DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE vs. NEELIMA PANKAJ THORAT, PUNE

The only issue raised by the Revenue is against allowing deduction of expenditure in respect of Employees contribution to ESIC and PF paid beyond the due date prescribed under the respective statutes in contravention of the provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Act.

Briefly stated, the facts of the case are that the Assessing Officer (AO) processed the return u/s.143(1)(a) and made adjustment on account of late payment of employees contribution towards ESIC and PF. The ld. CIT(A) allowed the appeal, against which the Revenue has come up before the Tribunal.

We have heard the rival submissions and gone through the relevant material on record. The issue of making disallowance u/s.36(1)(va) in respect of Employees share of ESIC and PF deposited beyond the due date under the respective Acts but before the time limit for filing the return u/s.139(1) is no more res integra in view of the judgment of Hon’ble Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) holding 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

The assessee in its Cross Objection has taken up jurisdiction issue. The ld. AR contended that the appeal before the Tribunal was filed by JCIT (OSD), Circle-8, Pune who was not competent to file the appeal. In support of this contention, the ld. AR relied on Notification dated 04-01-2012 dealing with faceless appeal before the ld. CIT(A). On a specific query, it was admitted that this Notification applies only qua the appeals before the ld. CIT(A) and not before the Tribunal. On the contrary, the ld. DR relied on another Notification dt. 25-09-2020 and contended that the jurisdictional AO had rightly filed the appeal before the Tribunal.

Having heard the rival submissions and perused the relevant material on record, it is seen that the Notification dated 25-09-2020 deals with “Faceless Appeal Scheme, 2020”. Para 3 of the Notification deals with the “Scope of the Scheme” providing that :

The assessee has raised another additional ground contending that the AO went wrong in making adjustment u/s.143(1) in respect of Employees share of ESIC and PF deposited beyond the due date under the respective Acts. He relied on the judgment of Hon’ble Bombay High Court in Khatau Junkar Ltd. and Another Vs. K.S.

We are unimpressed with the contention raised and reliance placed on the judgment of Hon’ble Bombay High Court in Khatau Junkar Ltd. and Another (supra). In that case, the adjustment u/s.143(1)(a) was made by recalculating the book profit by not accepting the transfer of certain amount to the shares, revaluation Reserve Account. Obviously, this judgment has no application in the present context because the communication u/s.143(1)(a) to the assessee categorically provides for the “disallowance of expenditure indicated in the Audit report but not taken into account in computing the total income in the return filed u/s.143(1)(a) of the Act”. The instant intimation has been issued only on the basis of the Audit report indicating that the amount disallowed represented the Employees share of ESIC and PF deposited beyond the due date under the respective Acts. The Pune Benches of the Tribunal have dealt with this issue elaborately in Cemetile Industries Vs. ITO and others (ITA No.693/PUN/2022 and others, dt. 23-11-2022) and has rejected the assessee’s contention in this regard. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) was not justified in deleting the disallowance u/s.143(1)(a) in respect of the Employees share of ESIC and PF deposited beyond the due date under the respective Acts and such view is contrary to the law laid

In the result, the appeal of the Revenue is allowed and the Cross Objection by the assessee is dismissed.