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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ SMC Bench, Hyderabad
Before: Smt. P. Madhavi Devi
This is assessee’s appeal for the A.Y 2009-10 against the order of the CIT (A)-4, Hyderabad, dated 21-11-2016.
Brief facts of the case are that the assessee firm, engaged in the business of dealers in grills, gypsum boards and contractors in false ceiling, filed its return of income declaring total income of Rs.29,06,570/-. The assessment was completed u/s 143(3) determining the total income at Rs.30,44,080/-. Subsequently, the AO observed that an amount of Rs.1,02,613/- received from employees towards contribution to PF was paid by the assessee to the Govt. after the due date mentioned in the relevant statute and therefore, it is not allowable as a deduction as per section 36(1)(va) of the I.T. Act. To take remedial action, the case was reopened by issuance of a notice u/s 148 dated 4.10.2012. In reply thereto, the assessee accepted that there was a delay in payment of PF, but submitted that complete dues of PF of 2017 Premier Agencies Hyderabad.
were paid by it before the end of the financial year, except for the month of March, 2009. It was submitted that the amount received towards the PF needs to be credited to the employees a/c before the due dates and that the amount paid as a challan shall be credited to employees A/c only at the time of filing of contribution returns under the relevant Act. Though the assessee admitted that there was a delay in payment, it submitted that the same was corrected in due time. The assessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Vinay Cement Ltd. The AO however, did not accept the same and he disallowed the claim of deduction of the employees contribution to the extent of Rs.1,02,613/- and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order of the AO and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “1. That the order of the Commissioner of Income Tax (Appeals)-4, Hyderabad, in confirming the assessment order passed by the Asst. Commissioner of Income Tax, circle-5(1). Hyderabad, for the assessment year 2009-10 under the Income Tax Act, 1961, is contrary to law, against the weight of evidence and probabilities of the case.
2. That the original assessment order passed by the then assessing authority is perfectly correct and do not warrant revision at all. It is submitted that there is no illegality or impropriety or any irregularity in the original assessment order passed by then the assessing authority under section 143(3) of the Income Tax Act to warrant any revision at all.
3. There is no fresh material de-horse the assessment record to warrant any revision at all of the earlier assessment order. All the facts and documents borne on record were before the assessing before completion of the assessment. After looking to the above and facts and documents, the assessment have been completed. Hence proposing initiating section 148 of the Income Tax Act and invoking section 148 of the Income Tax do not warrant the borne facts of the case to revise the assessment order.
4. The observation of the Asst. Commissioner that the particulars were concealed is absolutely incorrect. The Page 2 of 6 of 2017 Premier Agencies Hyderabad.
Hon'ble Commissioner of Income Tax of Appeals may be pleased to call for the entire assessment records to know about the concealed particulars. The allegation is bald unwarranted and contrary to the facts on record.
Mere accepting that there is delay in payment of provident fund, do not mean to be accepted as income of the firm. The Asst. Commissioner failed to note that the delay in payment was complied within the time limit prescribed under the Act or not, which the assessing authority failed to note and committed an error in revising the assessment order.
6. The assessment order is going beyond the scope of the show cause notice. The petitioner replied to the contentions, which the assessing authority twisted and further added certain facts to disallow the contentions of the petitioner firm. The Hon'ble Court have held in number of occasions, that the final order cannot go beyond the notice. Once the above said test is applied, the assessment order is not sustainable in the eye of law.
The Assistant Commissioner failed to furnish the reasons, why he proposed the notice under section 148 of the Income Tax Act. At whose instance the above said notice was proposed. The petitioner firm is under the bonafide belief that the notice was issued at the instance of the audit to propose revision and based on that the above said notice was issued and confirmed the proposition although reply was submitted. The Hon'ble Courts have held that audit party note cannot make the proposed addition. The assessing authority is quasi- judicial authority under the Act to act independently and not the instrumental at the instance of the audit party's observation. Hence the assessment is bad in law and liable to be set aside.
The observation of the assessing authority in disallowing the sum of Rs.l.02.613/towards the employee's contribution to the relevant fund, was dealt under section 36(l)(va) read with explanation and held that the sum so paid is not entitled for deduction. On the contrary to section 43 B which allows deduction of any sum payable by the assessee on actual payment basis i.e., more so the said sum should have been paid on or before filing the return of Income. When there are two provisions contradicting to each other, the benefit should have been extended to the assessee which minimizes the liability. When there is debatable provision the assessee should not be mulct with harsh provisions, when simplicity provisions are on record.
The assessing authority ignored and failed to distinguish that the decision of the Hon'ble Delhi Court, of 2017 Premier Agencies Hyderabad.
which was confirmed by the Hon'ble Supreme court by dismissing the departmental special leave petition, that means the judgment rendered by the Hon'ble Delhi High Court is approved. Hence distinguishing the said judgment by the assessing authority is quite contrary to law and liable to be set aside. That the Petitioner craves leave of the Hon'ble Tribunal to permit the Petitioner to add, alter or amend the grounds of appeal during pendency of the same “.
The learned Counsel for the assessee submitted that what is disallowed by the AO is not employees contribution, but that it is employers contribution and since the same has been paid before filing of the return of income, it is not to be disallowed u/s 36(1)va) of the Act. He has filed the relevant details in the form of additional evidence and requested to admit the same and consider the issue afresh.
The learned DR however, opposed the additional evidence stating that the assessee has not stated before the AO and the CIT (A) that what is sought to be disallowed is not the employees’ contribution, but he has disallowed employers’ contribution. To this, the learned Counsel for the assessee, has drawn our attention to the details of the payment wherein even interest of Rs.4637/-has been paid on 27.09.2008 for late payment of the PF Amount into the Bank A/c. He placed reliance upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Vinay Cement, while the learned DR relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Gujarat Road Transport Corporation (2014) 41 Taxmann.com 100 (Guj.) and the Hon'ble Kerala High Court in the case of CIT vs. Merchem Ltd (2015) 61 TAxmann.com 119 (Ker.) and the decision of the Hon'ble Madras High Court in the case of Unifac Management of 2017 Premier Agencies Hyderabad.
Services (India) (P) Ltd vs. Dy. CIT reported in (2018) 100 Taxmann.com 244 (Mad.) wherein it was held that the employees contributions not paid within the due date cannot be allowed u/s 36(1)(va) of the Act.
5. Having regard to the rival contentions and the material on record, I find that the assessee’s contention that what has been disallowed is not the employees’ contribution, but it is employers’ contribution, needs verification by the AO. If it is employers’ contribution, then as per the amended provision, it is to be allowed as a deduction if it is paid even before filing the return of income and if it is employees’ contribution also, as held by the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd (2009) (185 Taxmann.com 416), it is to be allowed even if it is paid before the date of filing of the return of income. Therefore, I deem it fit and proper to remand the issue to the file of the AO only to verify whether the disallowance is of the employer or employees contribution to the PF, and allow the deduction in accordance with the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd (Supra).
In the result, assessee’s appeal is allowed.
Order pronounced in the Open Court on 17th January, 2020.