SUBHASH CHANDER,NEW DELHI vs. DCIT CPC, BANGALORE

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ITA 1843/DEL/2020Status: DisposedITAT Delhi08 August 2022AY 2018-196 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition made on account of delayed deposit of employee's share of PF and ESI dues, when deposited before the filing of the return of income, was not justified. The Tribunal followed the jurisdictional High Court's decision in favour of the assessee.

What were the facts?

The assessee filed a return of income, which was later revised by the CPC. The assessee appealed to the CIT(A) against the revised intimation, but the appeal was dismissed. The assessee then appealed to the ITAT.

What were the issues?

Whether disallowance of employee's contribution to PF/ESI is justified when deposited before the filing of the return of income. Applicability of Finance Act 2021 amendment to the assessment year under consideration.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 43B,Section 2(24)(x)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI

For Appellant: Ms. Supriya Mehra, C.A
For Respondent: Shri Abhishek Kumar, Sr. D.R
Hearing: 02.08.2022Pronounced: 08.08.2022

ORDER

PER ANIL CHATURVEDI, AM:

1.

This appeal filed by the assessee is directed against the order dated 31.07.2020 passed by the Commissioner of Income Tax (Appeals)-12, New Delhi relating to Assessment Year 2018-19.

2.

Brief facts of the case as culled out from the material on record are as under :-

3.

Assessee is an individual and filed his return of income on 13.10.2018 for A.Y. 2018-19 declaring total income of Rs.38,29,810/-. In the intimation issued u/s 143(1) of the Act by CPC, Bangalore vide Identification No.

2 CPC/1819/A3/1863823580 dated 21.05.2019, the total income was determined at Rs.42,19,750/-. Aggrieved by the intimation issued u/s 143(1) of the Act, assessee carried the matter before CIT(A) who vide order dated 31.07.2020 in Appeal No.81/19-20 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds:

1. “That on the facts and circumstances of the case, the Ld. CIT Appeal has erred in sustaining the addition/disallowance made in the order passed U/s 154/155 of the act on the basis of an application made u/s 154 by the appellant against assessment order passed by DCIT, CPC, Bengaluru u/s 143(1) of the act.

2. That the Ld. CIT ignored the explanations submitted by the assessee and sustained assessment of assessee at the income at Rs.42,49,497/- as against the returned income of Rs.38,59,558/- adding back Rs.3,89,939/- alleging delay in payment of employees’ share of PF and ESI dues on due dates.

3. That the learned CIT has erred both on facts and in law in completing the assessment without giving proper and adequate opportunity to the assessee to represent its case and also in framing the assessment ignoring the correct legal position.

4. The appellant prays that the disallowances/additions of Rs.3,89,939/- made on account of delay in payment of employees’ share of PF and ESI dues on due date but before filing of ITR be deleted, keeping in view of circular issued by CBDT circular no 22 of 2015 and also order of Honorable Apex Court vide order dated 04-07-2017 in case of M/s Rajsthan State Beverages Corporation Ltd. 84 taxmann.com 185 (250 taxman 16)(SC).

5. The appellant craves leave to add, amend or alter any of the grounds of appeal.”

3 4. Before us, at the outset, Learned AR submitted that the grievance of the assessee is the additions on account of delay in deposit of employee’s contribution towards provident fund and ESI fund made by AO and upheld by CIT(A).

5.

Before us, Learned AR submitted that additions has been made in the intimation issued by CPC, Bangalore u/s 36(1)(va) of the Act for the reason that the contribution received towards PF/ESIC by the assessee from its employees was not deposited before the due date. He submitted that though there has been delay in deposit of PF/ESIC Contributions but all the contributions received by the assessee from its employees have been deposited with the appropriate authorities before the filing of return of income by the assessee. He therefore submitted that since the amounts have been deposited before the filing of return of income, no disallowance is called for and for aforesaid proposition, he relied on the decision in the case of Azamgarh Steel & Power vs. CPC in dated 31.05.2021 and CIT vs. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi) and various other decisions.

6.

Learned DR on the other hand supported the order of lower authorities and also placed reliance on the decision of Delhi Tribunal in the case of Vedvan Consultants Pvt. Ltd. vs DCIT in order dated 26.08.2021. He also submitted that the amendment brought out by Finance Act 2021 would be applicable to the present case as by the amendment it has been clarified that provisions of Section 43B of the Act shall

4 not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub clause (x) of Clause (24) of Section 2 applies.

7.

We have heard the rival submissions and perused the material available on record. The issue is no more res-integra. The issue has already been settled in favour of the assessee by various judicial pronouncements by the Tribunal. The Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. dated 10.09.2018 has already taken a view in favour of the assessee by holding as under: “In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.”

8.

As far as reliance by Learned DR on the amendment brought out by Finance Act 2021 is concerned, “notes on clauses” to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation, we are of the view that the amendment brought

5 out by Finance Act 2021 does not apply to the assessment year under consideration.

9.

Before us, Revenue has not placed any material on record to demonstrate that the aforesaid order cited hereinabove has been overruled/stayed/set aside by higher judicial forum. In view of the aforesaid facts, we are of the view that the AO was not justified in denying the deduction claimed by the assessee on account of late deposit of PF/ESI/EPF, albeit before filing the return of income. Admittedly in the matter, the Revenue had not contended that the assessee has deposited the contribution after the filing of the return of income. In view of the above, respectfully following the decision of the Hon’ble High Court cited hereinabove, we allow the ground raised by the assessee and direct the AO to delete the addition.

10.

We have since deleted the addition, we are of the view that the other grounds raised by the assessee have been rendered academic and does not require adjudication and hence not adjudicated.

11.

In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 08.08.2022

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