(2) of the Act, as follows: “Scope of the Power of Rectification 12. As stated above, in this case we are concerned with the application under section 254(2) of the 1961 Act. As stated above, the expression "rectification of mistake from the record" occurs in section 154. It also finds place in section 254(2). The purpose behind enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its Order dated 10.9.2003 allowing the Rectification Application has given a finding that Samtel Color Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record. 13. "Rule of precedent" is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income- tax Act, 1961. When prejudice results from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, the Tribunal was justified in exercising its powers under section 254(2) when it was pointed out to 17 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. the Tribunal that the judgment of the coordinate bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case.” 5.7. Article 141 of the Constitution of India provides that the law declared by Hon’ble Supreme Court shall be binding on all courts within the territory of India. The law laid down by Supreme Court operates retrospectively and is deemed to the law as it has always been unless, the Supreme Court, says that its ruling will only operate prospectively. 5.8 In the light of the law as explained above, there is a mistake apparent on record in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt.Ltd. (supra) though rendered subsequent to the order passed by the Tribunal and has to be rectified by holding that the disallowance made by the revenue authorities u/s.36(1)(va) of the Act was justified. Consequently, the appeal by the Assessee will stand dismissed. The order of the Tribunal will stand modified /rectified accordingly.” 5.6 Being so, in my opinion, the disallowance could be made u/s 143(1) of the Act, which has been shown in the audit report filed u/s 44 AB of the Act as not paid in respect of employees’ share of contribution of PF/ESI within due date stipulated in the respective Act and there is no error committed by the AO in making such disallowance. Accordingly, we direct the AO to make such disallowance disclosed by assessee in his report filed u/s 44AB of the Act column no.20(b) as well as referred in Annexure E and 26(A) – Annexure G, if the assessee has made no suo motu disallowance by itself. Accordingly, I direct the AO to limit the disallowance to that extent. Ordered accordingly. ITA No.1079/Bang/2022 (AY 2019-20): 6. On similar lines as adjudicated in the case of ITA No.995/Bang/2022 for the AY 2020-21, this appeal is also remitted back to the file of AO with direction to limit the disallowance to that extent. Ordered accordingly.

7. As discussed above the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT in Civil Appeal No. 2833/2016 vide judgement dated 12th October, 2022 decided the issue on allowability/ treatment of ‘delayed’ payment of employee’s contribution to PF/ESI in hands of the assessee under the provisions of the Income Act and held that Section 18 & 1154/Bang/2022 Shri Panati Vidyanath Reddy Nirmal Enviro Solutions P. Ltd. 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e. employees’ contribution is linked to payment before the due dates specified in the respective Acts and employer’s contribution is linked to the payment before the prescribed due date for filing of return of income under Section 139(1) of the Act. The result of any failure to pay within the prescribed dates also leads to different results. In case of employees’ contribution, any failure to pay within the prescribed dates under the respective PF Act of Scheme, will result in negating the employer’s claim for deduction permanently forever under Section 36(1)(va) of the Act. On the other hand, delay in payment of employer’s contribution is visited with deferment of deduction on payment basis under Section 43B of the Act and is therefore not lost totally. Therefore, as per the above decision, the additions made by Revenue authorities were fully justified.