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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI MANJUNATHA. G, HON’BLE
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
These appeals filed by the assessee are directed against separate, but identical orders of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, all dated 11.11.2022, 22.11.2022 & 23.11.2022 and pertains to assessment years 2019-20, 2018-17 & 2020-21, respectively.
:-2-: 70 & 71/Chny/2023 ITA No: 70/Chny/2023 AY 2018-19:
The brief facts of the case are that the assessee is engaged in the business of manufacture of leather belts, leather purses, bags etc filed its return of income for the assessment year 2018-19 on 28.09.2018, declaring total income of Rs. 1,06,77,650/-. The return of income filed by the assessee has been processed u/s. 143(1)(a) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 16.02.2019 and determined total income of Rs. 1,55,62,470/-, by making certain disallowances including disallowance of employees contribution to PF & ESI u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act for Rs. 44,376/-. The assessee carried the matter in appeal before the first appellant authority, but could not succeed. The Ld. CIT(A) for the reasons stated in their appellant order dated 22.11.2022 rejected arguments of the assessee and sustained additions made towards disallowances of Employees contribution to PF & ESI u/s 36(1)(va) of the Act.
The ld. Counsel for the assessee, referring to paper book filed by the assessee submitted that, for the month of March,
:-3-: 70 & 71/Chny/2023 2018, the assessee has remitted employees contribution to ESI on 14.04.2018 and the same has been debited to bank account of the assessee by the bank on 16.04.2018. However, the tax auditor in the report issued u/s. 44AB of the Act, stated that contribution for the month of March, 2018 has been paid on 16.04.2018 by an inadvertent error. He further submitted that 15th April, 2018 being Sunday, the bank has debited amount paid to ESI on 16.04.2018, but fact remains that the assessee has remitted the contribution on or before due date prescribed under the Provisions of ESI Act.
The ld. DR, on the other hand submitted that the AO, CPC has processed the return on the basis of information furnished by the assessee and as per tax audit report, Form no 3CD, the tax auditor reported that contribution for the month of March, 2018 has been paid on 16.04.2018. Therefore, there is no error in the reasons given while computation of total income by the AO and their order should be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. As per details filed by the assessee including challans
:-4-: 70 & 71/Chny/2023 for payment of employees contribution to ESI, bank statements of assessee and tax audit report in Form no 3CD, we find that although the assessee has remitted employees contribution to ESI on 14.04.2018, but the bank has debited to bank account of the assessee on 16.04.2018, because 15.04.2018 being Sunday as a holiday for bank. As per General Clauses Act, if the last date for compliance of any requirement is holiday on account of Sunday or other declared holiday, then it is deemed that payment made on subsequent day should be considered as payment made on due date as prescribed under the Act. Therefore, we are of the considered view that when the assessee has filed relevant details to prove that payment has been made on or before 15.04.2018, the AO ought not to have disallowed employees contribution to ESI u/s. 36(1)(va) of the Act. But fact remains that, these documents were not before the AO when the return has been processed. Therefore, we set aside the issue to the file of the AO and direct the AO to re-consider the issue of disallowance u/s. 36(1)(va) of the Act towards employees contribution to ESI, in light of various evidences filed by the assessee and decide the issue as per law.
:-5-: 70 & 71/Chny/2023 6. In the result, appeal filed by the assessee is allowed for statistical purposes.
ITA NO: 71/Chny/2023 AY 2020-21:
The first issue that came up for consideration from ground no. 3 to 8 of assessee’s appeal is disallowance u/s. 36(1)(va) of the Act for Rs. 5,17,431/-. The AO has disallowed employees contribution to PF & ESI for the month of September, 2019 and March, 2020 u/s. 36(1)(va) of the Act for belated payment of said contribution under respective Act. The AO, had also disallowed employees contribution to PF for the month of May, 2019 and March, 2020 for the reasons of belated payment of said contribution under respective Act. It was the argument of the assessee before us that ESI contribution for the month of September, 2019 has been paid on 12.10.2019, but auditor had wrongly reported that said contribution had been paid on 11.10.2020. He further submitted that for the month of March, 2020 the assessee had paid dues on 08.05.2020, whereas the extended due date as per Employees State Insurance Corporation notification dated 01.07.2020 is upto 15.07.2020. Similarly, employees contribution to PF for the month of May, 2019 has been :-6-: 70 & 71/Chny/2023 remitted within due date as per the provision of Provident Fund Act. However, the AO has disallowed said payment while computing income without understanding the fact that there was an extension of due date for payment of contribution for the month of March, on account of Covid-19 lockdown.
The Ld. DR, on the other hand supporting the order of the CIT(A) submitted that as per details available with the AO while processing return of income u/s. 143(1) of the Act, the assessee has not reported relevant details with evidences. Therefore, he has rightly disallowed ESI & PF contribution and their order should be uphold.
We have heard both the parties, and considered relevant evidences filed by the assessee including Challans for payment of employees contribution to PF & ESI. We find that contribution for the month of September, 2019 towards ESI has been paid on 12.10.2019. However, by inadvertent error the tax auditor reported that said contribution has been paid on 11.10.2020. Similarly, contribution for the month of March, 2020 has been paid on 08.05.2020, whereas the extended due
:-7-: 70 & 71/Chny/2023 date for payment was 15.07.2020, as per notification of Employees State Insurance Corporation dated 01.07.2020. Therefore, we direct the AO to verify the evidences filed by the assessee and allow employees contribution to ESI paid for the month of September, 2019 and March, 2020. In so far as contribution to PF for the month of May, 2019 and March, 2020, as per the tax audit report itself, the assessee had paid contribution for the month of May, 2019 on 08.06.2019, which is within due date for payment on 15.06.2019. Similarly, for the month of March, 2020, the assessee has remitted contribution on 08.05.2020, whereas extended due date is 15.05.2020, as per notification dated 15.04.2020 of Employees Provident Fund Organization. Therefore, we direct the AO to verify the details filed by the assessee and allow deduction towards employees contribution to PF for the month of May, 2019 and March, 2020.
