BANSHIDHAR SEWBHAGOVAN & CO.,DIBRUGARH vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, DIBRUGARH

This appeal at the instance of the assessee pertaining to the Assessment Year (in short “AY”) 2019-20 is directed against the order of the National Faceless Appeal Centre [in short ld. “CIT(A)”] dated 22.09.2021 which is arising out of the order u/s 143(3) of the Assessing Officer dated 01.05.2020.

The case was called for. None appeared for the assessee. In the past, various notices have been served through RPAD but there is no compliance. We, therefore, deem it fit to hear this appeal with the assistance of ld. DR and the available records.

From the perusal of the grounds of appeal, the grievance of the assessee is two-fold. Firstly, the ld. CIT(A) erred in confirming disallowance u/s 36(1)(va) r.w.s 2(24)(x) of the Act for the delay of Assessment Year: 2019-20 Banshidhar Sewbhagovan & Co, Dibrugarh deposit of PF and ESI at Rs.5,12,478/- and secondly, the ld. CIT(A) erred in not giving benefit of Rule 8 of the Income Tax Rules applicable to assessee as the assessee engaged in the business of manufacturing of tea.

We have heard the ld. DR and persued the records placed before us. So far as the disallowance of Rs.5,12,478/- towards delay in deposit in employee’s contribution to PF & ESI is concerned, we find that the Hon’ble Supreme Court in Chekmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) dated 12.10.2022 has settled the issue and thus in the light of the ratio of the Hon’ble Apex Court, we are inclined to hold that the said sum of Rs.5,12,478/- has rightly been disallowed. So far as the second ground of the assessee that whether the above- stated disallowance of Rs.5,12,478/- is to be restricted only to the extent of 40%, we find that there is no dispute to the fact that the assessee is engaged in the business of manufacturing of tea and for such type of assessee, income is to be computed as provided under Rule 8 of the Income Tax Rules. Sub-section 1 of Rule 8 states that if the income is derived from sale of tea grown and manufactured by the seller in India then the same shall be computed as if it were income derived from business and 40% of such income shall be deemed to be income liable to tax. Since the assessee is engaged in the business of manufacturing of tea, only 40% of its income is allowable for tax. Therefore, when the alleged disallowance of Rs.5,12,478/- is added back to the income of the assessee, it will be entitled to deduction of 60% and the remaining 40% i.e. Rs.2,04,991/- will be subject to tax. Thus, in view of above, disallowance is sustained at Rs.2,04,991/-. Assessee gets relief of Rs.3,07,487/-. Ground Nos.2,3 & 4 of assessee’s

In the result, the appeal of the assessee is partly allowed. Kolkata, the 15th March, 2023.