M/S DAON AUTOPARTS INDIA PRIVATE LIMITED,KANCHIPURAM vs. ITO, NFAC, DELHI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) (National Faceless Appeal Centre) [NFAC], Delhi dated 23.12.2022 relevant to the assessment year 2017-18 passed under section 270A of the Income Tax Act, 1961 [“Act” in short].

Facts are, in brief, that during the course of assessment proceedings, the Assessing Officer has noted that the assessee has made delay remittance of employees contribution of EPF/ESI to the tune of ₹.17,93,326/-. As per the provisions of section 36(1)(va) of the Act, in respect of any sum received by the assessee as contribution from his employees towards any welfare fund of such employees is allowed as deduction only if such sum is credited by the taxpayer to the employee’s account in the relevant fund on or before the due date. If the payments are not made within the due date there is contravention of the provisions of the Provident Fund Act and the defaulting assessee are not entitled to the benefits of deduction which are otherwise allowable to them under the scheme of the provisions of the Act. Accordingly, the Assessing Officer has disallowed an amount of ₹.17,93,326/- under section 36(1)(va) of the Act and added to the total income of the assessee.

Subsequently, the Assessing Officer has initiated penalty proceedings under section 270A of the Act on the ground that the assessee has under-reported its income and levied penalty of ₹.2,77,069/- under section 270A of the Act, which was confirmed by the ld. CIT(A).

We have gone through the penalty order and appellate order. The Assessing Officer has not discussed anything about the under-report of the income. In this case, the claim of the assessee under section 36(1)(va) of the Act was denied on the ground that there is a delay in payment. How the delay in payment is amounting to under-report of income was not discussed by the Assessing Officer. Even, the ld. CIT(A) has simply confirmed the order of the Assessing Officer. Thus, we find that it is not a fit case to impose penalty under section 270A of the Act. Accordingly, the penalty levied under section 270A of the Act is deleted.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 12th April, 2023 at Chennai.