The next issue that came up for our consideration from ground no. 9 to 11 of assessee’s appeal is disallowance of Rs. 13 lakhs on account of provisions of gratuity. The ld. Counsel for the assessee referring to statement of total income and :-8-: 70 & 71/Chny/2023 relevant ITR filed for the assessment year 2020-21, submitted that assessee has made provisions for gratuity at Rs. 25,28,306/- and added back to the total income in the statement of total income. Further, the assessee has paid provisions for gratuity of Rs. 13 lakhs before due date of filing return of income u/s. 139(1) of the Act and the same has been claimed has deduction. However, the AO has disallowed amount paid on or before due date u/s. 139(1) and added back to the total income.
We have heard both the parties and considered relevant material on record and we find that, although the assessee has made provisions for gratuity at Rs. 25,28,306/-, but the same has been added to total income while computing income from business. Further, the assessee has claimed deduction for Rs. 13 lakhs towards amount paid on or before due date for furnishing return of income u/s. 139(1) of the Act. Therefore, we direct the AO to verify the issue in light of evidences filed by the assessee and allow deduction towards provisions for gratuity as claimed by the assessee.
:-9-: 70 & 71/Chny/2023 12. The next issue that came up for our consideration from ground no. 12 & 13 of assessee appeal is disallowance of Rs. 62,117/- u/s. 14A of the Act. We find that the assessee has disallowed expenses relates exempt income u/s. 14A for Rs. 62,117/- in the statement of total income. Therefore, further disallowance towards very same amount by the AO u/s. 14A amounts to double deduction. Therefore, we direct the AO to verify the issue in light of evidences filed by the assessee and delete additions made towards disallowance u/s. 14A of the Act, in case the assessee has already disallowed expenses relatable to exempt income u/s. 14A of the Act.
In the result appeal filed by the assessee for assessment year 2020-21 is allowed for statistical purposes.
ITA NO: 32/Chny/2023 AY 2019-20:
The only issue that came up for our consideration from ground no. 3 to 9 of assessee’s appeal is disallowance of employees contribution to PF & ESI u/s. 36(1)(va) r.w.s. 43B of the Act, for Rs. 4,03,497/-. The Ld. Counsel for the assessee, referring to challans for payment of employees contribution to ESI for the month of May, 2018 submitted that :-10-: 70 & 71/Chny/2023 the assessee has remitted said contribution on 14.06.2018. However, the AO has disallowed said amount on the basis of tax audit report, where the auditor has reported that said amount has been paid on 22.06.2018. He further submitted that, the assessee has remitted employees contribution to PF for the month of June, 2018 on 14.07.2018, but the bank has debited said amount to assessee’s bank account on 16.07.2018, because 15.07.2018 was a bank holiday on account of Sunday. Therefore, he submitted that the AO has completely erred in disallowing employees contribution to PF for the month of May, 2018 and June, 2018.
The ld DR, on the other hand submitted that the AO has disallowed contribution to PF & ESI on the basis of tax audit report, where the auditor has reported that there is a delay in remittance of PF & ESI for the month of May, 2018 and June, 2018 and thus, there is no error in the reasons given by the AO to disallow said contribution u/s. 36(1)(va) of the Act and their order should be uphold.
:-11-: 70 & 71/Chny/2023 16. We have heard both the parties and considered relevant evidences filed by the assessee, including statement for payment of ESI contribution and PF for the month of May, 2018 and June, 2018 and we find that the assessee has remitted ESI contribution for the month of May, 2018 on 14.06.2018 and for June, 2018 on 14.07.2018. However, the tax auditor has reported that contribution for the month of May, 2018 has been paid on 22.06.2018 and for the month of June, 2018 on 16.07.2018. Similarly, the assessee has remitted PF contribution for the month of June, 2018 on 14.07.2018, whereas, the auditor reported that said contribution has been paid on 16.07.2018. We find that there is no basis for the auditor to report that payment for the month of May, 2018 has been paid on 22.06.2018, because as per evidences the assessee has remitted said contribution on 14.06.2018. In so far as payment for the month of June, 2018, although the assessee has remitted contribution on 14.07.2018, but because of Sunday being holiday for bank, the bank has debited to assessee’s bank account on 16.07.2018 and on that basis of auditor reported that contribution for the month of June, 2018 has been paid on 16.07.2018. We find that as per General Clauses Act, if last
:-12-: 70 & 71/Chny/2023 date of compliance of any statutory provisions is holiday, then it is deemed that payment made on next day is considered as payment made on last date itself. Therefore, we direct the AO to verify the facts with regard to the payment of ESI for the month of May, 2018 and June, 2018 in light of evidences filed by the assessee and also taking into account the provisions of General Clauses Act and decide the issue in accordance with law. As regards the contribution towards PF for the month of June, 2018, like in ESI case the assessee has remitted the contribution on 13.07.2018, because of bank holiday being Sunday, bank has debited to the account of the assessee on 16.07.2018 and on that basis, the auditor reported said contribution has been paid on 16.07.2018. Therefore, we direct the AO to verify the details with regard to the PF contribution in light of evidences filed by the assessee and also keeping in mind the provisions of General Clauses Act and allow the deduction as claimed by the assessee u/s. 36(1)(va) of the Act. In the result, appeal filed by the assessee is allowed for statistical purposes.
:-13-: 70 & 71/Chny/2023 17. As a result, all the three appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the court on 28th February, 2023 at Chennai.