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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SHRI SAKTIJIT DEY & PRADIP KUMAR KEDIA
ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeal by the assessee arises out of order dated 26.08.2016 of learned Commissioner of Income-Tax(Appeals)-12, New Delhi for the assessment year 2013-14.
The solitary issue arising in the present appeal relates to disallowance of Rs.40,80,222, representing employees contribution of provident fund (PF) and employees state insurance (ESI).
Briefly, the facts are, the assessee is a resident company, engaged in the business of manufacturing of cotton yarn, blended yarn on job work basis. In course of assessment proceedings for the impugned assessment year, Assessing Officer noticed that the assessee had not deposited the employees contribution to PF and ESI within the due date provided in the respective statute. Therefore, referring to Explanation below section 36(1)(va) of the Income-Tax Act, 1961, he held that the deduction of Rs.40,12,147 is not allowable. Assessee contested the aforesaid disallowance/addition before learned Commissioner (Appeals).
While deciding assessee’s appeal, though, learned Commissioner (Appeals) held that if employees contribution to PF and ESI are paid within the due date of filing the return of income, no disallowance can be made, however, as regards assessee’s contention that the suo motu addition wrongly made by the assessee should also be deleted, he did not entertain the claim on the reasoning that such claim was not made through additional ground.
We have considered rival submissions and perused the material available on record. For deciding the issue, the following observations of learned Commissioner of Income-Tax(Appeals) would be relevant:
“8.6 Ground No. 2 relates to disallowance of Rs.40,12,147 after due date mentioned in the PF/ESI Act. Appellant has submitted that Section 43B(b) overrides all other relevant Section of Income Tax Act and, therefore, contribution made by the employees after the due date of relevant Act but before the due date of filing of Income Tax Return u/s 139(1) of the Act is allowable. CIT(A) in Appellant’s own case for A.Y. 2012-13 has deleted the disallowance on account of late payment of PF and ESI vide her order dated 28.05.2015. Hon'ble Delhi High Court in the case of CIT vs. Aimil Ltd., 321 ITR 508 has held that deduction on account of employee ESI contribution towards PF and ESI cannot be disallowed u/s 43B if the actual payment is made before the due date of filing of return. Therefore, following the judgment of Hon'ble Delhi High Court disallowance of Rs.40,12,147 is deleted. Appellant has also claimed that while filing the ITR, it has suo moto added the amount of Rs.40,80,222 on account of employees contribution of PF and ESI which has wrongly been added. However, it is seen that Appellant has not taken any additional ground regarding its claim, therefore, claim of Appellant is not considered.”
From the aforesaid observations of learned Commissioner (Appeals), it is very much clear that he has accepted assessee’s claim that, in case, employees contribution to PF and ESI are deposited within the due date of filing of return of income, no disallowance of such amount can be made. In fact, learned Commissioner (Appeals) has deleted the disallowance made by the Assessing Officer. However, the matter does not end there. As it appears from facts on record, in the return of income filed for the impugned assessment year, assessee had suo motu added back the employees contribution to PF and ESI, since, they were deposited beyond the time limit prescribed under the relevant statute. In addition to the suo motu disallowance made by the assessee, Assessing Officer again made the very same disallowance while completing the assessment.
Though, learned Commissioner (Appeals) deleted the disallowance made by the Assessing Officer, however, he did not delete the suo motu addition/disallowance made by the assessee of the very same amount. The only reason ascribed by learned Commissioner (Appeals) for not accepting assessee’s claim is that such claim was not made through any additional ground.
In our view, it will be too hyper technical to reject assessee’s claim in absence of any additional round, in case, the material on record establish that the assessee is otherwise entitled to the deduction. In aforesaid view of the matter, we restore the issue to the Assessing Officer for verifying assessee’s claim of suo motu disallowance made of employees contribution to PF and ESI. In case, assessee’s claim is found to be correct, the suo motu addition made has to be deleted, as, in principle learned Commissioner (Appeals) has accepted that employees contribution to PF and ESI, if deposited within the due date of filing of return of income is an allowable deduction. Needless to mention, Assessing Officer must extend adequate opportunity of being heard to the assessee before deciding the issue.
In the result, appeal is allowed for statistical purposes.
Order pronounced in the open court on 17th May, 2022.