BALAJI SOLUTIONS LIMITED,HOWRAH vs. ACIT, CIRCLE-2(1), KOLKATA, KOLKATA

The grounds of appeal raised by the assessee read as under:-

(1) That the Ld. CIT(A) was wrong in confirming the order of A.O which was passed without properly appreciating the facts of the case and without providing proper opportunity of being heard to the appellant. Therefore, the order confirmed by the CIT(A) is in gross violation of natural justice and needs to be quashed. (2) That the Ld. CIT(A) was wrong in confirming the addition of Rs. 25,00,000/- by treating the same as undisclosed cash credit u/s 68 of the Act. The Ld. CIT(A) as well as Ld. A.O failed to consider the facts that the aforesaid loan was interest bearing, taken through banking channel and was repaid back in the same financial year through proper banking channel. Further, TDS was duly deducted on the payment of interest. As such, there can’t be any doubt regarding the genuineness of transaction. Therefore, the addition confirmed by CIT(A) is bad in law and needs to be deleted. (3) That the Ld. CIT(A) was wrong in confirming the disallowance of Rs.2,86,814/- u/s 36(1)(va) of the Income Tax Act on account of delay in deposit employee’s contribution towards PF & ESI within the due date prescribed under PF/ESI law. The Ld. CIT (A) as well as Ld. A.O failed to consider the fact that the aforesaid payments were made within the due date of filing of return u/s 139(1) of the Act. Further, the delay was due to technical glitch in the PF/ESI Portal. It is a well settled preposition that employee’s contribution towards PF & ESI is allowed as deduction if the same is paid within the due date of filing of return u/s 139(1) of the Act. Further, the Amendment made by Finance Act, 2021 is also not applicable for A.Y 2017-18. Therefore, the addition confirmed by CIT(A) is bad in law and needs to be deleted.

Brief facts of the case are that the assessee is a Limited Company engaged in business. Income of Rs.15,09,69,250/- declared in the e-return was filed on 30.10.2017. Case selected for complete scrutiny through CASS followed by serving of notices under section 143(2) and 142(1). Relevant details were called for by the assessee and in response to the notices, assessee- company submitted audited accounts and copies of relevant documents through e-assessment portal. Assessment completed after making disallowance under section 36(1)(va) of the Act on account of delay in deposit employees’ contribution towards P.F. and ESI amounting to Rs.2,86,814/-. The ld. Assessing Officer also made an addition under section 68 of the Act at Rs.25,00,000/- for unexplained cash credit. Income assessed by the ld. Assessing Officer at Rs.15,37,56,064/-.

Aggrieved, the assessee preferred appeal before the ld. CIT(Appeals), but failed to succeed on any of the grounds. Being aggrieved, the assessee is now in appeal before the Tribunal.

Ld. Authorized Representative for the assessee vehemently supporting the written submission placed before the ld. CIT(Appeals) with regard to disallowance under section 36(1)(va) 3 Assessment Year: 2017-2018 Balaji Solutions Limited of the Act and submitted that there is no delay in the said deposit towards employees’ contribution as it has been paid mostly before the grace period provided under the P.F. and ESI Act and, therefore, disallowance is uncalled for.

On the other hand, ld. D.R. vehemently supported the order of ld. CIT(Appeals).

We have heard the rival contentions and perused the relevant records placed before us. Ground No. 1 in this appeal is general in nature, which does not need for any adjudication.

Apropos to Ground No. 2 regarding the issue of unexplained cash credit amounting to Rs.25,00,000/- under section 68 of the Act is concerned, we find that the assessee took loan from M/s. Ambala Trafin Pvt. Limited. It is not in dispute before us that the aforesaid loan was interest-bearing loan taken through normal banking channel and was repaid back in the same financial year through banking channel and tax at source has been deducted on the interest paid thereon and all the documentary evidence in order to explain alleged credit has been duly placed before the lower authorities. Since no specific discrepancy has been observed by the lower authorities and the said loan being taken and repaid during the year itself and also considering the income of Rs.15.10 crores offered by the assessee, we do not find any reason to question the genuineness of the said loan. We, 4 Assessment Year: 2017-2018 Balaji Solutions Limited therefore, reverse the finding of the ld. CIT(Appeals) and delete the addition of Rs.25,00,000/- under section 68 of the Act and allow Ground No. 2 raised by the assessee.

Apropos to Ground No. 3 for disallowance under section 36(1)(va) of the Act at Rs.2,86,814/-, following details has been placed by the assessee to show that in most of the cases there is no delay in the payment of employees’ contribution for various funds and the same is reproduced below:- Assessment Year: 2017-2018 Balaji Solutions Limited

From the perusal of the above sheet, we notice that in most of the cases, the amount has been deposited on or before the due date of payment except few, which are beyond the due date. Recently Hon’ble Supreme Court in its judgment dated 12.10.2022 in the case of Checkmate Services Pvt. Limited –vs.- CIT (Civil Appeal No. 2833 of 2016) has held that if employees contribution towards P.F. and ESI are deposited after the due date prescribed under the Act, the same shall be disallowed and added to the income of the assessee. We are, therefore, of the considered view that this issue needs to be restored to the file of ld. Assessing Officer for necessary verification and examination of the facts for which the assessee shall file the copies of treasury challan for proving the deposit of P.F. and ESI as mentioned in the sheet extracted supra and in case ld. Assessing Officer found that the same has been deposited on or before the due date as prescribed under the PF & ESI Act, then no disallowance is called for, and in case it is found that it is deposited after the due date (considering the grace period as provided under the respective Act governing P.F. and ESI), then the same shall be disallowed as per the ratio laid down by the Hon’ble Apex Court. Thus ground no. 3 raised by the assessee is allowed for statistical purposes.